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Rough projections of the city's operating budget through 2014 show a revenue trough in 2011 that could lead to a $7 million budget deficit, though the upcoming 2010 budget year appears sound.

City Finance Director Craig Duncan presented five-year budget projections Wednesday to the Juneau Assembly Finance Committee.

Assemblyman Merrill Sanford asked if the city should start cutting now as it plans for the 2010 budget year, in which a positive $1.5 million balance is forecast, to start making up for the possible 2011 deficit. The city's core annual operating budget is about $84 million.

City Manager Rod Swope didn't have a reply ready.

"I don't know. I'm not sure," Swope said. "You're hearing this about as quickly as I am."

Duncan emphasized that his projections are based on market assumptions, real estate valuation trends, state and federal funding sources subject to change, the tourism industry and other uncertainties.

"A lot of this is really unknown. We're looking well into the future in this case. If what we're indicating actually comes to fruition ... my thought is, get more information into thesummer and fall" before deciding to pare back budgets, Duncan said.

Duncan said sales tax revenue is a "big unknown." Anecdotally, he said extended legislative sessions in the past have helped pad out the figures, as did the unusually big permanent fund dividends last fall.

Swope and Duncan said discretionary spending in city departments already has been cut almost completely and that only thing left to cut may be personnel.

"I guess the bottom line is it looks pretty grim," Assemblyman David Stone said.

"I think generally it's pretty obvious. People feel it, they anticipate it," Swope said. "There's no question, we're going to have a problem in (2011 and 2012). The question is how big a problem."

There are some things to be optimistic about, Swope added. Duncan's models don't include potential revenue from the construction of a major new office building near the old subport property downtown or the Kensington gold mine, if it goes online. That mine, located on the north side of Berners Bay about 40 miles northwest of Juneau, is on hold pending a decision from the U.S. Supreme Court regarding the disposal of mine tailings.

Representatives of the mine company Couer Alaska have said they will develop the site whatever the court outcome. The mine is expected to create more than 200 jobs, and industry salaries average $80,000, a company representative has said.

"It's not all gloom and doom. Those are the types of things that help moderate this a little bit," Swope said.

The Assembly's budget update - it's on the second year of a two-year cycle - must be approved before the new budget year begins July 1.

Before the committee moved on to other business, Sanford hinted at what he'll look for in the budget update.

"When Kensington comes online, we'll all stand up and cheer. But I'm not going to count on it. ... $7 million is a lot of money to make up," he said.