Lexington might consider layoffs, pay cuts, furloughs, eliminating city programs and other steps to make up for an estimated $12 million to $13 million revenue shortfall, Mayor Jim Newberry announced Friday.
He asked city division directors to propose ways to cut expenses.
Susan Straub, a spokeswoman for Newberry, said the directors were asked to find ways to cut their budgets by 5 percent "as a reference point."
But, she said, "our request is for them to come back with as many (cuts) as they can."
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The directors were asked to report back by Dec. 2. A budget-reduction plan will be presented to the Urban County Council in January.
Straub also said that because of civil service rules, any furloughs or pay reductions would be voluntary. If that route is chosen, she said, employees would be asked to take less to spare the jobs of other employees.
Councilwoman Diane Lawless, asked to comment on Newberry's announcement, said employees already have had to put up with only a 1 percent raise and an increase in their insurance premiums.
"The first place where the mayor should be asking people to take a two-week furlough is the highest paid staff," she said.
Lawless also said that Newberry's recommendation to cut the city's garbage fees by 10 percent, which the council approved over her objection, was "disturbing to me at a time when we are facing such a crisis."
Straub countered that garbage fees are dedicated funds that can't be used for overcoming other budget needs.
Councilman Doug Martin said he thought the Newberry administration has done "an excellent job" managing the city's finances in a difficult economic climate.
The bottom line, he said, is that people will have to settle for fewer city services until revenues improve.
"Folks want a Mercedes Benz kind of service, but we're going to have a Ford Taurus for a while, and there's nothing wrong with Ford," Martin said.
Councilwoman Linda Gorton said that after previous budget cuts, finding cuts this time would be difficult.
"The reality is the economy is not back yet," she said. She predicted there would be "some hard work in front of us."
Like other governments in the current economic downturn, Lexington's revenue projections are falling short, the mayor said.
"Over the past three years, we have cut the fat out of the city budget," Newberry said in a release. "This year, we will likely have to cut services to balance the budget."
Late last month, the Urban County Council was told that the local government faced a shortfall of $2 million for the first quarter of the fiscal year that began in July and that without cost cuts or an increase in tax collections, the deficit could reach $10 million by the end of the fiscal year.
Bill O'Mara, director of the city's revenue division, said Friday that revenues have continued to be soft into the second quarter of the fiscal year.
"We've waited as long as we can before having to react," he said.
Although the nation's economy was already in trouble when the budget was being prepared last spring, he said, Lexington's economic prognosis looked better.
"Our revenues were not falling off the charts like the people around us," he said. "We were hopeful that while the winds of the economy were blowing, they wouldn't be damaging to us."
While there are signs the economy is improving, O'Mara said, jobs aren't coming back, and the city depends heavily on payroll taxes.
This year's general fund revenues, as projected in the current budget, are $279.6 million. In the last fiscal year, revenues were $271.5 million.
It's anticipated that this will be only the second time since the city and county governments merged 35 years ago that revenues have decreased from one year to the next. The first time was in 1996.