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Expenses including streetcar operation, debt and pension costs are expected to create a budget shortfall for the city of Tucson for the fiscal year that starts in July 2014. The city's top financial manager said the number could be at least $15 million, but the calculation will be more precise in a few months.

This week Tucson's City Council approved raises for city employees, at a cost of $8 million a year, another expense for future budget years, said Kelly Gottschalk, assistant city manager and chief financial officer.

"We are seeing on an annual basis that our revenues are going up, but our expenses are going up faster than our revenues, so we are going to have to face challenges in fiscal (year) '15," Gottschalk said.

In the 2015 fiscal year, which runs from July 2014 to June 2015, the council will likely have to decide what to cut, or how to bring in more money. That decision could affect how much the city pays employees.

“The council is going to have to make priority decisions," she said. "Everything, every year is on the table, so whether they roll these raises back, I find that to be probably not very likely, but they are going to have to make some tough budget decisions."

The raises will cost $4 million for the second half of this fiscal year, spanning January 2014 to June 2014, and $8 million a year after that, she said. They come from the general fund, which is about $468 million. The raises are less than two percent of the general fund, but could be a significant amount of the estimated budget shortfall for the next fiscal year.

It is too early to know how accurate the $15 million shortfall estimate will be, Gottschalk said, because this fiscal year is less than halfway through, so actual revenue and expenditures haven't been determined.