Petaluma City Council members will get their first look at the upcoming year's budget during a special hearing tonight at City Hall.

The $35 million in the general fund — the budget that pays for most city salaries, benefits and services — is 5.4 percent higher than the previous year's. All of that $1.8 million increase, City Manager John Brown said, is related to salaries and benefits for city employees.

Though the budget is balanced, it doesn't rely on program and service reductions, or pay cuts and furloughs for employees, as in the previous five years.

Instead, balance is achieved by holding the line on costs the city can control, using carryover funds from last year and taking advantage of increased tax revenues.

The budget also begins shoring up the city's emergency fund, which had been drawn down to nearly zero in the past few years.

The council will discuss the draft budget at the special meeting and could request changes. Adoption of the final budget is set for May 20 for the 2013-2014 fiscal year that begins July 1.

About $1.1 million has been designated next year to go into a reserve fund. That comes from $60,000 in anticipated new revenues, a negotiated one-time $500,000 payment from the city's new garbage hauler and the return of $584,000 erroneously charged by the county in its property tax administration program.

Last month, the City Council agreed on new savings policies to sock away an amount equal to 17 percent of operating expenses over the next five years. All one-time revenues and 15percent of all new revenues are to go into the fund.

In the future, any reserve funds withdrawn will require a repayment source and must be repaid within three years. That policy should rebuild reserves to about $6.3 million by 2016-17, Brown said.

Additional revenues expected this fiscal year are coming mainly from sales tax, mostly in transportation and business-to-business categories, Brown said, and from the soon-to-open stores in the East Washington Place shopping center.

A large chunk of the additional $1.8 million in expenses comes from an increase of $590,000 in the cost of health insurance and retirement benefits. The city also added a long-range financial planning position at $150,000 and filled two fire department jobs, at $220,000.

The meeting begins at 6 p.m. at City Hall, 11 English St.

You can reach Staff Writer Lori A. Carter at 762-7297 or