That money would be part of $409,000 in overall "revenue adjustments," which could include higher fees for some city services, Martin and Zimmerman said. The specifics of the fees were not revealed at the meeting.
Zimmerman also recommended no increases in city staff, including firefighters, who steadily have increased in recent years.
The 1.5-cent property tax increase would translate to an increase of $15 for a home with an assessed value of $100,000. If approved, the city's total property tax rate would be 79.8 cents per $100 of assessed value, or $798 on a $100,000 home.
If the tax increase were approved, it would be the current City Council's third tax increase. The council raised real estate tax rates 1.5 cents last year and 3.6 cents in 2002.
Including a 4-cent tax rate increase in 2001, real estate taxes on a $100,000 home will have increased $106 in four years if the hike proposed this week is approved.
Zimmerman said his staff has identified $919,000 in possible cuts. The reductions include $400,000 in construction spending, holding off on a health insurance rate decrease for city employees, and holding fewer public functions.
The proposed rate increases and cuts would bring the budget closer to balanced, but the numbers Zimmerman presented Friday still leave a $417,000 shortfall.
The remaining gap, Zimmerman said, "will be a tough nut to crack."
Martin said the city should look at other ways to raise revenues, including impact fees on new development. He said a bill under review in the General Assembly would allow the city to seek a specific tax to support the fire department.
Hagerstown City Council members expressed positive feelings about the city's financial situation after the budget retreat.
Councilman N. Linn Hendershot said he had been concerned about what initially was estimated as a $1.8 million gap, but "I felt a lot better after that meeting than I did before."
Regarding the proposed tax increase, Hendershot said, "I'm hopeful that we can get it below that."
Councilman Kristin B. Aleshire said he's optimistic about the budget.
"It's fixable," Aleshire said.
Councilwoman Carol N. Moller said she thought the city's budget "is probably in better shape than a lot of ... corporations."
Zimmerman and Martin blame cuts in state tax transfers - which includes a $600,000 reduction from state gasoline taxes this year - and ballooning health care costs to city employees and retirees as major stresses on the city's budget.
Martin said that ongoing union negotiations could change the budget outlook.
While a Hagerstown City Police contract has been signed, the three remaining contracts - for firefighters, electric workers and water and sewer employee's unions - have yet to be settled.
In the unions' cases, the city has allowed for a 2.5 percent cost of living increase and a savings of $44,000 from a reduction in the unions' sick leave buy back program. "If it goes beyond that, the money will not be available in the proposed budget," Martin said.
The proposed budget is set for official release March 31, Zimmerman said. The following week, Zimmerman and budget officials will outline the detailed budget at a mayor and council work session. The council must approved a balanced budget, which will take effect July 1.