Oak Harbor city staff patched a $1 million hole in the general fund budget.

But the “one-time fixes,” as Finance Director Doug Merriman described them, aren’t long-term solutions and only put off the budget problems to next year unless something changes.

Apparently change is in store. Beginning in January, the city administration and city council are planning on working together to take a serious look at developing funding solutions.

Mayor Patty Cohen said all options will be on the table, which could include new or increased fees, asking the voters to approve a property tax increase, or even a business-and-occupation tax, which she said can be structured to affect only certain businesses.

“We’re going to have to go on the road with the message,” she said. “We have to take the public along and engage them.”

The money trouble is mainly a result of voter-approved, tax-cutting initiatives, particularly I-695 and I-747. The problem is that expenditures have been increasing over the years at an average of over 3 percent, while increases in property taxes — the city’s main general fund source — has been capped at 1 percent a year by I-747.

For city officials, the money crunch became painfully obvious when department heads turned in their budget requests for 2007. The requests, if they were all granted, would put the general fund budget out of balance by a whopping $2.6 million.

The general fund pays for police, fire, development services, parks, finance and the legal department, as well as elected officials’ salaries and travel. The general fund in 2006 is about $12.3 million.

City staff then pared the budget hole down to about $1 million, including $400,000 to retain capacity for councilmanic bonds. City officials wanted to keep the bond capacity so that they could borrow against the general fund to pay for large capital projects, such as marina redevelopment, construction of a pier or downtown redevelopment.

Seven staff positions were lost in the round of cuts, though no one is losing his or her job. With one exception, the lost positions are either unfilled or new positions requested by department heads. The fire department lost one night-shift position, down from the current five positions to four. They also won’t be able to fill a request for a new operations chief position.

The legal department is losing a prosecutor, a position that’s currently vacant because of attrition. Development services is losing an associate planner position, which has been on the books but never filled, as well as a request for an administrative assistant and two half-time interns in engineering. The finance department also won’t get to fill a new cashier position.

Monday, Merriman and new City Supervisor Paul Schmidt unveiled a balanced budget.

To get there, Merriman said they cut out the $400,000 councilmanic bonding capacity, which means no general-fund money for big projects.

They also pilfered $200,000 from reserves. The general fund reserve is currently at 16 percent of the fund, but this will put it at 14.5 percent. Merriman said that’s still a healthy cushion. Originally, the target was 15 percent, but he said that’s been changed to 13 percent.

The additional $400,000 came from cuts, largely from delaying expenditures.

Specifically, $100,000 was cut from the street-repair fund. Money normally set aside for the replacement of fire engines will instead be spent. City council and mayor travel was trimmed. Projects to replace playground equipment were cut.

Public Works Superintendent Cathy Rosen said the city has to pull out older playground equipment at Neil Park and City Beach Park because of liability issues. The equipment no longer conforms to safety standards.

But with the budget problems, the city doesn’t have the money to replace equipment. At least not anytime soon.

Under the budget, no more general fund money will go toward Windjammmer, the city’s ongoing effort to revitalize the downtown and waterfront areas. Windjammer does have a limited budget of its own, with funds from lodging taxes. But the budget problems probably will make it more difficult for the city’s $135,000 Windjammer consultant, Tom Beckwith.

“It’s a real challenge,” Cohen said. “We’re really counting on the private sector to step in.”