Healdsburg's financial fortune seems to have reversed overnight Monday. A new look at the city budget shows a $1 million ending balance in this year's general fund, instead of an anticipated deficit.

But rather than a windfall that erased the previously forecast gap of $808,000, the reason was an accounting change in the way the city calculates the sick time, vacation, leave and workers compensation for employees.

Essentially, city administrators said the city for years has been setting aside too much in those areas, resulting in actual expenditures coming in significantly lower than budgeted.

"Every year, there were overstated personnel costs," City Manager Marjie Pettus said. "Department heads said, 'It's not fair. The accounting practice is increasing my budget.' "

The city instead has decided to move to a new system that will budget for personnel costs based on a three-year average of what is actually paid to employees.

City Council members cautioned that doesn't mean the city is suddenly flush.

"It can be spun in a lot of different ways. It's not just money that came out of the blue," Councilman Tom Chambers said.

But the new accounting approach was quickly criticized by Tim Meinken, a former City Council candidate.

"What a shell game that is," he told The Press Democrat. "The liabilities still exist. They made them unfunded."

He said the city will still owe employees what they have accrued for unused sick time and vacation when they leave the city.

"They push it out to the future when people leave," he said

While workers may collect some of those unused benefits when they leave or retire, city officials noted they will not be entitled to collect workers compensation and unemployment that has been set aside in the budget.

"We're bringing it around to be more transparent," Pettus said of the city's accounting shift. "The liability is still out there. We don't expect everyone to leave at once. It allows more money for operations."

Overall, city administrators say that instead of salary and benefits being $9.1 million for the current fiscal year, the estimated total is now approximately $8 million.

Administrative Services Director Jone Hayes said some of the salary savings can also be attributed to taking longer than anticipated to fill some vacant positions, which included the departure of the city finance director.

The City Council also was told that the estimated $6.8 million in accumulated reserves meet the city's goal this year. And reserves are expected to grow to $7.6 million by July 2014.

Part of the rosier outlook for the city's finances also can be attributed to an improving economy reflected in better than forecast sales and property tax revenues.

The city also has voters to thank for a half-cent sales tax increase approved in November, which is expected to bring in an additional $1 million in revenues to the general fund.

The increase, which took effect April 1, raised the sales tax in Healdsburg to 8.75 percent

A survey is underway to ask residents what four key areas the money should go to, including public safety, infrastructure improvement, economic development or city facilities.

The results of the survey will be discussed at a May 15 City Council meeting.

The sales tax measure passed after several year of belt tightening and staff reductions of 18 percent.

"There's a lot of things we've put off, and we can't continue to do that," Vice Mayor Jim Wood said Monday. "We survived. Now we have to rebuild."

"We're still not out of the woods," said Councilman Gary Plass, who noted that the city may have to contribute more in the future toward employee pensions and insurance benefits.

But overall, he said, the new budget picture "makes you smile a bit."

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