ORANGE BEACH, Ala. — During a Town Hall meeting at the Community Center in Orange Beach on Tuesday, Mayor Tony Kennon gave a brief synopsis of what the city was looking at in regards to the 2010 budget. In addition, possible fee increases within the city were also discussed.

“In 2009 we think we are going to take in $22 million. In 2010, we are projecting $20 million, giving us a $2 million shortfall for the year,” Kennon explained. “With the sewer administrative reimbursement from the raising of the sewer fees, we are putting back in $1.3 million, so our net shortfall should be around $.7 million.”

Kennon went on to explain that the figures did not include the costs such as beach renourishment, capital repairs such as street repaving, capital purchases such as replacing a fire truck or any other items that might need to be replaced, minimal employee training which is important to retention, no cost of living raises, or healthcare cost increases.

“Even when we are just managing operating expenses versus revenue, and we come up with a $700,000 shortfall, it is not really a true budget, because all of these items have to be included. So right now we are just living year to year, trying to make the cash stretch out,” Kennon said.

Kennon said that the $2 million shortfall was calculated by several factors.

“We are projecting next year’s sales tax to be down 7.5 percent or $500,000. Ad valorem taxes will be down 5 percent or $200,000, and lodging will be down 5 percent and that is another half a million dollars.”

Add to the $1.2 million from these major revenue sources another $800,000 from miscellaneous revenue sources such as building permits and use tax, and the projected deficit is $2 million.

“The $2 million shortfall is what we had to deal with last year, and at this point, it would mean another 20 jobs lost if we had to cut that out of the budget,” Kennon said. “Last year we eliminated 20 some odd jobs.  They were good people who did nothing wrong but we had to eliminate the positions.”

The mayor said despite those job losses, the city continued to maintain the same level of service to the citizens, but addition job cuts would be costly to services now provided.

“We have worked very hard and have been very lean, but at this point, a loss of another 20 employees would drastically affect the services of the city,” Kennon said.

Kennon said any other job cuts would likely come in the form of public works, police and fire.

“I don’t want to see that happen, and it was the main emphasis behind the sewer rate increase,” Kennon said.

Last year, with sewer rates at $20 per month, the sewer revenue was $4.10 million, while the sewer expenses totaled $4.95 million. In 2014 there will be a $500,000 increase in bond cost for the new sewer plant.

“Keeping the rates at $20 gave us no ability to meet our operation expenses or to replenish the reserve and capital fund that we currently have $6 million in,” Kennon said.

Kennon said the reserve fund is about to be depleted due to a $1.5 million new plant connection, replacement of the force main to County Road 12, the demolition of the current plant, and any unexpected costs and repairs.

Historically, taps have funded the reserve and capital funds, but because there is very little construction at this time, there are no new tap fees.

“Basically, for $20 a month, we just weren’t paying our bills,” Kennon said. “And my opinion is that a utility has to break even. It cannot be subsidized by the general fund.”

In regards to fees, such as the Orange Beach Recreation Center, Kennon said it is important the fees be enough to operate on a break-even basis or at least meet the industry standards.

“Right now, for example, the fees that we charge at the rec center are not even enough to pay the power bill,” Kennon said. “I feel that we need to get our fees in order and in line if we ever want to create stability in the way we manage our government going forward.”