Sonoma's city finances are healthy compared to many other California cities, but uncertainty over state funding could lead to residents being asked to approve new or higher taxes to generate more revenue.

That was the message of a City Council study session held Wednesday night to provide an overview of the city's financial picture.

Sonoma ended the fiscal year in July with general-fund revenues exceeding expenditures by about $84,000. The city also has reserves of about $4 million.

"We're really pleased to bring that information to you and present that to you tonight," Assistant City Manager Carol Giovanatto told council members.

Nevertheless, the council discussed different ways to raise revenue, centering on the merits of asking residents to approve a hike in sales or bed taxes.</CW>

Mayor Laurie Gallian, who proposed the study session, said afterward that her intent was to "lay the groundwork for what happens if redevelopment falls through."

As part of the state budget passed in June, the Legislature and Gov. Jerry Brown dissolved redevelopment agencies that have been around for decades unless cities pay hefty fees to retain the programs.

Sonoma city leaders agreed to that requirement prior to Wednesday. But a legal challenge to Brown's actions is causing uncertainty about the availability of redevelopment funds in the future.

"There is a need for more revenue, notwithstanding our performance last year," Councilman Steve Barbose said.

But Councilwoman Joanne Sanders questioned that need given the city's relative financial health.

"To reach into consumers' pockets and take more money for the sake of adding more staff is not a compelling reason to raise more revenue," she said. "If it's going to give the city a swimming pool .<TH>.<TH>. or another service to improve quality of life, that's a different story."

Sonoma has an 8 percent sales tax, lower than several other Sonoma County cities, including Santa Rosa, Rohnert Park and Sebastopol. If Sonoma residents approved raising the tax by a quarter percent, it would generate an additional $535,000 for city coffers, according to staff estimates.

The city's transit occupancy tax, a 10 percent surcharge on overnight stays, also is lower than in most surrounding communities and has not been touched since 1992.

But several Sonoma hoteliers who spoke Wednesday expressed reservations about the city hiking the tax. Instead, they generally favor taxing themselves to promote tourism and lower vacancy rates through a newly created tourism improvement district.

"Obviously the city needs money. We need money, too," said Wendy Watkins-Stewart, co-owner of the El Pueblo Inn.

Council members are planning to revisit the budget discussion after the first of the year when legal issues surrounding redevelopment agencies may be resolved.