YARMOUTH — Town councilors and School Committee members wrestled Tuesday night over how to balance maintaining a high level of education without drowning taxpayers.

The discussion, prompted by a Feb. 7 workshop where councilors agreed to further explore the consequences of freezing the budget, focused on how the town is going to handle potentially dramatic revenue losses from the state.

Council Chairman Steve Woods said budget pressures coming from Augusta are putting many property taxpayers in a critical situation, because after state money dries up, they are essentially the last source for revenue.

“If we’re at a finite point, where the tax base is at a tipping point and we’re hearing from taxpayers that they cannot take anymore … at some point it’s math, whether it’s in D.C., Augusta or Yarmouth,” he said. “Critical action needs to be taken to be responsible.”

School Committee member David Ray rejected the idea of freezing the budget and said it would mean drastic cuts to education.

He said a draft 2.8 percent increase in the school budget is largely the result of fixed costs, such as employee salaries and benefits, which are bound by contracts and account for more than 80 percent of the School Department’s budget.

“We have to do a reality check on what we have to work with,” Ray said. To implement a flat budget “we would have to begin thinking about increasing class sizes, laying off teachers and reducing programming. We don’t want our schools to go backwards.”

School spending has seen little growth in the last five years, with an average increase of less than 2 percent, including no increase in the 2010-2011 school year.

That 2 percent increase accounts for about $500,000 of the more than $20 million school budget.

Ray said when they deliberate over the school budget, the committee is always cognizant of the impact on taxpayers, starting at a zero budget and forcing administrators to prove why they need money for programs.

“The analysis is always, is this a nice to have or is this a need to have to continue with what we have?” he said. “I think the sense of this community is that we should preserve our schools. Maybe that’s a political conversation we need to have.”

According to current budget forecasts, taxes could increase by about 6 percent as the town faces an uphill battle against state curtailments, tax revenues and bonds.

On top of more than $400,000 in School Department revenue losses, the town is facing further potential reductions from Gov. Paul LePage’s steps to curtail state spending, including the loss of municipal revenue sharing, funding half of teacher pensions and reductions in the homestead exemption.

On the town side, freezing spending would have only minor impact, with the budget increasing less than half of 1 percent in the last five years, according to a draft budget.

Town Manager Nat Tupper said to reach a zero-growth budget, which would still require a tax increase, the town would likely have to eliminate one of two school crossing-guard positions and institute a sewer fee.

“It’s really a thousand little cuts here and there,” he said. “It’s not the end of the world, but I’m really out of rabbits in the hat.”

An economic dilemma unique to Yarmouth is the continued devaluation of the Wyman Station power plant, which has historically allowed Yarmouth benefits it might not otherwise have had because of its property valuation.

The oil-fired plant once accounted for nearly half of Yarmouth’s tax base, at more than $200 million. Over the years, it has lost more than half its value, and is now worth less than $100 million, with the costs of services built on those taxes now shifting to taxpayers.

Yarmouth also has two large bond issues to pay off and another potentially on the way.

Last November, the town approved bonds for the turf field and the public works garage, totaling about $4.5 million. And in June, voters will be asked to approve another $1 million bond for safety and code issues at the aging Merrill Memorial Library.

They also face the possibility of paying for a multi-million dollar harbor dredging project.

Woods said the town has to make a decision about spending to avoid more serious effects in the future.

“We’re at a tipping point on the community as a whole,” he said. “At some point we cannot just keep having expenditures, regardless of where they’re coming from. Taxpayers are unable to absorb these increases and it’s creating a tremendous burden. None of this will be easy or comfortable.”

But Councilor David Craig said Woods was painting the council’s position “with too broad of a brush.”

“I think the notion of flat funding on the face of it with everything else, is kind of a crazy idea,” he said. “I think the majority (of the town) is saying we’re not at a tipping point. I want to make it clear that there is no unanimity on the Town Council that we have to flat fund.”

Other councilors, in favor of flat funding, expressed concern about losing Yarmouth’s sense of community if property taxes continue to rise, forcing people out of their homes.

“People came here to live because of the culture and the diversity,” Councilor Pat Thompson said. “We are losing that because the people known as the working poor are being driven out by tax increases. When we lose that diversity, we lose that quality of why we want to live here.”

Thompson, who is a real estate agent, added that she believes property values are going to go down if the taxes continue to rise.

Although few people attended the hastily scheduled meeting on Tuesday, Bill Hagerdorn, who has two children in the school system, said he moved to Yarmouth from Washington, D.C., specifically for the schools.

“I do take issue with idea that real estate values are going to be affected by property taxes,” he said, noting that strong schools were the most attractive aspect of Yarmouth when his family was deciding to move. “I wouldn’t have moved here if not for the quality of the schools.”

Whether councilors decide to flat-fund the budget or not, they’re going to have to make some difficult decisions.

“There is nothing we can do or not do that won’t create a hardship,” Woods said. “The reality is that the current economic condition offers a variety of painful choices and we as leaders need to make the best of those choices.”

Will Graff can be reached at 781-3661 ext. 123 or wgraff@theforecaster.net. Follow him on Twitter: @W_C_Graff.