Healdsburg's general fund is doing better than expected thanks to an uptick in sales and property tax revenues as well as plan-check fees, reflecting an improving economy.

A mid-year review shows sales tax proceeds, the largest source of income in the city budget, at more than 4 percent greater than expected, on pace to bring in a total $3.3 million for the fiscal year.

"This looks like good news," City Councilman Tom Chambers said. "We're still in the red, but a lot better off than anticipated."

"This is a really nice surprise," Councilman Jim Wood said. "With the upturn in the economy, this is fabulous news."

The upshot of the rosier-than-expected budget is that the city won't have to tap its reserve funds as much as expected to balance its $8 million general fund.

Instead of having to use $808,000 in reserves, the city now estimates having to draw down $460,000, leaving a total of $5.3 million in reserves.

Hotel bed tax revenues are up 4 percent compared to the same period last year, even though city officials were predicting an even bigger jump for the tourist-centric town in the heart of Wine Country.

This year's budget is part of a trend in Healdsburg, where over the past several years in budgets have ended up better than dire forecasts that included warnings of reserves running dry in a few more years.

"To some people, it may look like we're calling wolf all the time," Councilman Gary Plass said. "But we're not. The reality is, I believe the community would want us to be as conservative as can be when it comes to money."

He said the city typically budgets each year for a "worst-case scenario."

City officials don't know how the state's budget actions will affect Healdsburg and, "we don't know what the economy is going to do," he said.

Yet to be reflected in the budget is extra revenue from a half-percent sales tax increase that was approved by voters in November. That income, an extra $1 million annually, isn't expected to begin coming into city coffers until later this year.

Plass defended the need for the increased sales tax despite the improved prospects for the city general fund, most of which goes to pay for police and fire services. He said the extra income will be especially welcome to help offset the loss of redevelopment funds after the state eliminated them. The extra tax income can be spent for economic development and infrastructure, especially street maintenance, he said.

"There's never been any money for roads for years," he said.

To help balance its budget during the past few lean years, the city cut its staff by 18 percent and employees now pay more toward retirement and medical benefits.

It's the second year in a row that sales tax proceeds exceeded analysts' projections.

Figures released Monday show that for 2011-2012 a $384,000 projected deficit in the general fund turned into a $73,000 surplus because of a combination of greater than expected revenues, particularly sales taxes, and slightly less expenditures, especially personnel costs.

You can reach Staff Writer Clark Mason at 521-5214 or clark.mason@pressdemocrat.com.