GARDINER — City councilors will likely face the option of cutting additional services or increasing the tax rate now that the state budget-writing committee has proposed a state spending plan with cuts to municipal aid.

The dilemma is a reversal from what city officials had been expecting for the last two months, following an April budget proposal by City Manager Scott Morelli with no cut to revenue sharing and no tax increase.

The city’s proposed $8,738,596 budget goes to public hearing 7 p.m. Wednesday at City Hall.

In January, Gov. Paul LePage proposed eliminating revenue sharing for two years, but strong opposition from municipalities led Morelli and others to believe it wouldn’t be touched.

“Unfortunately, we were all wrong,” he said.

The most recently proposed state budget calls for cutting municipal sharing by about $75 million, a reduction from the $200 million cut proposed by LePage in his two year budget.

The cuts to revenue sharing will cost Gardiner around $177,000, according to Morelli.

He said council has to either cut that from the budget or raise taxes by that amount, leading to a tax increase of $.50 per $1,000 of assessed value.

This would mean a tax increase of about $73 for the average household in Gardiner, valued at $146,900.

Morelli recommends raising the tax rate to avoid cutting more services. His original proposal called for $618,000 in cuts to expenses. City Council will review the proposal tonight.

“There’s a lot of bad choices that could be made by the council, but none of those will be my recommendation,” he said.

Morelli is blaming the potential tax hike on the state Legislature, which will be reviewing the proposed budget in the coming days, including cuts to municipal revenue sharing.

“While our tax increase won’t be what most other communities are facing, it’s still not something that we want to have to do,” Morelli said. “Unfortunately, it’s easier for the Legislature to shift cost on a municipality.”

“It’s easier for them to pass this decision on to us than raise taxes themselves,” he added.

The state gives a portion of its sales and income tax revenues to municipalities to supplement property tax revenue.

The budget endorsed unanimously by the Appropriations Committee restores about two-thirds of the total revenue sharing LePage proposed to cut, according to Jodi Quintero, a spokeswoman for House Speaker Mark Eves, D-North Berwick.

Gardiner Mayor Thomas Harnett said his primary concern with the state budget is that LePage proposed cutting revenue sharing, yet he says he’s against raising taxes.

“I think the governor’s repeated claim that he’s not going to raise taxes, not going to raises taxes, is remarkably disingenuous,” Harnett said.

LePage has vowed to veto the budget proposed by the Appropriations Committee because it includes tax increases — temporary increases on sales and the meals and lodging tax.

City councilors have previously discussed the importance of trying to avoid moving the city’s tax rate over $20 per $1,000 of assessed value, so it’s unclear whether they’ll back Morelli’s recommendation of increasing taxes.

The rate has held steady at $19.90 for the second year in a row.

Harnett said he doesn’t know what council will do, but he thinks some councilors will be concerned about the potential of passing the $20 threshold.

“I don’t think it’s a ceiling that cannot be exceeded, but it’s exceeded at some risk because we are trying to attract new residents to Gardiner,” Harnett said.

The city has a higher tax rate than most surrounding communities, and some councilors have expressed concern that a higher rate will lead to more potential residents choosing to live elsewhere.

Harnett said he thinks the city needs to do a better job of explaining the benefits to potential residents of living in a service center like Gardiner over nearby rural towns with lower tax rates.

Besides the potential tax increase, Morelli said he doesn’t expect the budget to cause much other reaction from members of the public at Wednesday’s meeting.

Morelli made slight changes to the budget he originally proposed after hearing feedback from councilors.

The largest change was restoring $11,000 of funding for two private cemeteries — Oak Grove Cemetery and Mount Hope Cemetery.

Councilors have also discussed Morelli’s proposal of using $175,000 from the city’s fund balance to prevent the budget from increasing taxes further. Originally, he proposed it with the objective of avoiding any tax increase.

Morelli described the dipping into the fund balance as a firewall to get through the next year, with the hope that the city receives more state funding or increases its revenue before the following year.

Without more revenue, the city could be facing a budget gap of over $500,000 in fiscal year 2015.

Wednesday’s meeting will also include public hearings on a liquor and outdoor consumption application for Water Street Grill, a design for a new gazebo, and special event permits for a church and Gardiner youth hockey.

The gazebo design presentation will be the first chance for councilors and the public to comment on a design draft from the Parks and Recreation Committee.

The committee already solicited input from the public about ideas for a replacement structure to the gazebo in the Gardiner Common torn down last year.

Paul Koenig — 621-5663
[email protected]

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