The Troy City Council on Friday approved a $42.5 million operating budget for the upcoming fiscal year which includes funding needed to begin building a new public library.

The budget consists of a $16.4 million general government fund and a utility department fund of more than $26 million.

With city expenses increasing faster than revenue, Troy Mayor Jimmy Lunsford called the budget one of the toughest to balance in recent years.

Department heads were able to cut costs without eliminating jobs, but Lunsford said the city may work to reduce personnel costs through attrition.

“We may not replace some positions as they come open,” Lunsford said.

The new budget anticipates some growth in city revenue. Sales tax revenue is projected to increase $300,000 and lodging tax is projected to grow by $310,000 based on new hotels opening.

The budget includes a surplus of more than $690,000, which Lunsford told the council will enable the city to move forward with plans to build a new public library.

City Council president Johnny Witherington said he feels the city is finally ready to begin the library project after years of planning.

“I think we are postured to make real progress on making a new library a reality,” Witherington said.

“We’ve just got to make a decision on how location will affect the issue.”

City officials are still weighing whether to build the library on Elm Street at the former Troy High School location or purchase property elsewhere, but Lunsford told the council that the decision should be made within a month.

“I plan to call a meeting within the next month to make final plans on the location,” Lunsford said. “We have to make an informed decision.”