Breichner said Friday he has no doubt some type of tax increase will be necessary to balance the budget.
The city is also looking at other ways to increase revenues, such as raising city parking rates, as well as ways to cut expenses, he said.
To balance this year's budget, the city increased real estate and business property tax rates, trash fees and water and sewer rates.
Before the council adopted the $25.57 million budget in June, the Finance Department estimated the city would face a $678,368 shortfall for fiscal 2003, which begins July 1.
In September, Hagerstown Finance Director Alfred Martin projected the shortfall would be closer to $1 million.
Martin now estimates the shortfall will be closer to $1.25 million.
The financial picture has become more bleak because revenue from city personal property tax and state income tax have been less than estimated, city officials say. The cost of health care and pensions have continued to increase in the last few months.
The city has delayed filling some job vacancies and may defer some capital projects to address budget shortfalls.
At September's meeting, the council discussed increasing the real estate tax rate by about 1.5 cents, which the city said would raise $270,000. For homeowners whose properties are assessed at $100,000, the increase would add $15 to their annual tax bills.
At that meeting, Councilman Kristin Aleshire asked Martin to also explore the possibility of imposing an impact fee on new residences, with the proceeds paying for firefighting expenses. The fee would help the council with a goal of hiring two firefighters next year at an estimated starting annual cost of about $90,000.
The general fund is the only city fund that receives money from city taxes. Other funds, such as water and sewer, receive money from user rates and fees.