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Northampton Mayor David J. Narkewicz this week issued a memo to all city department heads saying that most purchases of more than $250 need prior approval from his office.

NORTHAMPTON - Mayor David J. Narkewicz has ordered a reduction of all significant spending in the city as he grapples with a drop in projected revenues and an increase in expenses in several key areas halfway through the fiscal year.

In a Thursday memo to department heads, Narkewicz said all purchases over $250 will require prior approval from his office, except for utility payments, contractual agreements and capital projects.

The spending advisory does not include a hiring freeze, though Narkewicz said he will review every vacancy prior to posting a position.

"I ask that you consider the necessity of every expenditure before it is made," Narkewicz wrote.

The mayor's memo also outlines a bleak picture for fiscal 2013, stating that early estimates show the city facing a $900,000 budget gap just as the budgeting process is about to kick into gear next month.

The impetus for the this year's spending advisory is based on two developments. First, mid-year projections show revenues in several key accounts, including building permits and parking fines, are coming in below expectations.

Second, a handful of accounts that are typically underfunded each year and often supplemented with free cash are expected to face significant shortfalls.

He cited estimated budget overruns of $300,000 for overtime, most of it due to expenses from the Oct. 29 snowstorm; $225,000 for veterans benefits; and $450,000 for additional expenses in snow and ice removal, legal, unemployment and other emergency expenses.

The mayor said the city will have to dip into its free cash account to balance those budgets, a move that will essentially wipe out most of the slightly more than $1 million in that account.

In a report to the City Council last week, Finance Director Susan Wright outlined the city's revenue projections six months into the fiscal year.

On the positive side, meals tax revenue is up by about $77,000 from this time last year, and the hotel tax is up $10,500 over last year.

The city is also seeing an influx of unexpected money from property owners paying back taxes. A total of nearly $158,000 has been collected this year, an increase of $79,000 over this time last year, Wright reported.

"Since we do not plan on tax title income in our budget, this is significant additional revenue for the city," Wright wrote in a memo to councilors.

Parking meter proceeds are also up significantly this year, thanks to an increase in fees that went into effect last summer. The city has collected nearly $278,000 more than it had a year ago at this time.

Not all is rosy when it comes to parking revenue, however. Wright said that parking ticket fines through the first six months of the year were only up by $4,600 over the same period last year, even though the fines when from $10 to $15 last summer.

As a result, the city has lowered its revenue projections from parking ticket fines by $50,000 and likely will have to adjust the number down again in the coming months.

City officials speculate that the drop might be a result of higher ticket fines, but the cause also might be due to a vacant part-time parking enforcement officer position.

While the city's Building Department has issued more permits this year than last, the value of those permit fees is off considerably, Wright said. The amount of a permit fee is based on project cost.

Building permits are down 53 percent, plumbing permits are down 31 percent and wiring permits are off by almost 24 percent. That results in nearly $113,000 less money in permit fees than over the same period a year ago.

As for next fiscal year, Narkewicz said initial estimates from the state show a net reduction in state aid of about $178,000, even though the governor's budget plan released Wednesday includes level funding for schools and unrestricted local aid.

Combining state figures with preliminary revenue and expenditure estimates leaves the city with a gap of $900,000. The gap might actually be larger because it doesn't include salary and step increases for employes or collective bargaining agreements for the current and next fiscal year.