Abbotsford homeowners are likely to face a property tax increase of less than five per cent in 2010, but with money tight at city hall, they can also expect a reduction in services.

That’s according to Mayor George Peary, who describes 2010 as a “challenging year” for the city as it grapples with a decrease in revenue and increase in expenditures.

City finance staff made a presentation on Thursday night in Matsqui Centennial Auditorium, during which they said a tax increase of 11.9 per cent, or an additional $11.5 million, would be required in 2010 to keep the budgets of the police, fire and other city departments at 2009 levels.

A tax increase of 5.5 per cent would raise about $5.3 million, of which $2.2 million would go to police to maintain 2009 staffing numbers, while $3.1 million would go to other city services including fire.

The figures pitched by staff will be used as a guide when council first debates the 2010 budget at its Nov. 23 council meeting in Matsqui Centennial Auditorium.

However, Peary suspects the numbers will be trimmed further.

“I can’t imagine council will approve anything above five per cent, but it’s a case of what we will be willing to sacrifice to go below five per cent,” said Peary. “This is a challenging year. This is a year when we will have to have a pretty deft touch to make it all work.”

Peary has previously told The News that higher taxes, service cuts, layoffs and more user fees would all be considered in order to keep property taxes as low as possible in 2010.

The economic downturn has brought a drop in revenue from development permits, said city manager Frank Pizzuto.

Meanwhile, the city is also dealing with extra payroll costs due to renegotiated contracts with unionized employees in 2007.

While Pizzuto expects next year to be tight financially, he said the city is already seeing some “light at the end of the tunnel” with building permit applications starting to increase again.

“We knew that 2009 would be difficult because of the economic downtown, but we knew 2010 was going to be even more difficult because of very little economic activity in 2009 .. but we will see a turnaround in 2011.”

The city has already said it faces a $30-million shortfall for planned capital projects next year, including parks, roads, buildings and new equipment.

The final budget is expected to be approved at the beginning of January.

A one per cent property tax increase adds $4.25 to an annual residential property tax bill, for each $100,000 of a home’s assessed value. For a business, that number is $12.50 per $100,000.

Abbotsford taxpayers faced a 5.5 per cent property tax increase for 2009, along with hikes in utility fees.