The city of Albany would borrow nearly $3 million over three years from its Pepsi settlement fund to get over an expected budget hump, according to a recommendation going to the city council today.

In order to repay the money, the city then would defer future capital and street projects. The plan does not say which projects would be postponed.

A little more than $10 million remains of the $18.5 million Albany received from Pepsi in 2010 in settlement of a lawsuit filed after the company failed to build a promised Gatorade plant in Albany.

The city council has been talking about using a big chunk of the money to build a new police station and the rest for “economic development,” but no final commitments on those items have been reached.

City Manager Wes Hare said Friday the plan to balance the budget with Pepsi money would not necessarily postpone the police station project if the council wanted to go ahead.

The budget proposal goes to the council when it meets for a work session at 4 p.m. at City Hall.

Whatever the council decides would then be incorporated in the draft of a 2012-13 budget due out this spring.

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“The plan anticipates that economic growth and continued diligence in managing costs will offset the need for additional transfers in support of operations in 2014-2015,” Finance Director Stewart Taylor said in a memo to the council.

Hare said he was optimistic that the plan would tide city government over until economic growth returns. He pointed to expected taxes from the Walmart and Lowe’s projects. Also, he said, some housing construction was taking place.

Meanwhile, though, the city expects a shortfall of revenue to meet the costs of existing services in this and the next two budget years.

To plug the gap, Taylor proposed that through fiscal 2014, the city use $2,929,600 from the Pepsi settlement fund to shore up the police and fire departments, other parts of the general fund and the parks department.

To reimburse the Pepsi fund, the city would redirect money that now goes to the street fund from water and sewer bills, totaling just under $1.7 million over six years starting in fiscal 2013.

The Pepsi fund would get back other money from the general fund plus, in about 10 years, more than half a million dollars from parks and recreation.

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