NORMAL -- The Normal City Council needs to cut expenses and/or raise more money to add about $3.4 million to its general fund each year for the next five if it wants to maintain an 8 percent reserve fund balance.

That was the bottom line of a financial discussion Monday night as the town tries to battle the effects of the recession on its $48.7 million general fund, which finances day-to-day operations.

"Ron (Hill, finance director) and I find ourselves in uncharted waters here," said Normal City Manager Mark Peterson. "Frankly, we've never encountered a situation as significant, substantial as the current economy."

Hill said state income tax revenue could fall 21 percent below projections this year. Local and state sales taxes are expected to be a total of 15 percent below the town's conservative calculations made when the 2009-10 budget was adopted in April.

A wet summer and delay in construction on the new Fairview Family Aquatic Center slides caused that revenue to dip 60 percent below estimates.

The town's investment income is down nearly 60 percent.

Peterson said the town has delayed capital improvement projects, delayed equipment purchases, left positions vacant, and made 2 percent across-the-board cuts in all departments, but the reserve fund still took a big hit.

"We're still in the black but it's important to take a two-, three-, or four-year approach on this. If we don't take action and continue as we are … we could have serious problems in two to three years," he said.

The reserve fund would dip to 2.6 percent by the end of the 2010-11 fiscal year and fall in the red each year later, according to Hill.

"It's very, very difficult to get lower than 4 percent and have any degree of comfort," Peterson said.

The reserve fund is like a savings account. The town relies on it for emergencies and to cover expenses while waiting for revenue to come in.

Peterson said the town could take $1 million from its vehicle replacement fund over the next two years and $2.2 million could be saved by eliminating the planned fourth fire station on the town's east side from the third and fourth year of the town's five-year budget.

But, Peterson said, beyond that, cuts likely mean losing people and eliminating or scaling back basic services.

The council did approve a voluntary separation incentive program that will be offered to all town employees with at least 20 years of service. In essence, those employees choosing the option would get two years of insurance at their current rate.

Council members will consider a list of suggested new revenue sources over the next two weeks and return on Nov. 2 with a course of action for town staff. The council typically reviews a proposed budget in January and approves it in March. The fiscal year runs from April 1 to March 31.

Revenue-producing proposals

Listed are the new revenue sources most recommended by the town of Normal staff. Estimate revenue to be produced is for the first full year of implementation.

Proposal - Estimated revenue produced

Revised towing ordinance - $120,000

Increase local sales tax by 1/4 percent - $1,022,774

Increase property tax by .0432 to cover under-funded retirement costs - $356,000

Move up garbage fee increase by a year - $370,000

Increase day camp fees - $22,000

Add a convenience fee to online transactions - $7,080

Increase parking ticket fines from $10 to $20 - $10,000

Create a technical rescue fee - $10,000

Create a $500 auto extrication fee - $5,000