After four years of painful cost-cutting, Petaluma's budget remains tight, but new version aims to pay the bills in the coming year without layoffs or requiring concessions from employees.

The city has cut spending from $43.2 million in 2007-08 to a proposed $32.5 million for the fiscal year beginning in July. During that time, the city's employee benefit costs have increased dramatically and revenues plummeted on sales- and property-tax declines during the recession.

At its meeting tonight, the City Council will consider a proposed 2012-13 budget balanced through anticipated revenues of $32,478,000 and 5 percent across-the-board spending cuts.

The city essentially exhausted its reserve fund last year, with Finance Director Bill Mushallo forecasting a reserve balance of $377,000 after this upcoming fiscal year if the council adopts the proposal.

The council is scheduled to discuss and tentatively adopt the proposed budget. Formal adoption is scheduled June 4.

"Barring any negative effects from unforeseen circumstances, the reductions that balance the 2012-2013 budget establish positive balances through each of the next four years," City Manager John Brown said.

They are modest and even tenuous balances, he acknowledged, but an improvement over forecasts from just a year ago.

And some relief may be in sight. The city is projecting a $1.4 million surplus by 2015-16, in part from tax proceeds of the East Washington Place shopping center now being built.

Councilman Mike Healy called the budget "bare bones" and said many of the cuts can't be sustained over the long term without major service reductions.

The city is in the midst of negotiating with 11 bargaining units, but so far no agreements or concessions have been agreed to.

Twenty-four full-time equivalent positions were eliminated from the general fund budget last year, bringing the total number of positions cut from city payroll to 72 since 2008-09. No employees were laid off as the reductions were accomplished through early retirements and eliminating or freezing vacant positions.

Revenue estimates for next year reflect growth in sales and property taxes, which together make up 52 percent of city revenues. Sales tax revenues are projected to increase almost 8 percent and property taxes by 3.5 percent.

Cost increases include an additional $850,000 in salaries and benefits.

To meet revenue targets, each department head was asked to recommend cuts of 5 percent, totaling $1.6 million.

"Finding new ways to cut, opportunities to consolidate and revenues to increase is exponentially more difficult than it once was," Brown said. "Everything that remains in the budget represents a priority."

The police department, the single costliest department at $14.4 million, recommended $635,000 in cuts toward a target of $720,000.

The proposal freezes one vacant police officer position and eliminates a temporary officer slot, saving $270,000. A vacant dispatcher job would be frozen, saving $100,000, and a cut in the overtime budget would save $65,000.

Perhaps the most controversial proposal in the budget is the recommended elimination of one of the city's two animal control officer positions, projected to save $90,000. A previous proposal recommended the elimination of both officers.

Several citizens have spoken in support of the city's animal control officers and the shelter staff, who care for more than 1,000 animals a year and handle 2,000 calls for bites, dangerous or neglected animals, loose animals and more each year.

The council likely will discuss a proposal from the Petaluma Animal Shelter Foundation to run the department as a nonprofit.

Initial indications show it wouldn't save the city much money, but its reduced pay and benefits structure would maintain both animal control officer positions and increase operating hours of the shelter, relying more heavily than now on volunteers and private donations.

Councilman Mike Harris said he's willing to listen to the privatization proposal.

"We should be entertaining any and all opportunities to more efficiently provide services to the citizens," he said.

The fire department, the city's second largest department by cost at just under $10 million, proposed $500,000 in cuts by holding five positions vacant. The department has had to absorb the costs of six firefighter positions previously funded by a grant.

Other proposed budget cuts include discontinuing off-season maintenance at the Petaluma Swim Center and security at the Keller Street garage, totaling savings of about $90,000.

"At this stage of the game, nothing proposed to reach reduction targets is desirable," Brown said. "Everything will result in an immediate or eventual degradation of services."

In a budget workshop, the council discussed asking voters to pass a sales-tax increase or a hike to the hotel tax, but it is unclear whether either idea has majority support.

The council meets at 7 p.m. at City Hall, 11 English St.

Contact Staff Writer Lori A. Carter at 762-7297 or lori.carter@pressdemocrat.com.