By Steve Harrison

sharrison@charlotteobsrver.com

The first look at the city of Charlotte's upcoming budget shows a slight increase in revenues, and city officials don't anticipate significant budget cuts as the economy appears to "have turned the corner."

The proposed fiscal year 2013 budget, however, doesn't yet have money set aside for a pay increase for employees. In addition, the city doesn't have enough money for a bond referendum in November to pay for roads, affordable housing and neighborhood improvements.

The city historically has held bond referendums every two years. The last referendum was in November 2010.

"The biggest issue we have is capital," said City Manager Curt Walton during a City Council retreat in Pinehurst Thursday. "That's problematic on a number of different levels. We aren't in a position to meet the needs of a growing community."

The snapshot of projected revenues and expenses are based on no new change in the tax rate.

It's possible, however, that City Council could push for more programs, which would be funded from either budget cuts or a tax increase.

Mayor Anthony Foxx, a Democrat, said the council will have to debate its priorities for the upcoming year. He said he doesn't know at this time whether he would support keeping the tax rate the same or endorse an increase.

He said "stability" of an unchanged tax rate would be important to residences and businesses. But at the same time, he said the city's AAA bond rating is tied to having a capital program.

"A lot of our budget discussions will turn on whether we would do a service or disservice to our citizens," Foxx said.

The last city property tax increase was in 2006. Foxx, in his first full year on council, lobbied for the increase, saying it would fund important programs, such as new police officers. Last year, the mayor lobbied for a revenue-neutral tax rate in the wake of Mecklenburg County's property reevaluation.

The city's general fund is projected to generate $532.1 million this fiscal year. The city projects it to grow modestly next year, to $539.7 million.

That increase will give the city some breathing room, but probably not enough money for pay raises and a capital program.

Three years ago, the city had no raises or one-time bonus payments for city employees. For fiscal year 2011, the city had a pay hike that averaged 2 percent. And for the current fiscal year, employees were given a one-time payment that equaled 1 percent of their salary. That payment didn't increase their base salary, however.

Walton said a pay raise for the roughly 7,000 city employees is a "high priority" for the manager for the upcoming year.

The city anticipates health care costs increasing 5 percent in the next year. Typically the city splits those increases with employees.

The city is still wrestling with how to pay its public safety employees, mostly police and firefighters. Last decade, when the economy was flush, the city had a generous pay plan for public safety employees that, in good times, included a 5 percent step increase and a 3 percent cost-of-living adjustment.

But Walton now says that plan is "unsustainable." He said Charlotte-Mecklenburg Police and the Fire Department have been working on a more modest pay plan.

"They have a good plan," Walton said. "We can support it."

Charlotte Fire Chief Jon Hannan said one proposal is to keep step increase at the same level for younger public safety employees, but reduce them for more senior ones.

Walton said details of the plan would be discussed at a future budget meeting.

Though the city will have slightly more money, the city's budget presentation listed some challenges:

* CMPD has 50 officers that are currently funded by federal stimulus dollars. But starting in September, the city will have to begin picking up that expense. The city cost will be $2.3 million for the next fiscal year, and $3.1 million in fiscal year 2014.

* Some department are concerned about higher fuel prices and increased maintenance costs for vehicles.

* The city expects to have to begin paying streetcar expenses starting in fiscal year 2015. The initial cost is expected to be $800,000, but could grow to $1.5 million a year. Construction hasn't begun yet on the uptown streetcar.

* Another concern is how property tax appeals to Mecklenburg County will play out. Due to last year's property reevaluation, thousands of property owners appealed to the county, saying their assessed values were too high.

Lower evaluations could mean less revenue for the city.

The fiscal year 2013 budget will take shape over the next four months. Council members will vote on a budget in early June.