The first look at the city of Charlotte's upcoming budget shows a slight increase in revenue, 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 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 was in November 2010.

"The biggest issue we have is capital," said City Manager Curt Walton during a City Council retreat Thursday in Pinehurst. "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 change in the tax rate.

It's possible, however, that City Council members could push for more programs, which would be paid for by either cutting the budget or increasing taxes.

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 city's property-tax rate the same or endorse an increase.

He said stability of an unchanged tax rate would be important to residences and businesses. But he said the city's AAA bond rating is tied to having a capital program, which could mean higher taxes.

"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.

Employee pay raises?

Three years ago, the city had no raises or one-time bonus payments for city employees. For fiscal year 2012, 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 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.

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

The city is still wrestling with how to pay 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 included a 5 percent step increase and a 3 percent cost-of-living adjustment.

Walton now says that plan is "unsustainable." He said the police and the fire departments have been working on a more modest pay plan.

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

Fire Chief Jon Hannan said one proposal is to keep step increases at the same level for younger public-safety employees, but reduce them for more senior ones. Walton said details would be discussed at a future budget meeting.

Challenges ahead

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

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

Transportation: Some departments are concerned about higher fuel prices and increased maintenance costs for vehicles.

The city expects to begin paying streetcar expenses starting in fiscal 2015. The initial cost is expected to be $800,000.

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

Lower valuations could mean less revenue for the city.

Republican council member Andy Dulin said he hopes better economic forecasts, such as higher sales-tax revenues, will quell talk of a property-tax increase. "Things are looking better," Dulin said.

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