Auditor Milene Henley told the County Council on Tuesday that the county will have $1 million less in revenue to spend next year.

Henley said decreases in sales tax revenue, a reduction in new construction and an anticipated lower collection rate for property taxes will probably cause year-end total revenues for 2008 to fall short of revenues projected in the 2008 budget.

Combined with changes in budgeting practices that left little slack and tapped into beginning-of-the-year cash in 2008, next year’s general fund budget will need to be roughly $1 million, or about 7 percent, lower than this year’s.

Henley said the county is not immune from the effects of the national economy and the investment banking crisis. The San Juan County Land Bank and the county’s Capital Improvement Fund depend heavily on the Real Estate Excise Tax collected on home sales, which have taken a nose-dive.

On a presentation slide labeled “The Revenue Conundrum,” she noted that the 1 percent increase allowed in property tax revenue in San Juan County is only $40,000, which is “less than 2009 requested (budget) increases due to the cost of fuel and related expenses” alone.

In the long run, “Even if the county cut all non-mandated services, revenues could not keep up,” she said. “Service levels will fall and (programs supporting) community values will be lost.”

Pointing to a graph that showed projected revenues falling further behind maximum projected expenditures through 2014, she added, “And it only gets worse.” The maximum projection for expenditures assumed that county costs continue to rise at the same rate that they have the past three years.

Henley offered no easy solutions, but noted that San Juan County’s property tax levy is only one third of the maximum permitted by the state, and that the law allows for dedicated levies to support health programs and criminal justice.

County staff members are now in the midst of preparing 2009 budget recommendations. County Administrator Pete Rose told council members that he will present them with a balanced budget in October as required by law, but told council members they would have to make difficult decisions about priorities, essential services and community values.