POUSLBO — Poulsbo city leaders are looking for ways to cut $50,000 in spending for the remainder of 2010.

Department heads were asked by the city council Wednesday night to cinch operations expenditures over the next six months to compensate for revenue shortfalls and unplanned legal expenditures.

This week also marked the start of the 2011 budget planning process, during which city leaders plan how they’ll use taxpayer dollars in the coming year. Preliminary budgeting shows a possible shortfall between $700,000 and $1.2 million, said city Finance Director Debbie Booher.

“The overall picture is we’re right where we expected to be,” said Booher.

Sales and real estate tax figures are actually higher than projected she said, but a few revenue sources — planning and permitting fees and investment earnings — are down.

The city has earned $60,000 in investment returns so far this year, a far cry from the $200,000 it projected to earn by year’s end.

The city also spent more than $30,000 fighting an unanticipated appeal against its 2009 Comprehensive Plan.

Now city departments will make cuts to help bridge that gap. Poulsbo Mayor Becky Erickson expects to save roughly $31,000 by no longer contracting with the Poulsbo Fire Department to assess business license applicants. Erickson is personally footing the bill for her travel and training. She also decreased her executive assistant’s hours to part-time, and reviews nearly all department expenditures.

“Any expenditure that is not contractually obligated or a utility has to get my prior approval before it goes out the door,” she said.

The council also recommended an increased utility excise tax on water and sewer revenues, bumping the amount that goes into the general fund from 6 percent to 8 percent. The change is expected to increase the general fund by $60,000 over a 12-month period. Rate payers will not see a cost increase, officials said.

“No effect on the citizens, no effect on the services,” said Councilman Ed Stern.

The change isn’t mean to be permanent, as that would eventually affect the city’s ability to conduct capital replacements, Councilwoman Connie Lord said. The city will review the tax next year.

The city council is also cutting its travel and training budget by $2,500, effectively halving the remainder of its spending funds for the year.

A budget kickoff Wednesday night outlined various spending and allocation recommendations, many of which carry reductions made in 2010 over to 2011. Those recommendations will be worked into a budget draft to be released in late September. The budget will likely be adopted in December.

Councilman Jeff Bauman lauded city staff for cutting nearly $100,000 in operating expenses already, and said continued cutbacks in 2010 may not fix next year’s budget issues, “but it at least gets us headed in the right direction.”