The year 2010 figured to be a challenge when the city started with a new form of government and three newly elected council members. But it’s doubtful anyone expected such a major overhaul.

But that’s what happened when a crippling budget deficit forced the council and a restructured staff to rethink how Bainbridge operates.

The past year was a trying one of change and hard decisions. The community and city government debated over issues with storied history, made painful and contested budget decisions and wrestled with the dilemmas created by previous city officials. And next year isn’t promising to be any easier.

“I think we accomplished far more than I ever thought possible in just one year with a new city manager, council members, city attorney and finance director,” said Mayor Bob Scales. “Our biggest accomplishment was getting on a sound financial footing so we don’t really have to worry about finances next year. There is still a lot of work left to do and we have a lot of big items on our plate for next year.”

With the January swearing-in of new councilors Scales, Kirsten Hytopoulos and Debbi Lester, and with the new council-manager form of government making its debut, the council wasted little time attempting to establish its distinctiveness. Improved transparency and open communication were goals for the new system of government.

“In the past there was a lot of talk about 4-3 votes and blocks of council members forcing things through,” said Scales. “I haven’t heard that this year even though we have had a number of 4-3 votes. There is a great mixture of how the [council] is made up. We aren’t agreeing on everything, but we are making decisions and moving forward.”

Mid-year personnel changes, beginning with the hiring of Interim City Manager Brenda Bauer, quickly led to major changes in how the city functions. Then two important directors were let go without cause: City Attorney Paul McMurray was eventually replaced by Jack Johnson; and Finance Director Elray Konkel left after his mid-term report on the city’s financial affairs alarmed the council. Bauer replaced Konkel with Ellen Schroer, a former colleague of Bauer’s at the City of Seattle.

More new faces were added in the following months as Bauer proposed a realigned budget, reorganized staffing departments and continued to make strides in improving efficiency of city business.

The changes weren’t easy.

The council approved a 2011-12 budget in late November that achieved its policy goal of placing $2.4 million in reserve at the end of 2011. To do so, it severely cut funding to community service organizations, terminated its contract with the community broadcast station (BITV) and eliminated 13.9 staffing jobs.

Those tough decisions will help the city weather the storm next year, Scales said, and stay afloat in case the economy stays flat or dips into a deeper recession. Utilities, he added, will be the main issue in 2011.

“I think its time for both city management and the council to get a handle on the utility structure and determine what is best for our city as a whole and what is best for the ratepayers,” said Scales.

“I don’t think anyone has the answers to those questions right now. I think we will spend a large portion of our time next year trying to figure that out,” he continued.

General community distrust, pending lawsuits against the city and an ongoing state audit on the city’s utilities will continue to shadow any decisions made in 2011.

The city has no lack of other loose ends to tie up.

The city will have to decide what to do with the $2 million it expects to receive from the state after choosing the cash to settle a land use disagreement with Washington State Ferries.

The money is not currently in the city coffers, but Bauer made preliminary negotiations prior to the council’s decision two weeks ago, which may abate fears that the cash-strapped state could withdraw the offer considering its dire financial condition.

Scales said he hopes the money will be left intact for at least six months so that the city can review its capital facilities plan and determine the best use for it.

The money was originally restricted to a water-related use, but WSF lifted that requirement prior to the city deciding to take the money or lease less than acre of land that’s now part of the WSF maintenance facility. There was some talk among council members to still use for a water-related project, but no formal vote or decision has been made.

Despite strong outcry from some members of the community to keep the Bainbridge Island Municipal Court on island, the council voted to pursue lease negotiations to share a court facility with Poulsbo.

The negotiations are ongoing with meetings between Poulsbo and Bainbridge officials scheduled for January, according to Scales. A formal decision has yet to be made.

Obtaining both the permits and construction of the open-water marina will continue to unravel in 2011 after the state’s Department of Natural Resources and the city agreed on a lease to stave off evictions and save the liveaboard community after months of debate. Because the agreement happened so late in the year, permits and construction will need to be obtained and started next year.

The city still needs to choose how to televise and broadcast its council meetings after ending the BITV contract.

Two options being explored are a temporary agreement with Bremerton Kitsap Access Television and the city doing its own live-streaming of the meetings.

Next year is an election cycle for four council positions now held by Barry Peters, Kim Brackett, Bill Knobloch and Hilary Franz.

The council will revisit union contracts in 2011 for staff and police employees after approving a one-year contract extension for both unions last July.