GULF SHORES, Ala. — After a hard hitting year for the economy, Gulf Shores received its 2008 fiscal audit.

“The city’s hanging in there,” Matt Taylor with Grant, Sanders and Taylor, PC told the council Monday night.

Taylor reported on the city’s economic standings for last year at Monday’s council meeting. The audit included an additional three months due to the city’s transition from a fiscal year to a calendar year.

Overall, in 15 months the city collected $26,656,000 in revenue. Expenditures amounted to $26,031,000, leaving a $624,000 surplus.

“Unfortunately that doesn’t include debt service,” Taylor said. “The net transfers for debt service were $4 million so we have a deficit in the general fund of $3,385,000.”

The audit showed from September 2007 to September 2008 the city expenditures fell below revenue, and at the end of the fiscal period the city showed a small surplus of $159,000 in the general fund.

“Unfortunately the period from October to December on the coast is rather thin revenue wise,” Taylor said.

The extended period, used to transition into a calendar year, showed a great downfall.

“Basically from September to December (of 2008) we ran through about $3.5 million,” Taylor said.

December is the month when debt service payments are due and this year’s audit saw two. That added an additional $1,325,000 in debt service to the bill. The city’s actual operation expenses for the extra three months was $1 million.

Mayor pro tem Carolyn Doughty said the lay-offs that came toward the end of the year were a response to lagging revenue and the lack of expected growth in the city.

The city’s struggle with the Federal Emergency Management Agency has also caused a problem with finances.

“It took quite a toll on our general balance,” Taylor said.

Although the general fund shows a $1.5 million deficit, the city’s reserve fund is holding $6 million as a precaution. Of that money $4 million is being held as savings until FEMA makes its final decision on the city’s appeal for work done during Hurricane Katrina.

“After we found out about the possibility of the Office of Inspector General telling FEMA to ask us for the money back we took $4 million out of the (general) fund and put it (in the reserve fund),” Doughty said in an interview.

Currently, the city is in the midst of an appeal process, started after FEMA not only refused to reimburse $3.5 million for sand removal but requested for $1 million already awarded back.

“It all hinges on FEMA,” Doughty said. “In trying to find a silver lining in a dark cloud, I’ll share that for the first two months of ‘09 we are $2.4 million ahead of projections.”