Saratoga Springs residents are facing a 163-percent property tax increase, and the city has been forced to lay off 18 employees as the community addresses the largest crisis in its history.

Playing to a packed house on Tuesday with residents standing in the hallway, the city held the first of two public hearings on a proposed tax increase. A second hearing will be held on Aug. 20 at 7 p.m. at City Hall.

"On that night we will establish the final property tax rate," said Mayor Tim Parker.

If the 163-percent increase is enacted, it would increase taxes $21 a month on a $300,000 home, according to the city.

There is one option, but it is bleak, City Manager Ken Leetham said. The city could reduce the proposed increase by half by taking $600,000 from the water fund and reducing the legal budget by $70,000.

"One of the risks of using this money is that it is close to the end of the city's reserves, ... and if somehow revenues come in less than projected, that is a risk that we take," Leetham said.

From 2002 to 2007, building permits, for which the city can charge thousands of dollars in fees, tripled in the city. Permit revenue also tripled from $1 million in 2002 to $3 million in 2007. But in 2008 the number of permits fell back to 2002 levels, Leetham said.

Building permits for single-family homes declined from 575 in fiscal year 2007 to 158 in fiscal year 2008, Leetham said. To help make up for the shortfall in fiscal year 2008, the city spent $900,000 in reserve funds.

"This is a real problem the city is trying to grapple with," Leetham said. Later in the meeting, he responded to residents: "This is probably the biggest crisis we've been through in the history of the city."

Saratoga Springs has "made every attempt to first cut or delay the city's spending as part of the solution to the problem," Leetham said.

Budgets in all city departments have been cut, including a 51-percent cut in the engineering department, 67 percent in the streets department, and 39 percent in the legal department.

"Having arrived at a point where we feel we can't cut more from the city without not being able to provide basic public services, it brings us to the part of the presentation where we talk about raising revenues," he said.

In a handout distributed at the meeting, city officials said the shortfall had been created by "declining development-related revenues and some increasing costs." The shortfall had started at $3.5 million and been cut to $2.8 million by city departments making reductions, and then cut to $1.5 million by the City Council.

Reductions have included the city eliminating 14 full-time and four part-time positions, reducing the cost of city celebrations, cutting or delaying road projects, giving employees no raises, charging employees more for their health insurance and instituting a hiring freeze last year.

Councilman Jefferson Moss said the council had been "blind-sided" by the shortfall when told of it by city staffers in May, and would be looking for monthly budget updates from staff from now on.

Councilwoman Denise Kelly said shortfalls should be blamed on previous councils.

"Previous councils should have been raising these rates incrementally," she said of property taxes.

At Tuesday's meeting, residents voiced myriad opinions on the issue. Some said the true tax increase is 263 percent. Parker said the 163-percent increase is over the existing base tax.

Another resident brought his tax assessment from the county assessor's office and said the city portion of his taxes have increased 11 times over last year. Others demanded to know what the money would be used for and whether a library or recreation center would be built.

One man said the city should cut from its new police department, saying the new force may be the greatest police department in the world but residents could not afford it. Council members protested, saying it would have cost the same to get less police protection from the Sheriff's Office.

Many residents were kind. One man accused residents of complaining to the council instead of offering to help. Another resident told the crowd that few realized the hours the council had spent and residents should get involved instead of complaining.

"You can be part of the solution instead of complaining about the problem," the woman said.

Several said they were willing to bite the bullet and accept tax increases. Many said they had learned a lot at the meeting about the challenges the city faced and how the city was facing them.