After the first quarter of the fiscal year, city revenues are only about half of what was projected, but city finance officials said they aren’t ready to panic yet. The negative balance for the city budget is not just related to lower-than-anticipated revenues – a large part of the imbalance is due to greater-than-anticipated expenditures.

The $812 million city budget is running negative at the moment – “typical” for the first quarter of the fiscal year, according to the most recent report from the city Finance Department.

The first quarter financial report will be presented to the City Council Tuesday.

Of the six main sources of revenue for the city – property tax, utility user tax, sales tax, business operations tax, public safety tax and transient occupancy (hotel) tax – two sources have not been on par with projections made when the budget was approved in June.

Property tax – which at 34 percent of all general fund revenues is the largest source of revenue for the city – appears to be at about 2 percent of projections, but that number can be misleading, according to Dawn Holm, acting budget manager for the city Finance Department.

Property tax revenues are received by the city in late January and late May, so the current report doesn’t reflect revenue beyond June.

Once the city receives property tax revenues in January, the general fund ledger will be adjusted to reflect a new balance.

The new result still may not be as good as was expected when the budget was passed in June, however.

Property values continue to decline at a higher-than-expected rate throughout the state, according to a County Assessor’s Office property tax update given to the city Finance department earlier this month.

Initially, property tax revenues for Sacramento for fiscal year 2011-12 were projected to be close to $126 million – about 1 percent less than the totals received in 2010-11.

Taking into account the county assessor’s projections, though, the actual year-end number could wind up being down 2 or even 3 percent, Holm said.

“It’s really too early to tell with any precision,” Holm said.

The good news is sales tax revenues may take up the slack and balance out the potential property tax shortfall.

According to a city staff report, taxable sales in California are expected to increase by 1.7 percent in 2011, and Sacramento is currently projecting a 4 percent increase over the 2010-11 budget.

Sales tax results that come in better than anticipated will offset the decline in property taxes, according to the staff report.

Four areas of general fund expenditures that are already in the red – and may go deeper – include department spending for fire, police, convention and leisure, and parks and recreation.

The Sacramento Fire Department is facing a projected $2.3 million shortfall by the end of the year due to overtime spending required to restore two formerly browned-out stations and the costs of hiring 27 people as part of a federal grant program.

The city accepted a federal grant that will pay for the new staffers, but grant money doesn’t come in until the positions are filled, Holm said, and when the money does come in, it cannot be used to reimburse overtime spending.

One option the department is considering to manage the budget shortfall is potential funding from Medi-Cal transport reimbursement, which is allowed by the recently passed AB678.

“The alternative would be to direct the department to implement the two additional brownouts again,” Holm said. “We’d still be in the hole, but not as much as we look to be in right now.”

Fire department representatives could not immediately be reached for comment.

The police department’s projected deficit of $3.1 million is due to unfunded employee services benefits, additional overtime because of staffing reductions and unexpected reductions in grant and contract service reimbursements, according to the staff report.

When the Convention, Culture and Leisure Department transfers golf maintenance to a private contractor in January, the city will incur one-time expenses associated with the transfer that had not been budgeted, according to the staff report.

“Part of contracting out (golf maintenance) is going to be letting go of some staff,” Holm said. “When we let go of any employees, we have to pay for unused sick leave, vacation and overtime.”

Holm said those costs are paid out as lump-sum payments to employees when they leave city service.

“That is never budgeted for,” Holm said, “so when you have a large group leaving, it’s a hit to the department.”

In this case, it is a $229,000 hit to the Parks Department budget, according to an Oct. 25 report to the City Council.

Golf maintenance included 58 positions, and contracting out the service eliminates those positions.

Fifty of those positions were filled at the time that the City Council approved contracting out the service.

The city’s fiscal year runs from July 1 through June 30. Until this year, the City Council received semi-annual reports from the Finance Department: a mid-year update and an end-of-year final report.

Since coming to the position in September, City Manager John Shirey has instituted a quarterly report to council members to provide the most timely information regarding the city’s current financial condition, Holm said.

“He felt that every six months was just too long,” Holm said. “He wants everyone to have an understanding of where things are going on a more regular basis.”

The next quarterly financial report will be presented to the City Council at end of January or first week in February. Meanwhile, Holm said, department staff will continue to work toward meeting budget goals.

Melissa Corker is a Staff Reporter for The Sacramento Press. Follow her on Twitter @MelissaCorker.