“Sales-tax dependent cities are in a real hurt right now,” Molalla city manager John Atkins said at the city’s budget proposal meeting on Thursday. “We’re not in that position … We’re not forced to make a bad situation worse by cutting vital sources that citizens depend on.”

Unlike many cities outside Oregon depending on sales taxes to fund their budget, Molalla receives the majority of its funding from property taxes.

The city also receives funding from grants, franchise fees, licenses and permits, interest and other revenue sources to meet its annual budget needs.

The budget committee met Thursday night to discuss the proposed city budget for fiscal year 2008-09 beginning July 1.

Breaking away from the previous spreadsheets, the budget document underwent a redesign this year, adding pictures, graphics and other features to make it more reader-friendly.

Atkins hopes the new design will help the budget serve as a more effective communication tool between the city and citizens.

One of the most significant changes from last year’s budget is the decrease in funding for the sewer expansion fund. Last year, the city borrowed $2.7 million to complete waste water treatment plant improvements.

The project is now complete, so revenue and expenses in the waste water category appear to have dropped significantly on the budget, Atkins said.

The planning department forecasts fewer system development charges (SDCs) from planning fees, development permits, building permits and other funding sources due to the recent decline in new construction.

“Because of the housing market, they’re just not building houses like they did these past two years,” city finance director Peggy Johnson said.

Johnson said the planning department is one of the most difficult departments to budget for.

“We don’t know what the economy is going to bring, so you just have to forecast from prior years,” Johnson said.

Gas prices pose another budgeting challenge. Prices have jumped since Johnson began preparing the budget in January and now she questions whether she has budgeted enough to keep police and public works vehicles fueled.

Gas prices also affect the Adult Community Center, which is funded in part by the city and pays drivers by the mile to transport local residents to medical appointments.

“The price of gas is going to have quite an effect on us,” Johnson said.

Other budget expense increases include a 3.5 cost of living increase for city employees and an unexpected $115,000 jump in health insurance costs.

Atkins said his goal in upcoming years is to build the city’s contingent fund, so that more backup funding is available.

“The thing that is troubling to me about this budget is that the contingent fund for rainy days is only one percent,” Atkins said.

In the meantime, if the city hits an unforeseen financial hardship, it would likely either borrow from other funds or be forced to enact spending freezes or layoffs, Atkins said.

“A year ago, we were borrowing money every year to operate the Molalla Aquatic Center,” Atkins said.

Now, the city has budgeted funds to operate the pool, allotting some of the street fund’s PGE franchise fees to the aquatic center.

However, if voters choose May 20 to annex land within the Molalla River School District to the North Clackamas Parks and Recreation District, the city would be freed of their obligation to fund the pool.