As it prepares to put together the 2017-2018 fiscal year budget, Washington’s City Council knows it faces challenges, including finding ways to increase revenues.

During his presentation of the audit report for fiscal year 2015-2016, Lucas Jackson, an audit senior accountant with Martin Starnes & Associates, displayed graphs showing revenue and expenditure data. The report shows the city’s financial books are in excellent order.

In fiscal year 2016, property taxes generated $4.34 million in revenue, down from $4.44 million in fiscal year 2015, according to Lucas. In fiscal year 2016, other taxes and license fees generated $2.68 million, down from $2.82 million the previous fiscal year, according to the report. As for revenue generated by the unrestricted intergovernmental sources, it increased from $2,046,278 in fiscal year 2015 to $2,059,167 in fiscal year 2016.

“The interesting point of those three slides is that in two out of the three, the sources of income have decreased in the last year,” Councilman Doug Mercer said.

That decline in money from two of the three revenue sources does pose a challenge for city officials, said City Manager Bobby Roberson on Monday.

“For us, it’s big,” Roberson said about the decline in revenue generated by some sources. “One of the things is we’re expecting the economic side of residential (growth) to be picking up, and it is. We’ve also had some things that have let us down a little bit in terms of retail sales inside the community and things like that, which have hurt us.”

Jackson told the council that some usual revenue sources for the city produced less revenue in fiscal year 2016 than in previous years. One of those revenue sources — the business privilege licenses — was taken away by the North Carolina General Assembly several years ago, costing the city at least $100,000 each fiscal year. The city took in about $123,000 in such revenue during the 2014 fiscal year, according to city officials.

Although the General Assembly promised to provide an alternate revenue source after it took away the city’s authority to generate revenue by issuing business privilege licenses, it has yet to do so. Roberson said that alternate source of revenue would be welcome, and the sooner, the better.

“They said they would, and we’ll be counting on it. We haven’t seen anything yet,” he said.

In recent years, the city worked toward decreasing the revenue transfer from the electric fund to the general fund, with the goal of eliminating the transfer. In fiscal year 2012, the city transferred $973,150 from the electric fund to the general fund. By fiscal year 2015, that transfer fell to $470,000. In fiscal year 2016, that transfer was $654,281. In the current budget, that transfer is $908,723.

Jackson said the transfer amounts are “well within the 3-percent limit” allowed by state law.

As it has been for at least two decades, Washington’s major expenditure each fiscal year is to meet public-safety needs — police, fire, EMS and the like.

In fiscal year 2016, which ended June 30, 2016, public safety accounted for 49 percent of the city’s general-fund budget, according to Jackson.

The next three top expenditures are culture and recreation at 19 percent, general government at 18 percent and other at 14 percent, according to the audit report. The top three revenue sources, according to the report, are property taxes at 39 percent, other taxes and license fees (sales taxes and franchise fees) at 24 percent, unrestricted intergovernmental funds (grants) at 19 percent and other revenues at 18 percent.