Faced with skyrocketing pension and health care costs for city workers and retirees, Palo Alto officials are considering raising fees for athletes who play on local fields, gardeners who plant at city parks and artists who rent studios at the Cubberley Community Center to balance the budget this year.

The fee increases are included in City Manager James Keene's budget for fiscal year 2013, which begins July 1. They aim to close the budget gap caused by rapidly rising employee expenditures. Pension and health care costs have each risen by about $300,000 over the past year, while the city's contribution for retirees' medical care will jump by $1.9 million in fiscal year 2013, according to Lalo Perez, the city's chief financial officer.

The spiking expenditures are casting a shadow over good news on the revenue front -- namely, the fact that the city's sales-tax and hotel-tax revenues have essentially returned to where they were before the economy tanked in 2008. But while Keene's proposed budget for 2013 includes a $3.1 million increase in revenues, it also includes a $3.9 million hike in expenditures.

Perhaps the most dramatic, and controversial proposal, in Keene's effort to curb costs is elimination of the city's animal-services operation, a move that finance officials estimate will save about $500,000 annually. But while the outsourcing of the animal-service operation has generated much publicity and a torrent of community opposition (the City Council's Policy and Services Committee will discuss it Thursday night), animal lovers aren't the only residents who could feel an impact under the current budget.

The City Council's Finance Committee considered on Tuesday night the budget for the Community Services Department and heard protests from more than a dozen residents, including gardeners, artists and lawn bowlers.

Keene's budget proposes to raise the rent the city charges community gardens (designated gardening spaces at Johnson Park, Eleanor Pardee Park and near the Main Library) from 50 cents per square foot annually to $1 per square foot. This would raise the cost to most gardeners by $80 to $160 a year, depending on the garden size, and bring about $30,000 in revenue to the city.

The budget also proposed raising studio rents at Cubberley Community Center by 30 cents per square foot; raising fees for lawn bowlers by $100 a year (effectively doubling what they pay now); and generating another $100,000 in revenues by raising fees for users of athletic fields. These fees would help cover the cost of maintaining the fields.

Though the Finance Committee agreed on Tuesday that the proposed fee hikes are too steep and too hasty, members also acknowledged that some increases would be needed to cover the structural budget deficit and make community services more financially self-sustainable. The committee directed staff to return next week with a revised proposal that includes less dramatic increases to studio and garden rates. Councilman Pat Burt said the rate increases should be about half as steep as the ones staff had proposed.

"We've got big cuts that we have to make," Burt said. "But in any case where you had a long-time community use and you have a doubling or, in this case, a more than doubling of the fees in a single year -- it's just too abrupt in my mind."

Greg Betts, director of the Community Services Department, said programs like lawn bowling and community gardens were selected for fee increases because these are "exclusive-use facilities" that benefit a particular group rather than the community at large.

But many of the artists and gardeners who spoke at the meeting stressed the value of their operations to the larger community. Rita Morgin, who plants at the community garden near the Main Library, said the proposal to raise fees would make the community gardens "unavailable to people who'd benefit most" -- low-income residents and renters who don't have gardens of their own.

"This kind of an increase is really outrageous for gardeners -- especially on a limited income," Morgin said.

Burt also argued that the benefits of community gardens go far beyond the gardeners who plant them.

"While I recognize that the most direct benefit is to the gardeners, I think the community gardens do benefit a wider group of the community," Burt said. "In my neighborhood, people who don't have gardens view it as a community benefit to walk the gardens."

"There are other intrinsic values placed in there by the community and the community members who are not using the gardens," he later added.

Several of the artists who attended the meeting urged council members not to rush into raising the fees. Marguerite Fletcher, an artist with a studio at Cubberley, said artists have been making a special effort to reach out to the greater public. The effort includes more open-studio times, more public lectures and participation in Palo Alto Art Center programs.

"We do understand that the city is facing real financial dilemmas and we'd like time to work with you on a resolution that can preserve our artistic community and find equitable solutions," Fletcher said.

Committee Chair Nancy Shepherd stressed the need to "build a sustainable future for all these groups." She and Councilwoman Gail Price both advocated having staff negotiate with artists, gardeners and other parties impacted by the new fees to consider various revenue options. All three committee members (Vice Mayor Greg Scharff was absent) lauded the artist studios and agreed that they make valuable contributions to the city.

"We pride ourselves on being creative and valuing the arts and the use of the imagination," Price said. "And we need to live by that."

The Tuesday hearing was the first of a series public meetings leading up to the council's budget adoption on June 18. The budget proposes to eliminate 18 positions citywide and to keep 20 vacancies frozen. If adopted, the city's staffing level would drop to 1,006 full-time positions, 72 fewer than were budgeted for in 2011.

The proposed budget also plans to raise the city's infrastructure spending by $2.2 million, as recommended in a recent report by the 17-member Infrastructure Blue Ribbon Task Force. The council had also considered asking the voters to approve in November a bond or a tax increase to raise money for infrastructure repairs. But council members and staff ultimately agreed that they don't have enough time to do the necessary research and outreach for a ballot measure this year.

On Tuesday night, the council's Policy and Services Committee unanimously recommended not putting a revenue-raising ballot measure on the November ballot, a recommendation that the full council will consider later this month. The committee agreed that the city should instead look to 2014 for a possible ballot measure.