A selective hiring freeze, a dip into reserves and a postponement of some capital projects are among the strategies Alameda has begun to implement in response to a projected $4 million city budget deficit.

Forecast as a $1.5 million budget deficit in December, it's grown to $4 million, in large part because of a downturn in the nation's economy and subsequent reduction in the city's property transfer tax revenues.

The city has responded with several internal changes, and residents most likely won't notice a difference this fiscal year, which ends in June. However, city officials do not expect that to last.

"We're assuming revenues will continue to decline because the economy and housing market are continuing to decline," assistant city manager David Brandt said. "We may not be able to set next year's budget to avoid service cuts. It may not be possible."

The City Council will hear more during a second quarter financial report at its meeting tonight.

The council also will receive a quarterly sales tax report for the period ending Sept. 30. According to the report, taxable sales transactions in Alameda during that period decreased .4 percent, or $5,542, from the same quarter of the previous fiscal year.

Gains in sales of food (14.7 percent) and general retail (2 percent, which includes sales from new stores at Alameda Towne Centre) were offset by declines in all other categories, according to the report.

That includes a decline of 7 percent in the transportation category, 7.2 percent in business-to-business, 6.8 percent in construction and 36.3 percent in "miscellaneous," which in part reflects purchases made by the city.

Sales taxes contribute about $1.3 million in revenues to the city budget, making it the fourth-highest contributor to city revenues.

The largest revenue decline this fiscal year has been in the city's property transfer taxes, a tax paid when real property is sold in Alameda. The city has reduced its estimate of property transfer tax revenues by $1.4 million and may need to reduce it further if the housing downturn continues.

"With credit difficult to obtain and home prices falling," the report notes, "home sales are beginning to slow, making the property transfer tax the city's most volatile revenue under current economic conditions."

Also being affected by the economy is the motor vehicle in-lieu fees, which are collected when vehicles are registered, with the fees declining as the vehicle ages. In part because fewer cars are being sold, the city expects to see a decline in those fees by $828,000 this fiscal year.

The declining revenues also include a drop in property taxes, permitting fees, state library funding and a potential delay in state gas tax revenues. The city's budget stands at about $84 million, though only some of that money can be used by the city at its discretion.

In addition, Brandt noted that, unlike past years, the state has not yet raided city coffers to make up its own $14.5 billion budget shortfall.

"So far the state hasn't taken money from us," he said. "That can change at any time."

The Alameda Unified School District, however, has been impacted by the proposed state cuts, to the tune of $4 million. Tonight, the council will consider authorizing a resolution voicing its opposition to the governor's proposed reductions in school funding.

In addition, at 6:30 p.m., in closed session, the council will hold labor negotiations with all public safety bargaining units.

Reach Alan Lopez at 510-748-1659 or e-mail alopez1@bayareanewsgroup.com.