By Ray Gronberg

gronberg@heraldsun.com; 419-6648

DURHAM -- The city government's operating departments are on track to underspend their fiscal 2009-10 budgets by at least $1.9 million, a number that could rise as returns come in from recent changes to Durham's recycling effort.

But numbers from July, August and September suggest that because of the recession, revenues for the year could run about $1.6 million short of the city's original expectations.

Administrators cautioned that the picture will become clearer as property tax payments roll in this month and next.

City Council members were nonetheless pleased to hear Thursday that the departments are holding the line on spending.

"This is very impressive management," Councilman Farad Ali said.

Department-by-department figures show the largest expected savings in the Parks and Recreation, which is projected to shave about $178,481 off its authorized $10.1 million in spending.

Two joint departments, City/County Planning and the Durham 911 center, are on track to run $118,542 and $117,905 under budget, according to estimates from the city budget office. Officials said no department appears likely to bust its budget.

The overall savings number is likely to go up as officials add in what the Solid Waste Management Department is realizing from the moves it has made on recycling.

While the department is currently projected to run $81,623 in the black, that's likely "very conservative" because it won't have to spend a budgeted $300,000 on a contractor to sort and re-sell the recycled paper, plastic and other goods city workers collect, Bonfield said.

The council after months of debate approved on Monday a no-cost-to-the-city processing contract with Sonoco Recycling, which agreed to haul goods to a sorting plant in Raleigh at its own expense.

In addition, because residents are recycling more now that the city's given them larger collection bins, less trash is going to the East Club Boulevard transfer station for shipment and burial in a landfill in Virginia.

As a result, "in the first quarter we saved a little less than $200,000 in tipping fees," Bonfield said, referring to the fees the city has to pay for shipping waste to the landfill.

"If we keep on the same track that number is going to be closer to $1 million or $1.1 million," he added, referring to the overall savings in Solid Waste.

Both major recycling changes were hard-fought. The company that formerly handled recycling collections, Tidewater Fibre, opposed the city's decision to bring curbside service in-house, and then battled three other companies for the processing deal.

The decision to demand a no-cost processing contract came at the instigation of Mayor Bill Bell, who opposed a cost-sharing deal that would have forced the city to pay out the $300,000 if markets for recycled goods remain poor.

The cost-sharing deal would have made the city money if materials prices recovered. But Bell said he didn't want the city to take on the downside risk.

The one city department that doesn't rely on tax revenue, Water Management, appears likely to run about $2.4 million in the black in fiscal 2009-10.

The department is on track to underspend its $79.8 million budget by about $3.7 million. Revenues are running slightly ahead of expectations, so the department can cut back on planned draws on its reserves, officials said.

Water consumption in the first quarter was up 8 percent compared to the same months last year, as memories of the 2007 drought fade.

But the increase could have been worse, suggesting that customers are "responding positively" to continued calls for conservation, Budget Director Bertha Johnson and Interim Finance Director Keith Herrmann said in their report.

Officials are already plotting budget strategy for fiscal 2010-11, and face problems that include the continued lagging economy, rising debt payments and a series of moves by the state that will take revenue from the city while adding to costs.