HAYDEN - The city of Hayden's primary budget issue is ever-growing demands for services versus ever-diminishing sources of revenue.

"The challenge is meeting future service expectations while continuing to fall further and further behind," said Stefan Chatwin, city administrator. "It costs money to plow the roads in the winter time, maintain the streets and parks, and provide recreational opportunities to our youth. Every year, it becomes more and more challenging to do that as the revenue numbers get smaller."

The city's revenues are primarily made up of property taxes and sales taxes, but revenues from the latter have been slipping and slipping.

The city receives about $1 for every $1,000 of taxable value on property within its limits, while other cities like Coeur d'Alene, Post Falls and Rathdrum are in the $4 to $5 range on property.

Hayden has one of the lowest property tax rates in the state - roughly 20 percent to 25 percent that of neighboring communities, he said.

For this year, the city of Hayden had $2.37 million in general-fund expenditures and $1.16 in public-works expenditures for a total of $3.53 million. According to the Association of Idaho Cities, Hayden's population for 2009 was 13,190.

Chatwin said that depending on how it's calculated, observers could say the city spent about $268 per person.

"We could break it down further to state that per-capita expenditures from property-tax revenues were $74, and from all other revenue sources were $194," he said.

Much of the cost of services in a community is based on that particular community's unique needs. A community that has more commercial activity will generally require more law enforcement.

"There isn't any fat in our budget," Chatwin said. "We have stripped down the budgets in each of our departments down to zero and then focused on priorities when rebuilding it back up."

That strategy, one that he and others at City Hall call "zero-based budgeting," has been a worthwhile exercise, he said.

"We have found ways to continue to stretch our resources and get every ounce of efficiency we can," he said.

Hayden resident Ronda Mitchell said she understands the city does what it can with limited resources and operates conservatively.

But, she's surprised that cities in the area, including Hayden, haven't trimmed more from existing labor costs - like everybody in the private sector has done in the down economy.

"They need to take a hard look at the No. 1 expense, which is wages," said Mitchell, who has lived in Hayden for seven years. Mitchell also happens to be the vice president and a commercial lending officer at bankcda, in Coeur d'Alene.

"You can't just keep passing (city labor costs - including employee health care expenses) on to the average Joe whose salaries have been cut," Mitchell said. Cities "are not exempt from cutting labor costs."

At the same time, she said, if city residents keep demanding infrastructure improvements and additional services, they're going to have to pay for them.

City Councilwoman Nancy Lowery said, "We are so conservative with our funds. We accomplish a lot on next to nothing, and we're always looking for areas to cut or stretch dollars."

Lowery, who also is president of the Hayden Chamber of Commerce, said business is what makes a city, and the city does what it can to support the ones it has and bring in others.

"That is one of the things we brought Stefan in for - economic development," Lowery said.

The city has a well established light industrial area near the Coeur d'Alene airport.

She said the city also is helping downtown businesses be more viable, with more shoppers, diners, and consumers seeking goods and services in the city.

"We're business friendly in that we try and listen - then make adjustments," Lowery said. "We are trying to do things in concert with the chamber to bring in events, such as cycling, and music festivals. We want to have things that bring people into our community and create visits to businesses."

She said the city is doing everything it can so it's well positioned when the economy rebounds.

City resident Mark Daanen, who also owns Daanen's Delicatessen in Hayden with his wife, Irene, said it's easier operating his business in the city because of Hayden's size. It's small enough that he can deal directly with city staff members if he needs something. He knows the people there, they know him, and that makes a big difference, he said.

He said City Hall and the chamber have done a good job getting the businesses in town to work together for common benefit.

And he said changes downtown - such as on streets and sidewalks - have brought more people to the city. He appreciates the efforts.

The city has the correct game plan - develop a downtown core, then begin hosting events there and promote it, he said.

"That's a good, logical progression of how you build a city up," Daanen said.

City resident Jim Elkins, 26, said improvements to Government Way in Hayden was money well spent by the city, which he believes is conservative with spending overall.

"It's safer there for pedestrians with the medians," he said. "Also, visually, it adds to the appeal of the city."

He said the city of Coeur d'Alene pays close attention to streets, sidewalks and landscaping. Hayden needs to as well, he said.

Elkins, who also is general manager of Ciao Mambo, an Italian restaurant in Hayden, said the city has done a good job in the last year or two bringing people downtown with events.

"We've got a great group at the Hayden chamber," he said.

Chatwin said, "There is a fine and careful line we are walking to ensure that, although Hayden will continue to grow, we maintain many of the small town characteristics that make this such a great place to live."

He said the recession and the slow recovery since have had a cooling effect on business in the city.

As a result of the recession, property tax revenues, state revenue sharing dollars and street revenues have all been reduced.

A large reduction in the amount of money collected for impact fees due to reduced new construction activities has caused the city to delay many street and parks projects, Chatwin said.

With revenues dipping, difficult spending cuts will be considered. With little "fat," it's not clear where the cuts would be made.

"Since we have always been careful during the 'boom' years in the hiring of new employees or expanding departments unless absolutely necessary, we have had very little room for reducing the city's workforce," he said.

"I guess you could say that we were pretty bare bones before the recession kicked in and have continued to manage that workforce responsibly."