Alexandria City Manager Douglas Harman proposed an $89.6 million operating budget for the city next year that is up 9 percent, but call for a 12 cent reduction in the real estate tax rate.

This is possible, Harman said, because of substantially increased tax revenues expected from a construction boom, continuing condominium conversions, and higher assessments reflecting the areawide escalation of property values.

Despite the proposed cut, Alexandria officials said most homeoweners would have to pay higher real estate taxes this year because the assessments on residential property have increased an average of 10 percent over the current fiscal year.

Harman's budget calls for neither the expansion nor the creation of major new programs, and the 9 percent increase would be used to hire 44 new city employes, including 20 in the police and fire departments. The proposal also includes a 7 percent pay increase for city employes and a 24.5 percent increase in Alexandria's contribution to Metro's operating subsidy.

In presenting his budget to the Alexandria City Council yesterday morning, Harman said that because the city has had one of the highest real estate tax rate in Northern Virginia, it had "placed itself in a difficult position vis-a-vis other jurisdictions." However, the city manager called the proposed tax cut a "positive step" and said that his staff is preparing recommendations to adjust building permit, mechanical inspection, and other fees in an effort to find new sources of revenue.

If his proposed tax cut is approved, the Alexandria real estate tax rate will go down to $1.58 for each $100 of assessed value from the present $1.70. This compares with the rate of $1.49 for each $100 of assessed value in Arlington County and the $1.74 per $100 rate in Fairfax County.

Although the tax rate would but cut by 7 per cent under the proposal, the owner of a house now assessed at $60,000 would pay $23 more in taxes under proposal. This is because the assessed value would go up to $66,000, increasing the tax to $1,043 from last year's $1,020.

Budget officials stressed that in a city where assessments vary widely, the 10 percent higher assessment figure should be taken only as a rough estimate.

The operating budget proposed by Harman must be approved by the City Council before it goes into effect on July 1. The $89.6 million figure does not include $7.5 million the city expects to receive and spend in federal and state funds.

The figure also does not include $16.6 million Harman proposed in a separate budget that the city spend on capital improvements - building and other city improvements - during the next year. The largest expenditures in this year's capital budget are $4.1 million to begin construction of a new courthouse approved last December, $1.1 million for the Four Mile Run flood control project, and $1.3 million for school renovation and other school improvements. The rest of the budget will pay for a wide variety of other projects including park and street improvements, improvements to city buildings, and renovation of the old Torpedo factory.

In his general operating budget Harman is recommending the creation of 17 new positions in the Police Department including hiring six new uniformed officers and 11 civillian who would free policemen from desk work. Harman said the six officers well be assigned to the department's crime resistance program, the criminal investigations division, and street patrol.

In the Fire Department. Harman recommended that an additional fire inspector be hired along with two civilian dispatchers who would fill jobs traditionally held by uniformed personnel. Three emergency rescue technicians and two clerks would also be added to the department under the budget recommendation.

In another personnel matter, Harman wants to hire 14 employees currently in the Comprehensive Employment and Training Act (CETA), a federally financed but locally administered program designed to reduce unemployment. The federal government has told the city the 14 persons will be dropped fron the program if they are permanently hired by the city.

"We felt that these (CETA) positions had become and integral part of the agencies in which they are located," said James Randall, director of the Alexandria office of management and budget. Randall added that the CETA money would be used to hire additional unemployed persons.

City Manager Harman said that if the City Council wants to make cuts in his budget proposal these could come by dropping the 14 CETA positions and not hiring the additional personnel for the police and fire departments as well as deleting "nonrequired" social services such as dental care and passing a lower pay increase for city employees.

At least one council member is unhappy with proposed 7 per cent increase for city workers. Nicholas A. Colasanto said at yesterday's meeting that he would again propose as he has in the past aset dollar increase for all employees and added that instead of hiring more workers some should be fired as a saving to the taxpayers.

Colasanio also said the proposed real property tax cut could be as much as 15 cents per $100 assessed value instead of the 12 cent cut proposed by Harman. Two other council members, Donald C. Casey and Robert L. Calhoun, indicated that they too thought a greater tax cut may be possible. The budget presented by Harman yesterday will be in effect when the City Council comes up for reelection next Spring.

More than half of Alexandria's tax revenues (55.6 percent) come from general property taxes. Other major revenue sources for Alexandria are the sale, restaurants, and hotel taxes (15.5 percent), taxes from fees on licenses, permits fees, and fines (7.6 percent), school revenues (5.3 percent), and transfer payments (5.2 percent).