PORTSMOUTH — The town closed the books with a surplus of about $900,000 at the end of the last fiscal year, thanks to conservative management of spending and an unanticipated boost in revenue, according to Town Administrator Robert G. Driscoll.

The extra money went straight to the general fund, shoring it up from what Driscoll acknowledged had been a “perilously low” level of $1.2 million.

The current balance of $2.1 million is a “far better position,” he said, “terrifically good news” that will please the agency that rates the town’s municipal bonds.

Driscoll yesterday put the surplus into perspective, saying that the general fund has been restored to a level that historically has been the norm — about 4 percent of the town’s overall operating budget of roughly $50 million.

Because of new accounting rules, the town’s auditors have recommended that it raise the minimum balance from 4 percent to 8 percent, or another $2 million, Driscoll said.

Beginning in the next budget, he said, he will advise that the town increase the general fund to $4 million in a “systematic way,” by adding $200,000 a year, or 10 percent of the $2-million gap between the current level and the ultimate goal.

The Town Council has adopted a policy that embodies that approach to increasing cash reserves, Driscoll said.

He said the enactment of the policy apparently mollified the concerns of Moody’s Investors Service, which maintained the town’s A1 bond rating when it borrowed money last year.

The surplus in the 2007-08 fiscal year, which ended June 30, has its origins in concerns about tax revenue during the previous fiscal period, 2006-07.

At the tail end of that budget year, the spring of 2007, the town issued supplemental tax bills to comply with a Superior Court order raising revenue for the School Department.

As a result, collections dipped to about 96.6 percent, about half a percentage point lower than usual.

But the drop turned out to be an anomaly, said Driscoll, as late payments came pouring in at the start of the new budget year, in July 2007.

At that point, however, the town had already budgeted to compensate for reduced tax revenue as well as anticipated reductions in local aid from the state.

When the fiscal year came to a close, expenditures ran $515,429 under budget and revenues exceeded expectations by $375,679, yielding surplus of $891,108, according to a recent briefing that Finance Director David P. Faucher gave the Town Council.

The amount has yet to be confirmed by an audit, but Driscoll said, “we basically got whole on the revenue picture.”

In addition, vacancies in the Police and Fire Departments and in the Public Works Department left about $100,000 to $120,000 in the salary accounts at the end of the fiscal year last June, Driscoll said.

And the town put a halt to road paving and replacing outdated computer hardware, he said.

“You can manage conservatively in any one year,” Driscoll said, but such maintenance cannot be let go for too long before delay starts to wear on the infrastructure of the town.

gmacris@projo.com