After years of budget deficits, staff cuts and service reductions, Palo Alto officials found themselves in a delightful and unfamiliar position Tuesday night when they took their first look at City Manager James Keene's proposed budget for 2014.

The document, which will undergo scrutiny over a series of meetings in the next month, is a radical departure from its gloomy predecessors. Revenues are up by 5 percent; employees are contributing more toward their pensions and health premiums; and the frozen positions in the Police Department are about to be reactivated. Even with expenses rising, budget officials expect to end fiscal year 2014 (which begins on July 1) with a $200,000 surplus.

Keene told the City Council's Finance Committee on Tuesday that while there's "always a tendency to be gloomy when we're dealing with the budget," this year is different.

"This year, for the first time since I was here, we're in a better position as far as what I'm able to recommend to the council," said Keene, who was hired by the city in 2008. "In a lot of ways, we're not dealing with the kinds of specific cutbacks we've had to do every year. We're partly in that position because we did those things in the prior years."

Keene's budget for 2014 proposes a 4.6 percent increase in expenditures, with much of the added funding used to keep up with the rising costs of employee pensions and benefits. Of the $5.8 million in ongoing-expense changes, $4 million would be used for these benefit adjustments. The city also plans to unfreeze seven positions in the Police Department ($1.2 million); ramp up spending for planning and development services ($1.4 million); and allocate more funds for police overtime ($532,000).

But the new document is in some ways more notable for what's not in it: proposed cuts that in the past have driven discussions and stirred tempers. This year's budget is not proposing to outsource municipal operations, close the animal shelter or cut recreation programs in the Community Services Department.

Instead, the Finance Committee heard on Tuesday a generally rosy overview of the city's current budget picture. It then gave its stamp of approval to the budgets of numerous City Hall departments, including offices of the City Attorney, City Clerk, the City Manager and an Office of Sustainability, which will make its debut this year.

The new office will be staffed with a management position, the chief sustainability officer, for which Keene said the city is now interviewing candidates. This official will report to a board of department heads and coordinate Palo Alto's various efforts relating to environmental sustainability.

"I think that signals a more focused and stronger organizational strategy relating to our sustainability initiatives," Keene said.

Even with the hire, the city manager's office will see a budget reduction of $94,683, stemming in large part from the elimination of the deputy city manager position. The role was until recently filled by Steve Emslie.

Other departments also saw minor changes -- in some cases financial, in others nominal. The Human Resources Department, for example, got a bit of both. It is changing its name to the "Department of People Strategy and Operations." It is also getting $30,000 to design a citywide wellness program for employees.

The City Council's own budget is set to rise by $25,000 to accommodate more council meetings; more and better meals for the council on meeting days; and the council's travel and training expenses. Meanwhile, the City Clerk's office is losing an administrative position.

The biggest change in the new budget will occur in the Police Department, whose budget the Finance Committee is scheduled to review on May 16. The proposed budget would unfreeze seven department positions, mostly relating to traffic enforcement and investigations.

The Community Services Department, whose budget will be reviewed Thursday, is scheduled to get two new positions for its well-attended aquatic programs.

At Tuesday's kick-off discussion, staff attributed the brightening economic picture to both inside and outside forces. The council's recent reforms to employee benefits have resulted to greater contributions by city workers toward their health care and pensions. At the same time, the city has seen a surge in revenues, with sales taxes, hotel taxes and document-transfer taxes all going up. Joe Saccio, deputy director of Administrative Services, said document-transfer taxes are expected to hit a 15-year high. Local restaurants, auto dealerships and apparel stores are all reporting good numbers, Saccio said.

"We are experiencing really good momentum with our revenues," Saccio said.

The Finance Committee will continue to review the proposed budget Thursday. The council is scheduled to approve it in June.