Santa Fe city councilors on Thursday continued to whittle away at a budget gap for the fiscal year that begins July 1.

Eight of the governing body's nine members informally agreed at a special study session to use reserve cash from the city water utility to cover some of the projected $4 million shortfall.

While reaching consensus on tapping $1.1 million from the water system, councilors put off a decision on raiding a separate pot of reserve cash from the city wastewater division.

It appeared officials also are eyeing other accounts that hold millions more in cash.

"I wasn't aware that those balances were there and that we could possibly use them to close the gap," City Manager Robert Romero said. "It sounds like it's at the council's discretion how much we leave in those fund balances. So, it seems like the picture looks a lot better than what I understood before. It's just not something that we've done in the past."

Differences remain, however, about whether the city should impose a property-tax increase to create a more sustainable source of revenue in the wake of declining tax collections in recent years.

Earlier this month, Mayor David Coss offered to amend a property-tax proposal that he introduced in March by removing tax references and replacing them with language about cash reserves. However, the mayor said Thursday that unless councilors approve an alternative plan he agrees with, the tax proposal isn't dead.

City Finance Director Kathryn Raveling walked councilors through a list of funds in which cash balances have accumulated over time. The city has more than 250 such funds, which are used to support operations, and pay for equipment and capital expenses. Examples are $279,502 in a "Quality of Life" account, $7.6 million for solid-waste operation, and $467,989 in an airport reserve fund.

The amounts on hand vary from department to department. Raveling said one good practice for the future might be to set guidelines on how much money is retained.

"It probably needs to be a more formalized process," she told councilors, noting that the only fund required by state law to carry a cash balance is the general fund.

Councilor Rebecca Wurzburger asked Raveling to report back with a more complete analysis of how much money councilors could take from the fund balances without hurting overall operations.

"Every time we turn around, we appear to have more money, which is confusing to the public," she said.

Discussion of an increase in the city's share of property taxes, while backed by unions and others concerned about further cuts in personnel spending and services, ignited vocal opposition from the community.

Wurzburger, who chairs the Public Utilities Committee, said she expects councilors on her committee to hear next week from a rate consultant about options regarding further rate increases already scheduled for the wastewater division. The discussion comes in light of the fact that there is excess money in a reserve fund after a 30 percent hike took effect in 2010.

A discussion about that and long-term wastewater projects is planned for Wednesday evening.

Another idea floated Thursday as a stop-gap budget measure would divert into the general fund part of the gross-receipts tax revenue stream that goes to the wastewater division. If that recurring $1.7 million is added to the $1.1 million from water-system reserves for next year, that leaves a more manageable deficit, according to Coss and other councilors who said that plan appeals to them.

The next Finance Committee meeting is set for 5 p.m. Monday. The Public Utilities Committee meets at 5:15 p.m. Wednesday.

The deadline for state approval of the new city budget is June 1. The last City Council meeting before that date is May 25.

Contact Julie Ann Grimm at 986-3017 or jgrimm@sfnewmexican.com.