PORT TOWNSEND — The City Council had some big business to do Monday night.

There was the $28 million 2011 budget, a $3.8 bond issue and a $40,000 property purchase.

Yet the Port Townsend City Council found itself preoccupied with a seemingly minor measure that, at most, would cost it another $12,000 a year.

Council members scrutinized, questioned and finally sent to committee a proposal to extend the building fee deferments already permitted to developers of affordable housing — like Habitat for Humanity — to utility fees as well.

First, they approved on first reading a 2011 budget for $28 million that City Manager David Timmons called “status quo.”

The budget is close to the 2010 budget, he said.

With tax revenues generally stagnant, there are no cost-of-living increases for city staffers, and 1 ½ positions were cut from the payroll.

The budget is not final until it is approved on a second reading.

The city will continue with its ambitious plan for infrastructure improvements intended to enhance business opportunities, Timmons said.

The reserve fund, drawn down to respond to ferry service interruption, is planned to come back next year to just above the 5 percent of budget.

The council aims to have 5 percent to 8 percent in reserves, he said.

The council also issued $3.8 million in bonds, taking advantage of low interest rates, Timmons said, to fulfill the long-term capital plans for projects that include sidewalk improvements and a library seismic update.

The council also agreed to buy a 2.8-acre parcel of land for $40,000 that will allow the Howard Street improvements to progress and will likely be used for wetland mitigation on the Howard project.

But the council spent most of its time Tuesday on the building fee deferments, which automatically become permanent waivers after 10 years if a house continues to be owned by a low-income homeowner, costs the city $5,000 a year per unit in lost revenue and is considered an extension of its policy to support affordable housing.

Habitat has been building about two units a year, but hopes to soon be able to build four units.

The newest proposal would cost the city an additional $3,000 per unit.

No one on the council objected to the intent, but it was decided that more study was needed to refine the policy after it was noted that the proposal represents between 5 percent and 10 percent of utility fee revenues.

“That’s a big chunk,” said Councilwoman Laurie Medicott, who noted she is deeply involved with Habitat as a volunteer.

The proposal was unanimously approved on first reading but will undergo further scrutiny by the council’s development committee before coming back for final approval.

________

Julie McCormick is a freelance writer and photographer living in Port Townsend. Contact her at 360-385-4645 or juliemccormick10@gmail.com.