AUGUSTA — Significant declines last year in revenue streams essential to town and city governments may soon cause residents to make some tough choices about raising taxes or cutting public services, according to the author of a Maine Municipal Association report.

Kate Dufour, a legislative advocate for the association, wrote the report that looked at revenues and spending by towns and cities in 2010, evaluating data gathered in a survey that is sent out annually to municipalities.

The survey shows drastic and in some cases unprecedented drops in everything from local service fees collected to state and federal tax dollars shared with municipalities, Dufour said. The survey compares data to the same figures for 2009.

Town and city governments statewide saw an overall 6 percent decline in operating revenue from all sources, forcing municipalities to ask residents how they wanted to fill the budget gap, she said.

“At the end of the day, it’s up to voters and the residents of the community to decide what is best for their communities,” Dufour said. “Sometimes it’s an increase in taxes or a cut in services.”

Local government spending in public safety and road maintenance categories each increased by 6 percent, while the money spent on most other public services and programs decreased, the survey found.

Although the survey doesn’t provide data on specific budget cuts in each community, Dufour believes many municipalities tapped into reserves accounts, reduced employee benefits and shed workers to stave off more drastic cuts in public services last year.

Declines in spending on government administration costs, however, show that municipalities may be running out of places to cut very soon if the downward trend in revenues continues, she said.

There was a nearly 7 percent drop in spending on general administration — which consists of employee benefits, administrative offices, legal, economic development and government building maintenance.

Dufour characterized this decline in administrative spending as a drastic drop when compared to much smaller decreases in the category during the 16 years that she has written the report, which is released in November each year.

“This could be a preview of coming attractions and over the next few survey cycles we’re going to get a sense of what challenges may be in store for municipalities,” she said.

The city of Augusta, with a population of about 19,130, reacted to drops in revenue in 2010 by taking a variety of emergency budget measures, according to City Manager William Bridgeo.

In 2010, city employees faced a wage freeze, eight unpaid furlough days and reductions in certain employee benefits, he said Thursday.

“Like most communities, a big percentage of what we spend money on is employee costs,” Bridgeo said.

The city of Augusta has been forced to lay off 17 workers since the economy tanked in 2008, he said. There are the equivalent of 221 full-time employees currently.

The city of Waterville, with a population of about 15,760, has tapped into its reserves to offset declining revenues over the past four years, including 2010, according to City Manager Michael Roy.

The reserves account, also known as the undesignated fund, is built up by the tax dollars left over at the end of a budget year. It’s an emergency fund that professional auditors recommend municipalities maintain at a certain level to sustain government operations during a crisis.

After drawing down almost $4 million, the city’s undesignated fund is currently at about $7 million, which is above the $6 million minimum amount recommended by auditors, according to Roy, who did not return a message this week.

Many towns and cities statewide have also consolidated services and departments to reduce spending, something that highlights how local government is stretching revenues to keep offering public services, Dufour said.

“I think municipalities are going to continue to find ways to provide these services,” she said.

David Robinson — 861-9287

[email protected]

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