FRANKLIN — In proposing her city budget for the coming fiscal year, City Manager Elizabeth Dragon has some good news for the mayor and city council — and for the city as a whole.

“Overall, I can say this year our economic situation is slightly better than last year,” Dragon said.

The proposed $9.72 million budget includes a 1 percent increase on appropriations from last year's budget.

To meet the city's tax cap requirement last year for the fiscal year 2012 budget, Dragon cut more than $500,000 from the budget. For the coming fiscal year budget she had to cut only $369,000, she said.

Last year, step increases were not given to city employees, but this year, “in order to maintain the value of the performance system used citywide,” steps were included in the budget. In addition, the proposed budget includes $15,000 for a pay and classification study for the city.

Welfare vendor payments show a 28 percent increase over last year's budget, but the closing of the Franking Housing Authority fund has freed some resources for “temporary relief” from that increase, Dragon said.

Contributions to outside agencies in the budget proposal are level-funded in the budget.

Last year, major cuts were made in the city's recreation department and the library, and two positions were eliminated in those departments. This year, Dragon is not proposing any cuts in either department.

There are several capital expenditures proposed in the budget, including $61,000 to repair the fire department's roof, which is necessary because repairs have been delayed for many years, Dragon said, and water now leaks on expensive firefighting equipment.

The police department requested two new police cruisers, but budget constraints required Dragon to cut that to one new cruiser. The proposed budget includes the final payment on a three-year lease for one of the department's cruisers and the first payment on a four-year lease for a new cruiser.

The proposed budget will go to the city council and mayor in early July.