POULSBO — The City Council sees light at the end of the tunnel.

Although expenses will exceed revenue in 2013, the council expects more sales tax revenue to be generated next year.

The council approved the 2013 budget Wednesday. As in the past three years, projected expenses are higher than revenues, and the Finance Department estimated the council will need to use $287,107 from its reserve fund to come out even by the end of 2013.

However, Mayor Becky Erickson pointed out that through budget cuts throughout the year and higher-than-expected revenues, the council has not had to dip into reserves in the past three years, and is hoping it will be the same in 2013.

The preliminary budget variance was $511,000 at the beginning of budget deliberations. To lower the variance, the council decided to reduce transfers from the general fund to three funds — Parks and Recreation, pavement restoration, and street reserves — by 50 percent; reduce capital equipment purchases; and cut $39,352 in wages and benefits after union contracts were settled.

The finalized budget also reflects an increase in revenue. Because of upcoming construction projects and a generally sunnier financial forecast, the Finance Department is expecting to collect $2.85 million in sales tax, $150,000 more than what was projected a few months ago.

The city will also take 10 percent from the utility tax fund (it won’t affect how much residents pay in that tax), for an additional $88,500, but will revert to a standard 6 percent in 2014. The city is also counting on $6,100 from renting out its conference rooms, including $3,600 from the legislator’s office.

Finance Director Deb Booher said although five administrative furlough days were proposed to lower the variance, the council found furloughs weren’t needed and will not be implemented in the final budget.

The city’s total budget for 2013 is $24.7 million, a 28 percent decrease from 2012. The general fund, where the majority of the city’s operating budget and staff salaries come from, is $9.98 million.

Councilwoman Connie Lord, who sits on the Finance and Administration Committee, said the budget was easier this year because the economy is looking up.

“Slowly but surely things are looking a little bit better,” Lord said.

Erickson said that three years and three budgets ago, she was very worried — the city was facing a $900,000 a year mortgage for the new City Hall, while sales tax revenue was declining.

“Tonight was kind of a watershed moment for me,” she said. “We’ve yet to hit reserves … We are in a really good place compared to where we were three years ago.”