A hiring freeze and cutbacks in some city services are being studied at City Hall, as new figures estimate revenues for the 2007 city budget will fall about $1 million short of expectations.

“If we’re going to have less revenue – and that appears to be the case with sales tax – it means we can’t spend as much,” City Manager David Corliss said. “That is true in families, it is true in businesses and it is true in this building, too.”

Specific spending cuts haven’t yet been proposed, but Corliss said they likely would involve reduction to services that residents would notice.

“This won’t necessarily be a pleasant task, but I have a lot of confidence in the community and the prospects for growth,” Corliss said.

Corliss is considering the unusual step of reducing the city’s already-approved budget after sales tax collections for the city were down 2.4 percent in the first quarter of this year compared to a year ago.

That’s significant because the city built its budget on the assumption that sales tax revenues would grow by 3.5 percent.

City commissioners have told Corliss to look for cuts. If cuts aren’t made, the city would be on pace to spend roughly $3 million more than it is expected to receive in revenue in 2007.

The city has about $11 million in “fund balance” money – the equivalent of a savings account – that it could use to cover the $3 million shortfall. Some commissioners, though, are concerned that using that money could leave the city vulnerable in a financial emergency.

City policy states that the fund balance should not drop below 15 percent of the city’s total general fund spending. Taking $3 million from the fund would drop it below 14 percent.

“We have to be very careful about getting below the danger levels with our fund balances,” Mayor Sue Hack said. “That would be very poor planning on our part.”

Corliss said he’ll be looking at cutting the budget up to 3 percent, resulting in $1.1 million to $1.6 million worth of cuts.