Evanston residents will find out more tonight about how the city will solve its projected budget shortfall of at least $3 million.

Evanston City Council will hold a special session where city staff will lay out some of their ideas and aldermen will discuss financial issues in preparation for the budget proposal due Dec. 31, City Manager Roger Crum said.

“We’re going to explain why we’re making the choices we’re making,” Crum said. “We’ll try to get (the revenue) side of the equation figured out.”

The city is experiencing an annual expenditure increase of 5 percent but an annual revenue increase of just 3 percent — a factor in the city’s expected deficit of about $3 million, according to city estimates.

City staff budgeted for a total revenue of more than $72 million in the general fund for the current fiscal year but anticipate about $71 million for next year. The current recession has limited state income tax revenue, a limit that will further cut Evanston’s state-allocated funds.

“The state income tax is the biggest concern we have,” Crum said.

Patrick Casey, director of management and budget, told residents Thursday night that although the city’s population increased by about 1,500 this year, the unemployment rate has kept the city from benefiting from more income tax. Casey said this forces the city to look for different kinds of revenue on which to depend.

“If we can diversify our revenue, the better off we’ll be,” Casey said.

Other revenues the city will lose include state-shared sales tax and building permit revenues as construction in the downtown area slows.

Evanston primarily relies on property taxes, which account for about 20 percent of the city’s revenue.

Last year the council increased Evanston’s portion of residents’ property tax bills by 7.2 percent. But as property taxes rise, Evanston’s portion has not been the only one to do so: Other taxing bodies also have increased shares, causing the city’s portion to take up less of the total bill — down from 19 percent to 18 percent.

Crum said the staff simply intends to discuss the revenue situation and added that no decisions regarding next year’s budget cuts have been made.

Ald. Steven Bernstein (4th) said although city staff’s revenue figures are “pretty conservative,” aldermen usually have little choice but to accept them as an accurate portrayal of the city’s situation.

“We’re pretty dependent on their numbers,” he said. “We don’t have people to go out and do surveys or anything.”

Crum said although city staff would like to project a more liberal image of revenue, the current situation forces them to exert caution.

“We think they’re slightly conservative,” Crum said. “But they’re not as conservative as we’d like them to be. We don’t want to err on the side of excessive optimism.”