Interim City Manager Pete Connet’s proposed Washington budget for the 2011-2012 fiscal year calls for a 5-percent decrease in in-town residential electric rates.

Connet presented the proposed $61.6 million budget to the mayor and City Council during its meeting Monday. The proposed budget keeps property taxes and water, stormwater, wastewater and trash collection fees at existing levels.

Councilman Doug Mercer is pleased with Connet’s budget proposal, but he believes additional cost savings are possible, possibly by outsourcing some city services and work now performed by city employees.

“After reading Mr. Connet’s budget message … he’s done a number of things that are very positive,” Mercer said Tuesday when questioned about the proposed spending plan.

Mercer called the proposed drop in in-town residential electric rates “a step in the right direction.” Mercer said he would like to reduce electric rates for all customers, which could happen if the city weans itself from annual transfers from the electric fund to the general fund.

“I think it’s a good step in the right direction for our residential customers,” council member William Pitt said of the proposed rate decrease.

He would like the city to continue efforts to help nonresidential customers.

“I’d like to believe, down the road, we can provide the same (relief) for all of our customers,” Pitt said.

Connet’s budget message does raise some worries.

“It is anticipated that certain revenue declines such as sales tax, which we saw in the FY 2010-2011 budget, will continue into the FY 2011-2012 fiscal period,” Connet wrote in his budget message.

Mercer expressed concerns that actions by the N.C. General Assembly could further reduce the city’s revenue stream.

“It gives me real heart burn,” Mercer said of how decisions by the Legislature could affect the city’s budget.

With the exception of the stormwater fund, no fund balance was used to balance any of the operating funds, the budget message notes.

“That’s a major accomplishment, because in years past we have been constantly drawing down those fund balances,” Mercer said.

As for the stormwater fund, money from the fund balance will be appropriated for two years because of the structuring of debt service for the Recovery Zone Economic Development Bonds. Revenue from the sale of those bonds is being used to help pay for drainage improvements in the city.

In December, the council approved awarding a $3.8 million contract to T.A. Loving Co. to make those improvements.

Connet’s budget message makes it clear the city will continue to face fiscal challenges in the next fiscal year.

“The continuing depressed state of the national and North Carolina economies made the preparation of the City budget a challenging process,” he wrote. “In the preparation of this proposed budget, staff was faced with numerous challenges in order to bring expected revenues and proposed expenses into balance.”

The proposed budget for the city’s general fund, which pays for day-to-day operations, comes in at $14,188,322, a decrease of $1,530,321, or 9.735 percent, below the current budget.

The proposed budget recommends the annual transfer from the electric fund to the general fund remain at $973,150 (the transfer amount in the current budget) to cover service-level costs that effect the city daily as the county seat of Beaufort County.

Mercer wants to further explore that recommendation.

“I want us to look very carefully to see if we can reduce that transfer,” Mercer said.

Pitt further discussed the proposed budget.

“It’s a good budget, From what I’ve seen of it, we are addressing needs,” Pitt said Tuesday.

Pitt said he believes the proposed budget, in light of fiscal challenges the city faces, does a good job of protecting city employees. Those employees “understand the things we have to do” in developing a balanced budget, which sometimes means making sacrifices, said Pitt, who has a history of advocating for city employees.

“They are, without a doubt, some of the most loyal employees a city could want to have,” Pitt said.

Connet’s budget message discussed other fiscal matters, including the influence of people who do not live in the city but use its services and facilities on the city’s budget.

“The influx of persons who live outside of Washington but work and shop here require the services of our Police, Fire and EMS Departments,” Connet wrote. “We also have non residents that use the Brown Library and enjoy our parks and recreation programs and facilities.”

The proposed budget does not include funding for the Turnage Theater ($100,000) or the Veterans Park entrance sign ($10,000). As for funding requests from outside agencies and groups, the budget would provide them 10 percent less than their current allocations.

For additional coverage of the council’s meeting, see future editions of the Washington Daily News.