Sit tight.

That was the advice City Manager Tom Forslund gave to the Casper City Council this week, banking on years of saving money to help the city weather a financial storm.

The city is facing a major shortfall in sales tax revenue, the largest source of funding for the city's daily operations. The difference between what the city council planned on and what the city received is close to $1.6 million over the first three months of this budget year.

The city has begun dipping into a reserve fund it keeps for rainy days. It's city policy to keep six months of operations in a reserve fund, and at the end of the last budget year the city had more than seven months in reserves.

But the city has already burned through almost $1 million of its $23 million reserve fund to help bridge the shortfall, and that's just for the first three months of this budget year.

At that rate, the city will have used about $4 million of its reserves by year's end.

"That assumes we've reached the bottom and that the first quarter is as low as it's going to go," Forslund told the council Thursday night. "That's the problem with doing straight-line projections -- you just don't know if you've reached the bottom."

Forslund's recommendations amount to a step-by-step approach that would see the city trim fat before resorting to layoffs, furloughs or service cuts.

The picture he painted was bleak, though.

He said the city has twice faced similar challenges, and ended up reducing the city's work force by 23 percent through layoffs, attrition and early retirement incentives.

"We had to because we had no reserves, particularly in the first round of cutbacks around 1987. We just did not have the reserves," he said. "We were burning through $1 million a month ... we were on the verge of being totally broke."

Sales tax revenue alone accounts for close to half of the general fund -- the pot of money that supports the day-to-day functions of city government.

Almost two-thirds of the general fund is used for labor-related costs. Even shielding public-safety employees from cuts could be impractical, as more than half of the city's employees are from that sector.

"You have to look at the whole organization," Forslund said. "You can't put big areas out of reach for things."

Forslund pitched a piecemeal approach: cutting travel expenses, overtime costs, leaving positions vacant and reviewing non-labor related costs for potential savings before looking at cuts.

"Phase two is a cutback phase," Forslund said. "It's when we go to cutback of services, cutback of staff, and cutbacks of projects. I don't think we're there, but I think we need to be prepared to move into phase two."

Ward 1 Councilman Keith Goodenough jumped in, offering to put the "dead in the water" civic auditorium project on the chopping block. The city has $4.5 million obligated to the project from the city's reserve fund.

Forslund reiterated the decision to create a reserve fund is what's keeping the city in good financial shape.

"We save in the good times so we can draw down the reserves in the down times," Forslund said. "Casper as well as Wyoming has a long history of booms and busts, ups and downs ... so it's certainly not unusual and unexpected that some down times would be coming."

You can reach city reporter Pete Nickeas at pete.nickeas@trib.com or (307) 266-0639. You can read more about Casper politics and government at http://tribtown.trib.com/redtape.