WATERVILLE — Property owners will face a tax increase if a proposed $36.8 million municipal and school budget for the upcoming fiscal year is approved.

The proposal would raise the property tax rate to $25.65 per $1,000 of assessed valuation, increasing the amount paid by the owner of a home assessed at $100,000 by $100.

The proposed municipal and school budget represents a $65,358 increase over the current $36.7 million budget.

In the proposed budget, the schools are asking for $605,096 more in local taxes than last year. Schools received $6.1 million in local taxes in the current budget and are asking for $6.7 million for 2012-13.

Money the city will spend to build a new police station or retrofit an existing building would not affect the proposed 2012-13 municipal and school budget, according to City Manager Michael Roy.

“We’ll be borrowing for that in 2013 — one year from now, so any financial implication will happen in the next budget year, not the one coming up,” he said. Roy said if the city borrowed $2.5 million for a police station and the loan is financed for 25 years at $185,000 per year in debt service, property owners would pay about $30 more a year on a home assessed at $100,000. He emphasized that the information was preliminary.

The Waterville Board of Education on Monday took a first vote to approve a proposed $19.8 million budget. City councilors have yet to consider Roy’s proposed $16.9 million municipal budget, which they received Tuesday.

The school’s current budget is $19.9 million, but the proposed one includes much less in state and federal funding, according to School Superintendent Eric Haley. The budget also calls for cutting 12 5/8 teacher positions.

State revenue sharing drops

City councilors met with the School Board Tuesday to get a first look at each other’s proposed budgets.

Roy said 54 percent of the city’s total revenue comes from property taxes; 11 percent from surplus and tax increment financing; and 35 percent from all other revenue, including motor vehicle excise tax, state revenue sharing and other sources.

Two major sources of the revenue, motor vehicle excise taxes and state revenue sharing, have both decreased in the last four years. From 2007 to 2011, vehicle excise taxes decreased 4.7 percent and state revenue sharing 38.8 percent, he said.

Roy said people are buying more vehicles this year than last, but they are buying fewer than four years ago. And they are keeping vehicles longer, so they are paying a decreased amount of taxes each year.

Roy was critical of the state for the revenue sharing loss. The state, by law, is required to provide an education subsidy that pays for 55 percent of the school budget, he said. The state also is responsible for revenue sharing that is based on 5.1 percent of state revenues.

But now, state help for education is at 45 percent and revenue sharing at 3.4 percent, he said, representing a loss to the city of about $700,000.

“For 10 years or more, the state has failed to live up to its legal responsibility for state revenue sharing and school revenues,” he said.

The state also has made changes to the homestead exemption law and other exemptions that shift more costs to towns and cities, Roy said. The changes represented a loss to the city of about $415,000 in 2011-12.

Both Mayor Karen Heck and Roy said that of the three main sources of tax revenue — income, sales and property tax, the only one not based on a person’s ability to pay is property tax. Because the state has not increased sales and income taxes, the burden falls on property owners, they said.

Reserve losses

To make up for lost revenue, the city can reduce expenditures, seek other revenue sources, lobby state officials to comply with the law or use surplus, according to Roy.

He said the city expects to spend $1.5 million in surplus for the proposed budget, just as it is doing now.

By July of next year, the reserve account will be near or below the 16 percent that financial rating organizations recommend for emergencies, he said.

The surplus was $10 million in 2008, but would fall to $5.1 million in July 2013, if some is spent in the upcoming fiscal year that runs July 1 to June 30, 2013, he said.

Both the council and school board must take three votes to approve the budgets. City and school officials said that the numbers could change as they review and discuss the proposals before the council takes final votes on the combined budget May 15.

Voters in June will consider the proposal in a referendum. The council is scheduled to take a first vote on the municipal budget May 1.

Amy Calder — 861-9247

acalder@centralmaine.com