No tax increases are included in the 1988-89 city budget proposed by Mayor Steve Newton, but there is a 3.2 percent increase for city employees, slightly more than they received this year.

That's good news for city employees this year, but it could mean no pay hikes and possible layoffs in future years unless the economy improves enough to boost construction, sales and other revenue-producing activities in Sandy.The reason for the ominous prediction made to the City Council is that the only money available for the raises is what the mayor called "one-time money," the city's fund balance.

Spending the $460,000 proposed for employee wage and benefit increases would nearly deplete the fund balance, which is the accumulation of unspent money carried over from the previous budget year.

The fund balance is expected to amount to about $1.4 million when the new budget year begins July 1. State law requires that the city set aside about $800,000 of the fund balance for emergencies.

That requirement, combined with the expenditure for employee salaries and benefits, would reduce the fund balance carried over to the 1989-90 budget year to about $140,000.

"In the long term, I believe the future of Utah's economy is bright," the mayor said. "I am hopeful that our economic turnaround comes quickly enough that we can avoid layoffs next (budget) year."

Dave Meldrum, president of the Sandy City Employees Association, asked the council to allow employees to choose whether to take the full 3.2 percent increase as a salary increase or to use part of it to cover increases in health insurance.

Meldrum said employees are not always aware of how much the city contributes to their health insurance and that offering them the choice would let them see just how much the benefit costs.

This budget year, employees were given a 3 percent increase, split evenly between salary and benefits. Newton agreed that many employees saw the increase as only a 11/2 percent hike, which the mayor said frustrated the city's administration.

The overall budget of $22.1 million is actually less than the amount being spent during the current budget year, $25.8 million. Most of that decrease is due to a slowdown in construction in Sandy, according to Byron Jorgenson, the city's chief administrative officer.

Jorgenson said fewer construction projects mean less money collected from building fees and other taxes levied against new construction. The decrease, he said, means that the city will be able to do fewer capital-improvement projects itself.

The budget does contain money to complete two city parks already under construction, Bell Canyon Park and Highpoint Park. But the mayor told the council that no money exists in the budget to maintain the new parks.

Money is also tight for street repair and maintenance. The $444,000 budgeted is not enough to prevent the condition of the city's streets from reaching a crisis situation, Newton said.

"Without a tax increase or budget cuts elsewhere, the funds are not available to meet a minimum level of road maintenance," he said, estimating the additional amount needed at several hundred thousand dollars.

The budget will now be reviewed by the City Council, and its spending recommendations will be the subject of a public hearing scheduled for 7:45 p.m. on June 7 in Sandy City Hall.

In other action, the council voted to begin the process of applying to become part of the Metropolitan Water District of Salt Lake City. City officials have said that Sandy residents could save considerable money by leaving the Salt Lake County Water Conservancy District.