OAKLAND — Town leaders have come up with what seems like a painless way to deal with an $87,000 budget gap created by the Legislature’s finalization of a state budget Wednesday.

Under the plan, approved Wednesday night by the Town Council, the gap will be filled by a projected rebound in excise taxes, thereby avoiding the scenarios of service cuts or tax hikes that are playing out in other towns throughout the state.

Every time a vehicle is purchased or registered in Oakland, the town receives excise tax, which can run from a couple of hundred dollars for an older used car to $1,000 or more for a new, expensive one.

For the last several years, excise tax revenue has been sluggish because the recession has affected local residents’ vehicle-buying decisions, Town Manager Peter Nielsen said.

“It hit that area of revenue pretty hard,” he said. “It’s something people can control, whether to buy a car and whether to buy a used one or a new one.”

In the $4.2 million budget Oakland voters approved during May’s Town Meeting, excise taxes were budgeted at $965,000, a $15,000 increase from the $950,000 that was budgeted for the fiscal year that ends June 30.

In reality, however, vehicle purchases have jumped dramatically over the past 11 months, and excise taxes now are expected to bring in much more than they are budgeted for, Nielsen told the council Wednesday.

“We’ve learned in the past several months that excise tax revenues are rebounding,” he said. “People are buying a lot of vehicles right now. The town is doing better than in the last several years by far.”

For the current fiscal year, actual excise revenue has exceeded the amount budgeted by $90,000 and is on pace to exceed it by $110,000, said Douglas Mather, the town’s finance director.

Nielsen said this will be the first time that excise taxes have exceeded $1 million since 2007, the year before the recession took its toll on consumers.

Town leaders are banking on the hope that the increased activity seen this year will continue over the upcoming year. If vehicle purchases don’t decline again, the town will take in enough money to offset the $87,000 gap, Nielsen said.

Nielsen said taking in enough to offset the gap is “reasonable to expect.”

If the revenue increase turns out to be a one-year spike, however, the town still could be left with a hole in its budget. In that scenario, the council probably would cut back on scheduled deposits into vehicle purchase accounts.

The budget includes a $65,000 deposit toward a new plow truck and a $60,000 deposit toward a new firetruck. Council members said they would be comfortable with reducing those amounts, if needed.

Nielsen credited Mather with coming up with the plan, a divergence from earlier discussions which had revolved around halting one or two of this summer’s scheduled road paving projects.

Under the new plan, a $62,000 project on East Pond Road and a $96,000 project on McGrath Pond Road both will move forward.

“It’s a little more attractive, I think, than whacking paving at this time,” Nielsen said. “It seems from our discussions that the paving is important to the people of Oakland.”

Nielsen said that the property tax rate, now $13.50 per $1,000 of assessed property value, would have to be increased by 17 cents if the $87,000 gap were to be made up for through taxation.

Councilman Dana Wrigley said he was opposed to the idea of passing anything along to taxpayers.

“That’s not what we told people we would do,” he said.

The plan was approved on a motion by Wrigley, a second by Councilman Don Borman and a unanimous vote.

Nielsen said the tax rate will increase by about 30 cents per $1,000 of assessed property value because of increased assessments from Regional School Unit 18.

Tax bills are scheduled to go out in early July.

Matt Hongoltz-Hetling — 861-9287
mhhetling@centralmaine.com