Extremely conservative. Status quo. Austere. A "timeout."

Those were the words used by Homer City Manager Walt Wrede in a report to the mayor and city council describing the city's Fiscal Year 2009 preliminary budget, which was prepared by the city Finance Department and officially presented to the council at its Committee of the Whole meeting Monday.

Wrede and city staff have proposed several ideas to reduce spending next year, including:

* An across-the-board 25 percent reduction in city funding of nonprofit agencies, including the Pratt Museum, the Homer Chamber of Commerce and the Homer Foundation.

* Elimination of the city's funding for maintenance of public art.

* Rejection of a proposed idea to fund expansion of the operating hours of the Homer Library.

* Rejection of a plan, at a cost of $93,906, to hire a new project manager for the Public Works Department.

* Elimination of a planned $10,000 contribution to the Sister Cities program.

* A 2 percent increase in the Cost of Living Allowance, or COLA, paid to city employees, which is less than the recommended rate and less than the rate of inflation.

* A freeze on spending toward the repair of city-owned buildings.

* Elimination of any city spending toward implementation of the Climate Action Plan.

* Rejection of an idea proposed by Mayor James Hornaday to hire a city lobbyist.

* A freeze on the purchasing of new vehicles and most new equipment for all city departments.

"I am sorry to have to bring you this news," said Wrede in the report. "I know this will be very unpopular with the public. However, it is hard to hold costs down when your fuel bill alone went up by 68 percent."

In addition to skyrocketing fuel costs, Wrede pointed to the recent passage of Proposition 1, the measure eliminating Kenai Peninsula Borough sales taxes on non-prepared foods for nine months of the year, as a major factor in the declining city revenues that have necessitated the budget reductions.

The tax exemption is estimated to cost the city $755,952 over the next year, according to city Finance Director Regina Harville. The Finance Department, foreseeing passage of the initiative, included financial impact from it in the preliminary budget. The department also predicts declining revenues in the next year in tourism and housing starts.

"The general state of the national economy, problems on Wall Street, sluggish job creation, an expected decline in property values and the soaring cost of living in Homer all add to uncertainty about the future," added Wrede.

In an effort to balance the FY 2009 budget, Wrede also is proposing an across the board increase in water and sewer rates (see related story, page 1).

The rate increase will be 15 percent "in the aggregate," meaning that residents and small businesses who use smaller amounts of water will have their rates go up at a smaller percentage while bigger businesses will have to pay much higher rates.

As for the proposed 25 percent reduction in city funding of nonprofit agencies, Wrede said he considered cutting the funding altogether.

"I did not eliminate non-profit funding entirely because there has always been strong support for funding them on the council," said Wrede, adding that the nonprofit groups, especially the Pratt Museum, have become dependent on city funding. "To simply eliminate funding on short notice did not seem to be fair or right."

The council will consider the proposed budget and make changes to it at their next regular meeting Oct. 27. Public hearings on the subject are scheduled for Nov. 10 and 24 at 7 p.m. The council, by city ordinance, must adopt a final budget at its Dec. 8 meeting.

Aaron Selbig can be reached at aaron.selbig@homernews.com.