As a result, the district is cutting conservation programs and overtime pay, and could seek higher-than-anticipated rate hikes next year. Furloughs for the district's 255 employees have been discussed, but the district hopes to avoid implementing them.

"It's a combination of things that we are facing," said board member Jack Gibson. "It's a perfect storm of factors."

Primarily, water officials believe the poor economy has prompted people to use less water. The number of high-volume water users has dropped significantly this year, district officials said.

"People are watching pennies wherever they can, so they are watering less," Gibson said.

The public is also hearing state warnings on water conservation, Gibson noted, although Marin's supplies are local and in relatively healthy shape.

The water district may also be a victim of its own success. It has been stressing water conservation as a way to help meet future water needs.

Conservation has also been highlighted this year as desalination as a potential water source has been discussed. Many have countered that conservation could solve an anticipated water shortage.

"The bottom line is we have been asking people to use less," Gibson said. "And that has hurt us, but we want to save the water."

Water sales are down almost 10 percent this year, according to the district, which has an

Ironically, in order to make up the lost revenue, the district board voted last week to cut its conservation program by about $1.7 million. The savings will come from reducing or limiting the rebates paid out for people who switch to low-flow toilets and who buy water-saving clothes washers.

Overtime pay also will be cut, which will have an impact on response times to pipe leaks and other problems. But if the problem is serious, crews will be dispatched. Ten positions are vacant at the water district and those will not be filled as well.

Before the budget woes hit, the district had built in an 8.25 percent water rate hike for the next fiscal year. Gibson said he hopes to not go above the planned rate hike, but that it might be moved up earlier in the year to generate more revenue sooner.

Paul Helliker, general manager for the district - which serves residents from San Rafael to Sausalito - said the district would try to avoid a big rate hike.

"We are looking heavily at the cost-cutting side," he said, adding that the financial picture will continue to be monitored.

The North Marin Water District, which serves customers in Novato and West Marin, also has seen a drop in water sales this year. The district also urged customers to conserve because of dwindling supplies from its main source, the Russian River.

"A lot of this is weather driven; it was a cool summer," said Chris DeGabriele, general manager of the North Marin district. "And people are watering less. There are a lot of brown laws in front of businesses and residences."

The district budgeted for lower water sales, knowing at the beginning of the year the county could face a drought. That resulted in putting off some maintenance projects.

"We have reduced revenue as well, but it's a little to early to know if we will need to make cuts," DeGabriele said.

Contact Mark Prado via e-mail at mprado@marinij.com