The Demopolis City Council heads into the new fiscal year without a new budget after city leaders opted not to pass an $11.2 million proposal Thursday night.

The primary obstacle in next year’s budget lies, ironically, in the bottom line of this year’s budget. The city is expecting to finish at an operating loss of more than $475,000 this fiscal year.

“The question is where it’s going to come from to make this (deficit) up,” Councilman Bill Meador said of the funding. “The obvious answer is out of reserves.”

Reserves will be looked to again this year as the budget calls for up to a $1.4 million infusion to balance.

“Alabama law says you have to pass a balanced budget,” Mayor Mike Grayson said. “It allows you to use funds from reserves to balance the budget. It doesn’t mean you’re going to spend it.”

Despite what looks to be an insurmountable figure, Grayson said the city anticipates a far smaller number at next year’s end than would appear.

“We expect somewhere around $100,000,” he said of the anticipated deficit.

That figure could easily be turned around, Grayson said, by occupying vacancies at the newly acquired intermodal complex.

“We’ve had two serious inquiries about leasing space at the intermodal complex,” Grayson said. “If we just get one of those, it would cover all but $25,000 of the annual note payment. If we get both, we’re in the black.”

Earlier this year the city entered into a $4.5 million bond to purchase the space previously occupied by Cenac, Inc. The city and the Industrial Development Board are working to convert the space into a viable port with already existing access to rail, highway and an airport.

The city is responsible for a $408,000 payment on the bond this year.

Since 2007-2008, the city has shed an average annual operating profit of $309,000, with 2008-2009’s mark of $402,000 serving as a banner year.

Coupled with a dragging economy, Grayson pointed to increased fuel costs, higher utility costs, workman’s compensation claims and unscheduled maintenance and repairs as drivers in this year’s deficit, along with a large one-time expense.

“There’s the $100,000 the city gave to the hospital for the labor and delivery unit,” he said.