That’s just the start of red ink. Projections show growing gaps between revenue and expenses for the next five fiscal years, reaching $17.4 million by the end of 2017-18.

“We’ve got to do something different,” City Manager Tom Bonfield said. “You can’t have costs that go up 4 percent a year and revenues that go up 2 percent a year for long.”

Budget Director Bertha Johnson presented the forecast last week. City leaders meet again March 1 to set guidelines for next year’s budget.

Councilman Eugene Brown said the numbers indicate “the future may not be as bright.”

Things may change, said Councilman Steve Schewel. The forecasts, though, say that “We’re either going to have to find new revenue sources or not provide a lot of services,” he said.

The forecasts will be affected by the 2013-14 budget requests the city’s department heads turn in Friday. The forecasts’ built-in assumptions for increasing revenue over time will also be affected by the General Assembly, since shared state revenue accounts for 12 percent of the income Durham uses for its day-to-day operations.

“We have a different group of people in (the legislature), so that can be changed,” Johnson said.

Expense projections include taking over the salaries of 31 police officers and firefighters as the grants currently paying them expire over the next two years. There are also increases for city employees’ retirement benefits and pay-for-performance raises; for street repair and maintenance; and for catching up on property maintenance deferred in years past.

The city’s finance department has saved taxpayers $2.5 million in the past two years by refinancing debt at lower interest rates, but Finance Director David Boyd said more refinancing opportunities are not likely soon. Sluggish growth in property values is likely to continue, meaning sluggish growth in the property-tax revenue that accounts for 37 percent of the city’s income.

“Recognition of the substantially slower growth rates that we are projecting going forward is going to force us to change ... the models by which we generate revenue to pay for government and the level of services that are being provided,” said Bonfield.

“You get in front of a group of citizens and, ‘I want more trails,’ ‘I want more of this,’ ‘I want more public safety’ – here’s the long term impact of that,” Bonfield said.

Bonfield introduced long-range budget projections to show City Council members the future implications of their decisions. Eventually, he wants to move the city to budgeting for several years at a time.

“It’s challenging, for political reasons, for legal reasons, but it can be done,” he said. “The models that we think work to fund government are not going to work any more. ... The model can’t sustain itself.”