FALMOUTH — The Town Council and School Board finance committees disagreed Tuesday afternoon about how to best use nearly $522,000 in unexpected state aid to education.

Town Manager Nathan Poore said the money can be used for only two things: reducing the mil rate or increasing the School Department reserve.

The School Board’s proposal was to retain the additional funding and put it towards replenishing an undesignated fund balance and capital reserve fund.

Councilors were more inclined to use at least part of the windfall to reduce property taxes in fiscal 2016.

School officials reasoned that they have in the past committed funds from the undesignated fund balance to reducing the tax rate, which is an unsustainable process, according to Finance Director Dan O’Shea. The fund balance has declined to $595,000 as of June, which O’Shea in a memo called “a small safety net.”

O’Shea’s memo also said the school capital reserve fund is currently empty, and said recommended adding up to $200,000 from the state funds to this reserve.

If the money were added to the School Department’s undesignated fund balance and capital reserve fund, it could not be used for district projects in the current fiscal year. Superintendent of Schools Geoff Bruno said that would put the schools “in a better financial situation” going forward.

“The goal is to be as fiscally responsible with the money as possible,” Bruno said.

On June 9, voters overwhelmingly supported the nearly $33.2 million school budget, by a margin of roughly 4-1. That budget represented an expenditure increase of 4.69 percent, and increased the the school portion of the property tax rate to $11.08 per $1,000 of assessed value. 

According to O’Shea, if the entire sum of the additional state revenue were put towards reducing the mil rate, it would decline by 24 cents, to $10.84 per $1,000 of assessed value. For every $100,000 of assessed value, taxes would decline from $64 to $40.

Town Councilor Karen Farber recommended using a quarter of the state revenue toward reducing the tax rate, which would mean a 5-cent reduction per $1,000.

“I think there is a lot to be said for even a small reduction in the mil rate,” Farber said.

Farber also said using at least some of this funding for a tax rate reduction would mean the School Board wouldn’t be faced with residents coming back later and asking “what did you do with all that money?”

“It may not seem like much, but there are people in town for who 5 cents matters a whole lot,” Farber said.

Falmouth isn’t the only community wrestling with a windfall. South Portland’s City Council on Monday decided to use more than half of a more than $880,000 adjustment to reduce property taxes nearly 2 percent, to an increase of 1.8 percent over fiscal 2015.

Although further discussion was scheduled for the Town Council meeting on Monday, July 27, Councilor Charlie McBrady said it would be beneficial for councilors to have an opportunity to learn more in advance.

After some discussion, they added it to the agenda for their annual retreat Thursday, July 23, at the Central Fire Station at 8 Bucknam Road. The retreat will start at 8 a.m. instead of 8:30 a.m., and councilors will have to table another item on the agenda.

Colin Ellis can be reached at 781-3661 ext. 123 or cellis@theforecaster.net. Follow him on Twitter: @colinoellis.

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