While in better shape than some of its neighbors and certainly the state, the city of Bonney Lake’s budget is still coming up a little short in the revenue department and that could prove to be a problem for next year’s budget.

“Revenue coming in is less than we anticipated,” Mayor Neil Johnson said Wednesday.

In preparation of the city’s mid-biennial budget review, Johnson said he has asked department heads to review their budgets and bring him suggestions for what they would cut at 1 percent and 2.5 percent of their budgets.

According to Johnson, property tax revenue is down this year in the city due to a county-wide drop in property values as well as lower than expected permit revenues.

“We didn’t expect it to be down as much (as it is),” Johnson said.

But the real problem is expected to be next year’s budget. According to the mayor, the city is looking at a gap of between $300,000 and $600,000 for 2012.

Johnson said he does not anticipate any layoffs of city staff, and said he will not be recommending any staff cuts, but said the city would probably not do any hiring in the near future either.

Johnson said the city is still tracking revenues for the year and hopes to have a better idea on what exactly they can expect, but said projections for next year are not as rosy as anticipated when the budget was written last fall.

Johnson said the city’s sales tax figures have been relatively level because despite a slight drop from the larger chain stores, new businesses in the community have helped pick up some of the slack. Johnson said he was optimistic about the city’s long term prospects because of it.

“The retail sales tax really helps our general fund,” he said.

Johnson said an in addition to falling revenue, the city’s expenses will increase next year due to cost of living increases for employees, though the mayor said he has already said no to a cost of living increase for non-union employees, primarily department heads and managers.

As a bright spot, Johnson said the city council authorized the administration to use $400,000 of fund balance this year to cover expenses, which it has yet to utilize. Because the council did not authorize the fund balance to cover a 2012 gap, he is hoping the council OKs use of the fund balance to help bridge that gap.

“It’s all about how much fund balance we can utilize,” he said.

Deputy Mayor Dan Swatman, who also chairs the council’s finance committee said the council so far has gotten “cursory looks” at the financial data, but expects to get the full details soon so work on the mid-biennium amendment can get under way, though he praised the administration and staff for keeping things under control so far this year.

“The staff has done an excellent job keeping the budget in line this year,” he said, but added “It’s always a concern to make sure we’re spending less than we take in.”

Swatman said budgeting has become more difficult than it has in the past and he believes the economy has entered a “new normal” and will spring back to where it was a few years ago and that structural changes may be necessary at some point.

Swatman also said the city has a few options left, including the possibility of collecting a higher amount of property taxes, as Bonney Lake is not at the limit imposed by state law. However, he said he did not expect that to happen in the next year or so.

“I don’t see any substantial or significant change on the horizon,” he said.