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City officials have good news for taxpayers --- a proposed 2010 budget that's more than $1 million smaller than this year's budget, with no service cuts planned.

"They had us dead six years ago, but we're still squirming," said Mayor James Brewster, who presented the $19 million spending plan to city council at a special meeting Wednesday night. "I think that's a good thing."

Last year, city officials laid off 10 employees to balance the budget. The mayor said the city is still suffering the after-effects, particularly in the public works department.

"I don't want to go through that again," Brewster said. "I don't think that's the right thing for the city, and I think it sends the wrong message."

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Next year's budget is smaller than the current budget in part because several large projects have concluded, City Administrator Dennis Pittman said, and because of salaries eliminated through layoffs and retirements.

Two labor contracts --- for city police and firefighters --- are currently being negotiated. Brewster said employee raises have been factored into the budget.

Also factored is the expected closure in March of the Dish Network call center and the elimination of its 600 jobs.

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The direct financial hit on the city's income from the Dish layoffs and the previous closure of the Precoat Metals plant in Christy Park is the equivalent of four full-time employees, plus their benefits, Pittman said.

"We're asking all of our managers to manage better --- to spend their money like they spend it in their own households, and to take better care of their equipment," Brewster said.

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Under the proposed budget, which council will likely vote on at its Dec. 2 meeting, wage taxes would remain at 1.2 percent. (An additional 0.5 percent is collected for McKeesport Area School District.)

Property taxes would remain at 4.26 mills on the assessed value of buildings and 16.5 mills on land. City properties have a combined taxable value of $365.8 million; according to the Allegheny County Treasurer's Office, land accounts for 75 percent, or $274 million, of that value.

Balancing the budget relies in part on the city's receipt of a new $720,000 "host fee" from the Municipal Authority of the City of McKeesport.

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Landfills in many municipalities pay a host fee of $1 to $4 per ton of refuse dumped. According to Pittman, Allegheny County Sanitary Authority pays a similar fee to Pittsburgh for its plant in that city's Manchester neighborhood.

Last year's City of Pittsburgh budget does not include a line item for revenue received from Alcosan, and an Alcosan spokeswoman was not available for comment Thursday.

However, Pittsburgh does receive $6.8 million from the Pittsburgh Water and Sewer Authority and more than $1 million in "public service privilege" fees from other utilities who run lines beneath its streets.

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City officials said the host fee is intended to compensate taxpayers for hosting the authority's sewage treatment plant, located in the 10th Ward near the mouth of the Youghiogheny River. They note that water from Marcellus shale drilling operations is being treated at the plant, and is being trucked through the city's streets.

The 10th Ward sewage treatment plant also serves residents of East McKeesport, Glassport, Liberty, Port Vue, Versailles and White Oak boroughs and Elizabeth and North Versailles townships, whose residents presumably would be less than pleased at paying the city $720,000 through their sewerage rates.

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But city officials said they expect the municipal authority to pass much of the host fee onto Marcellus shale drillers and waste-water haulers.

"If (Marcellus shale drilling) becomes the business we expect it to be, we want to be ready for it," Brewster said.

Council President Regis McLaughlin, who also chairs the sewage authority's board of directors, said the agency is planning a major expansion of its treatment facilities to handle both well water from drilling operations and federal and state pollution mandates.

"We do have enough capacity now to handle what we're taking," McLaughlin said.

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The proposed budget includes $10,000 from leasing rights to drill into the Marcellus shale under city-owned properties. Brewster called that "peanuts" compared to the annual revenue that drilling rights could eventually generate for the city.

"If we have the rights to (drill into the shale), and if we can get access to it, it's my opinion that this revenue stream could generate a half-million to a million dollars per year," he said.

Three drilling firms have already approached the city, Brewster said, adding that he has asked City Controller Ray Malinchak, a registered professional engineer, to help evaluate drilling opportunities.

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Proceeds from the sale of delinquent sewer bills will help the city pay its pension obligations this year, he said, but in the future, the city needs to identify ongoing sources of income, such as Marcellus shale drilling rights.

"For those who have paid attention these last five and a half years, they know that one-time sales of things like the sewer lines and the receivables were done because we needed to fill these gaps," Brewster said.

"We're not going to be pulling any more rabbits out of hats," the mayor said. "I'm out of rabbits, and I'm out of hats."