By Steve Wehrly, Journal reporter

Looking at the town budget, which is scheduled for final approval by the Town Council Dec. 20, someone might ask “what recession”?

Understanding the budget basics is pretty easy. Revenues are projected at $11.67 million; expenditures are appropriated at $11.05 million. The budget will generate a $613,000 surplus. $11.05 million is a 21 percent increase over the $9.12 million 2012 budget.

Of the total expenditures, almost $2 million is appropriated for the “Current Fund” — the general operating account for the town government. That’s about 20 percent more than the 2012 budget, which was $1.66 million.

The rest of the expenditures are appropriations made to the “enterprise funds” (utilities such as sewer and water), reserve funds and bond redemption funds.

The enterprise funds collect revenues from utility billings; most of those revenues are used to operate the respective utilities. The bond redemption funds are used to make payments on the bonded indebtedness incurred for capital projects by the utilities. In 2011, the town paid about $196,000 in interest on its debt borrowings.

It’s the reserve funds that are a distinguishing feature of the town budget. Of the $14.2 million projected “ending balance” for all budget accounts, about $12 million are accounted for in various reserves and the Special Revenue Fund.

Started in 1987 by town Treasurer Wendy Picinich and then-Town Administrator King Fitch, the reserve funds were key to the town achieving an unprecedented A2 bond rating by Standard & Poors, resulting in a six-figure interest savings to the town on its sewer bonds. The reserve funds are mostly managed by the state Treasurer, who puts them in super-safe low-interest accounts; in 2011, about $14,600 was generated and credited to the reserves.

In response to questions from the Journal, Picinich explained: “The Town’s reserve funds are internal savings accounts to purchase future equipment, pay for future infrastructure, pay for study updates such  as the water comprehensive plan which is required by State law, pay for major repairs, etc. Some funds such as the Special Revenue Fund accounts for monies whose use is restricted by law. They aren’t used to balance the budget.”

Reserve funds are only part of the answer for big projects, such as the $8 million water transmission line replacement scheduled to begin in 2013, Picinich explained. Grants, low-interest state loans and revenue bonds will also be part of the financing mix, but having the reserve funds facilitates obtaining funding from other sources, especially if those sources offer funding on a “matching” basis.

No accounting tricks or budgeting gimmicks, no sleight of hand. And no tax hikes or utility rate increases, except for $230,000 in additional revenue from the public safety sales tax increase approved last summer by all the county voters.

What recession? Some town residents definitely continue to be affected, but because the town has kept to the “Picinich Plan,” Friday Harbor continues to be in fine fiscal fettle.