A budget that could see the City of Union’s first tax increase in more than a decade will be on the agenda when Union City Council meets Tuesday evening.

Council will meet at 6:30 p.m. in regular session followed by a budget work session in which it will deal with a projected $3.3 million deficit.

The city’s proposed budget for 2011-2012 projects expenditures totaling $41,213,950 compared to $42,912,140 budgeted for the current fiscal year, a decrease of $1,698,190 or 4 percent. Despite the projected decrease in expenditures, the city may to raise taxes for the first time since 1999 because projected revenues do not match proposed expenditures. Revenues for fiscal 2011-2012 are projected to total only $37,828,670 leaving a projected deficit of $3,385,280.

Covering that deficit may require an increase in property taxes and other city revenue sources as well as the use of prior year funds.

State law limits increases in municipal operating millage to the prior year’s millage plus population growth during that year and the total increase in the Consumer Price Index (CPI). The city, however, has lost population over the past decade and the CPI grew by only 1.6 percent in 2010. This would limit the city — should council opt to do so — to an operating millage increase of only 1.18 mills which would generate only $15,810 in additional revenue.

The city will also have to come up with funds to cover a $58,820 deficit the city ran in fiscal 2009-2010. State law permits the city to levy millage in its 2011-2012 budget to cover that deficit. An increase of 4.8 mills would be required to cover the deficit with council having the option of doing it in a single year or spreading it out over several years. This millage would be a separate item on a property owner’s tax notice and would be removed once the deficit is covered.

Also under consideration is an increase in the monthly garbage collection fee from $13 a month to $14. This would generate approximately $49,000 in new revenue and reduce the amount of money the city transfers from its general fund to the solid waste fund by an equal amount. Currently, the city transfers $130,000 a year from the general fund to the solid waste fund. If the increase is approved, that amount would fall to $81,000.

Council is also considering a 9 percent increase in the volume rate charged for water and sewer. The base rate would not increase but the rate customers pay based on the amount of water they use and the sewage they discharge into the sewer system would increase. This would generate approximately $400,000.

Also under consideration is the funding of several outside agencies with revenue generated by the Hospitality and Accommodations Tax instead of the general fund. This would reduce general fund expenditures by approximately $67,000.

This, however, would still leave the city facing a deficit of approximately $2.8 million which might require dipping into prior year funds to balance the budget. The city, however, is pursuing several grants that could reduce its costs, particularly for sewer and water construction. Council will also look for any and all other possible savings.