Budget guidance sends South Portland officials 'back to the drawing board'
SOUTH PORTLAND — At the end of a joint workshop Wednesday with City Councilors and School Board members, Mayor Tom Blake tried to coax a smile from City Manager Jim Gailey.
But given a council framework to hold the line a property tax increase for the combined budgets for schools, municipal operations and Cumberland County, Gailey and School Superintendent Suzanne Godin were more likely to grit their teeth.
With Councilor Patti Smith absent, five councilors let Gailey and Godin know a 2 percent property tax increase is the goal, including debt service for the renovation and construction at South Portland High School.
A 2 percent tax increase would add 34 cents to the current property tax rate of $16.50 per $1,000 of assessed value, and 18 cents of that is needed for debt service. The city share of county operations is expected to increase 4 cents, leaving Gailey and Godin to evenly split 12 cents.
The municipal share of 6 cents is a third of what Gailey said he needs to fund a proposed preliminary municipal budget of nearly $29.2 million, drafted with the expectation the city will continue to receive $1.8 million in state revenue sharing.
His preliminary, 3.23 percent, 18-cent mil rate increase for municipal operations would boost property tax revenues to $17.8 million from the current $17.2 million.
Given the Legislature is still working on the biennial budget and has not decided if Gov. Paul LePage's proposal to suspend the revenue sharing of sales and income taxes will be enacted, councilors said they are aware Gailey and Godin face a lot of unknowns and short deadlines for fiscal year 2014 budgets.
Gailey will present the municipal budget to the council March 18. He said he expects expenditures to increase by 2.1 percent, including a projected 1.5 percent cost-of-living increase for municipal employees and an increase of more than $200,000 in health insurance premiums.
Godin came with fewer details about the school budget, but did have more encouraging financial news, based on preliminary estimates of Maine Department of Education subsidies for next year.
City schools are currently slated to receive $4.5 million in state aid, although about $550,000 is earmarked as a reimbursement for paying into pensions formerly funded by the state. Godin said the estimate is a "best-case scenario."
She said the preliminary subsidy amount is about $1.8 million more than expected, but sought a 2.5 percent "needs based" increase to the current $40 million school budget. At that rate, Godin said seven positions, not all currently occupied, might have to be cut.
Godin will present her fiscal year 2014 budget to the School Board March 11, and said she is not ready to identify which jobs are in jeopardy.
By the end of the workshop, Godin said it "was back to the drawing board" because the suggested tax increase of 6 cents per $1,000 of assessed value represents an increase of less than 1 percent.
Consideration of the the debt service as part of the school budget created some tension between councilors and School Board members, who have maintained the $41.3 million school bond passed by voters in 2010 was done so on the understanding it would not be part of future operating budgets.
District 1 City Council candidate and current School Board Chairman Rick Carter sparred with Councilor Jerry Jalbert about how the debt should be considered.
Jalbert compared holding debt service aside to accounting practices at the failed energy company Enron, while Carter said there is an implicit understanding between the council and School Board on how debt service is viewed.
“We assured voters we would not gut schools to build the school,” Carter said.
Carter and Jalbert agree on the idea the 34-cent increase would not be split evenly off the top. Instead, they said, it should be based on a decreased amount reflecting the debt service. In fiscal year 2015, the debt service increase will be about two thirds less as bonds are retired and interest is paid.
Like Gailey, Godin said her budget draft is subject to revision because a change in the legislative proposal to reimburse school departments for pension contributions changes the aid formula so drastically that the School Department would actually lose more than $800,000 in subsidies for next year.
The council's target range of 1.4-2.3 percent for a property tax increase reflected concern about residents on fixed incomes and the specter of a taxpayer revolt like one 30 years ago that led to a temporary ordinance capping property tax increases at 3 percent.
Councilor Linda Cohen, who was City Clerk at the time, said the two years the cap was in place were difficult and damaging to the city. While she could understand the cumulative 62-cent, or 3.76 percent, property tax increase resulting from preliminary school, municipal and county budgets, she and Jalbert were adamant about avoiding a repeat the events of the mid-1980s.
Blake, at his December inauguration, initially set a goal of no more than a 1 percent property tax hike. On Wednesday, he said he could have supported up to a 2.5 percent increase "if I saw all the pencils were sharpened."
His figurative pile of pencil shavings may grow, but councilors, School Board members and administrators are aware events in Augusta may affect the local budget process through the spring.
“None of us are going to walk out of here tonight with a complete sense of what we have to do," Carter said.