CAPE ELIZABETH — The town manager’s proposed municipal budget for fiscal year 2011 contains no overall spending increase and a three-cent reduction in the property tax rate.

Town Manager Michael McGovern said the $8.5 million budget would maintain current services and employment, and the same level of spending as fiscal year 2010.

The spending plan would reduce the municipal portion of the property tax rate to $4 per $1,000 of assessed value, from $4.03 this year, because the town’s total valuation has increased. School and county assessments, which haven’t been set for fiscal 2011, account for the remainder of the current $17.54 tax rate.

“We saw the problems coming, and tried to prepare,” McGovern said. “There were reductions made last year and energy grants that helped with rising costs.”

In addition, the town consolidated dispatch services with Portland and South Portland last year at an estimated savings of $127,000 a year.

In a report sent to the Town Council, McGovern said the fiscal 2011 budget remains flat even though the Consumer Price Index has increased 2.6 percent.

Non-union employees and public works bargaining unit employees will not receive a pay adjustment and because of bond refinancing, debt service costs will decrease $151,000, he said.

In addition, residents have increased recycling and reduced trash disposal by 10 percent, reducing refuse costs by $80,000.

Street lighting costs have decreased $12,000 because of a street light reduction initiative, and electricity use at the community pool is down $18,000.

Even with the savings, there are some spending increases, McGovern said. A $67,000 increase in health insurance costs due to rate hikes and changes in marital status is the most significant increase in the budget, he said.

Unemployment insurance costs increased from $3,000 to $16,500 and requests for general assistance for families in need increased from $12,000 to $25,000 over the past year.

Finance Chairwoman Sara Lennon said McGovern’s ability to keep the municipal budget unchanged in a time of economic stress commendable.

“He is incredibly disciplined and an absolute genius with numbers and budgets,” Lennon said. “We need to acknowledge his hard work and the work of the staff, who are doing more with no increase in pay.”

McGovern will present the municipal budget to the Town Council on March 8 at 7:30 p.m. The council will review the budget through March.

To view the proposed municipal budget, go online to capeelizabeth.com.

Amy Anderson can be reached at 781-3661 ext. 110 or aanderson@theforecaster.net