Despite economic hard times all around, Bonney Lake Mayor Neil Johnson is proposing in his 2011-2012 budget to spend $2.6 million of the city’s fund balance on a series of capital improvement projects around the city, including setting $1 million aside for a new recreation center or YMCA.

Included in the proposed spending is $700,000 to “catch-up” the city’s Equipment Rental and Replacement fund, $300,000 for neighborhood sidewalks and street lights to make up for lost Real Estate and Excise Tax money, $100,000 for 10 radar speed signs and $500,000 for the intended civic campus in the downtown core.

In addition, the mayor is proposing using $226,263 from the fund balance to cover a general operations and maintenance shortfall predicted for next year.

The city’s fund balance is estimated to finish 2010 at more than $5.6 million. If the mayor’s entire proposal was enacted, the city estimates finishing 2011 with more than $2.7 million still in reserve.

“The whole point here is trying to look at things for right now and then look at the future,” Johnson said, adding the council has made it clear they want to use as little of the fund balance as possible to cover maintenance and operations, but has expressed interest in spending down some of the money on city projects.

Johnson made his proposal Tuesday during a budget discussion at the council workshop, which included a short presentation by Financial Director Al Juarez and City Administrator Don Morrison.

Though expenditures are set to outpace revenues in 2010, changes and savings made by the city are now projected to cut that gap to about $105,000, down from an estimated $585,000 when the council passed its mid-biennial adjustment.

According to Morrison, however, the city actually takes in $553,000 more in revenue than it spends each year, but the city’s debt service pushes the overall budget into the red.

For 2011, the city is proposing to “hold the line,” according to Morrison. The 2011 budget contains no new taxes or rates increase (beyond the 1 percent property tax increase) and there are no plans for any furloughs for city staff, though three open positions, including the sergeant position that was left vacant last week with the resignation of Sergeant Ken McDonough, will not be filled.

“Basically it’s a status quo, maintain the operations budget,” Morrison said.

The second half of the biennial budget, however, is a different story. According to Morrison barring a “miraculous recovery” or “substantial annexation that creates new revenue,” layoffs will be necessary in 2012, though he anticipated those positions would be added back by 2014.

There will be a public hearing on the city’s biennial budget and tax rate at 7 p.m. Tuesday during the City Council Meeting at Bonney Lake City Hall, 19306 Bonney Lake Blvd.