KRUM — City leaders will have their final hearing on next year’s budget tonight, hours before the state deadline to approve it.

DRC/Barron Ludlum

Tonight at Krum City Hall, 102 W. McCart St., the City Council will have its final hearing on the 2007-08 budget and tax rate. The meeting starts at 6:30 p.m.

The council has met a dozen times since its first workshop in June, wrestling with a budget that must meet the needs of a fast-growing fire department and shrinking reserves.

State law requires that cities adopt a budget, and the tax rate to support it, by the end of September. Once it is adopted, the city secretary must file the final paperwork with the county tax assessor by the Sept. 30 deadline.

Leaders for the cash-strapped city have proposed a tax rate of 58.983 cents per $100 valuation for the 2007-08 fiscal year, an increase of 5 cents from last year’s tax rate.

The average home valuation in Krum increased 4.4 percent this year, to $118,164 from last year’s average value of $113,218. This means the annual city tax bill for the average Krum home will be about $697 this year, or about $86 more than last year.

With money raised from the tax increase, the council has already voted to set aside $34,000 to boost the city’s cash reserves.

The City Council did not see the city’s full financial picture until after the May general election, when an independent audit for the 2005-06 year was finally released. State law makes such independent reviews generally due in January.

The city logged $1.2 million more in expenditures than it had budgeted for the 2006 fiscal year and accrued a $286,160 deficit.

At the end of September 2006, the city had $78,508 in unreserved funds, or only a few weeks’ worth of spending. Generally, auditors recommend that cities have about three months in unrestricted funds for a healthy cash flow.

City leaders took several strong control measures since the discovery, including recalling city credit cards, firing the fire chief and hiring its first city manager.

Jack Smith, who retired as Sanger’s longtime city manager, took the job in Krum for $1,000 per month. Smith said new credit card controls have helped rein in spending.

The interim fire chief also restructured that department’s shifts to reduce overtime costs. Ever since it became a city department in 2003, the Krum Fire Department has struggled to contain personnel costs. The first year, the city budgeted about $100,000 for fire service and spent more than $300,000. In 2006, the department went over its $450,000 budget by $170,000.

Former Mayor Larry Lamonica has been highly critical of current mayor Terri Wilson and the rest of the council in the waning days of the budget process.

During the last council meeting, he spoke for more than 10 minutes during the citizen’s agenda, far exceeding the three-minute time limit allotted to residents to air their concerns on non-agenda items.

Lamonica said Wilson, a schoolteacher, had conflict of interest in the city’s relationship with the school district regarding  the district’s new construction projects. He also said that fund balances in the water and sewer department had been allowed to go too low.

Friction between Lamonica and Wilson has been growing for some time.

Lamonica acknowledged that, before leaving office in May, he erased phone numbers from his city-issued cellphone and emptied filing cabinets in the mayor’s office.

He had received a letter from the town’s attorney demanding those files be returned.

Lamonica said he took personal notes with him, but the city secretary, not he, was responsible for keeping city records.

But since then, Lamonica said he has written the city attorney and pledged to cooperate with the request for copies of mayoral records in his possession.

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881. Her e-mail address is pheinkel-wolfe@dentonrc.com .