North Tonawanda officials must decide in the coming month how to make up a nearly $500,000 shortfall in the current year’s water and sewer budget.

Raising residents’ water rates is one way to help accomplish that, but council members have so far proved dead set against it. The most recent action by council members was to eliminate a line in former Mayor Larry Soos’ plan, which they had already approved, to charge more for water service to owners of apartments throughout the city.

About $174,000 of the overall shortfall resulted from that decision. The base water rate for apartments would have been increased to $12 quarterly, the same as that already paid by single-family homeowners, up from half that amount.

“It was more of a fairness issue than a rate increase,” City Accountant David Jakubaszek said. “The concept is if we were going to do anything with the rates we would have to do it before March 1.”

March 1 is when the city’s first quarterly water bill is sent out, meaning the council must work quickly to find a fix other than rate hikes before the option disappears.

In addition to eliminating the rate increase, other reasons for the water and sewer shortfall include the fact no deal has yet been reached with the New York Power Authority for low-cost power, and slightly less money than expected as part of a contract to lease out facilities at the wastewater plant to an outside company.

“They’re going to either have to cut costs, lay off employees, possibly use the general fund ...” Jakubaszek said.

From an accountant’s standpoint, Jakubaszek warned against using the general fund to cover the difference in the short term, which he said can have consequences for city taxes down the line.

Mayor Rob Ortt acknowledged the overall shortfall results from the change of heart on raising renters’ water rates, but he also placed blame on Soos’ budget which relied on spending cuts and more money than the city will actually receive from an agreement with Calgon, a Pennsylvania-based carbon regeneration company, to lease space at the wastewater plant.

Last year, Soos’ conservative inclusion of $200,000 per year from Calgon turned out to be $150,000. However, Water/Wastewater Superintendent Paul Drof said another $150,000 should be realized in savings resulting from the arrangement.

“We have a legitimate shortfall that basically we started the year with,” Ortt said, also noting he and Jakubaszek had met recently to discuss various options for balancing the budget. “It’s concentrated in the water and sewer funds and it’s the result of the budget that was proposed by Mayor Soos .. We’re going to have to find that money. We’re going to have to make that money up somehow.”

Another intangible still lingering over the question of how much money North Tonawanda will have to find is the city’s continuing negotiations with the New York Power Authority.

About $250,000 in planned savings on the city’s electric bill still hasn’t been realized. Jakubaszek said such negotiations could still bear fruit, but isn’t sure if it will come in the form of reduced rate power to the water department or a check from the authority. Beyond that, Ortt also said he still isn’t sure estimates in sales tax revenue of $7.5 million will come in that high when the information is reported near the end of the year.

There is a notable success to Soos’ 2010 plan, which the council adopted last fall with concerns despite very few, if any, constructive changes.

A retirement incentive offered to city employees netted eight retirements. Five positions were unfunded before officials knew how many would take the deal. But retirements from three additional funded positions so far are saving the city a combined $150,000 including salary and benefits, more than expected.

Jakubaszek recommends not filling the posts.

Ortt said he plans to meet with the city’s CSEA union leaders to discuss the fate of the additional three positions.

“I want to hear what they have to say, explain the role the city is in and see what happens,” he said.

Even as officials work to correct problems with the current budget, plans will soon begin to compile a spending plan for next year, beginning when department heads first get their wish-list forms in May. Ortt, when campaigning, said he hopes to explore changing the process in coming years. For example, he said the practice whereby mayors begin compiling the plan in July is inadequate because too little is known about that year’s budget figures to responsibly plan for the coming year.

He said he attended a recent meeting of the New York Conference of Mayors, where he asked an advisor her opinion of the city’s budget calendar, and she agreed the July start was unusually early. Ortt said he hopes to look at addressing the city charter regarding the schedule, possibly for changes as early at 2012.

Addressing criticism last year, council members also said getting the plan in August leaves them little time to make educated changes. One solution bandied about in the last election cycle was to include council members in the mayor’s planning process before Aug. 1.

“I have no qualms with making it — where possible — more transparent,” Ortt said, adding certain talks regarding, for instance, the city’s workforce, may have to be conducted in executive session and not include participation by the council.

Of the early start to the process, Jakubaszek explained the primary reason is to conclude budget talks before the election season. According to the charter, adoption by the council must take place on or before Sept. 15.

“Let’s say one of their members is able to sit in on the process. He or she would have a better idea of where we are and it could yield a more fiscally honest product,” Ortt said. “We all have an obligation to make hard decisions sometimes. We will meet those obligations some way, some how.”

Contact reporter Neale Gulley at 693-1000, ext. 114.