SOUTH PORTLAND — A preliminary budget projection shows the city could see a property tax increase of 3.5 percent to 5.3 percent in the coming fiscal year.
Those figures, presented to the City Council during a workshop Monday, are a picture of the municipal budget that hasn’t fully come into focus, City Manager Jim Gailey said.
Gailey will present his budget proposal to the council on March 19. He told councilors city departments are trying to toe a conservative line, but that it’s likely declining revenue will still leave the city in the red in fiscal year 2013.
“We’re not seeing a lot of requests from departments. They’re trying to keep it as bare-bones as possible,” he said.
The lower end of the estimated tax-increase range assumes revenue will stay the same, but both Gailey and Finance Director Greg L’Heureux said that’s unlikely.
The early projection is that motor vehicle excise tax revenue could fall by $300,000. Councilor Gerard Jalbert said that’s because a car rental company – he wouldn’t say which one – decided to register their vehicles in York County instead of South Portland to avoid Cumberland County’s emission requirements.
Investment income – interest accrued by the city’s cash deposits and other investments – is expected to be down about $100,000. L’Heureux said the average yield on investments is about 1.3 percent, which he said is “very bad.”
“I have started looking at longer-term investments with higher interest rates, but I haven’t flipped the switch on that option yet,” he said.
Other sources of revenue – state revenue sharing, bus fares and ambulance fees – are expected to funnel more money to the city next year, but not enough to make up for shortfalls in other areas of committed expenditure growth.
Estimated expenditure increases include a 1.5 percent cost-of-living salary increase ($201,000) for union employees and a nonunion salary step increase of about $15,000.
Health insurance premium increases are expected to cost the city $182,000, Maine State Retirement contributions will increase by about $138,000, and spending on fuel will jump by about $85,000.
The estimate does not include a projected $1.2 million budget gap for the School Department. School officials are still working on their budget proposal, but L’Heureux said he has warned administrators they need to rein in spending to avoid depleting the department’s savings.
In the past two years, the schools have taken more than $1 million annually from undesignated surplus to cover budget gaps. At that rate, there will be no unassigned savings left by fiscal year 2014, L’Heureux said.
“You have to back off the use of surplus, or you’ll have a cliff in your budgetary process,” he told School Board members Monday.
Gailey and L’Heureux stressed to councilors that the numbers presented Monday are a rough sketch, and are almost certain to change by the time the first official budget proposal is made.
“This is the reality of where we are today,” Mayor Patti Smith said. “It’s good to know.”