AUGUSTA — City councilors directed administrators Thursday to make changes to next year’s combined city and school budget so there is no more than a 2 percent property tax rate increase.

The budget proposed by City Manager William Bridgeo would have resulted in a tax rate increase of 4.24 percent. That leaves administrators to find more than $600,000 in either cuts or new revenue.

Ralph St. Pierre, finance director and assistant city manager, said both the city and schools could take an additional $280,000 each from their fund balances, accounts made up of reserve funds built up from previous years, to lessen the effect on taxpayers. That would leave a gap of about $73,000 to close to get the tax rate increase down to 2 percent.

City councilors appeared to reach consensus on that figure this week, directing St. Pierre to come back with a city and school budget with a 2 percent tax increase.

“I’m not voting for a budget with a penny more than 2 percent,” At-Large Councilor Jeffrey Bilodeau said.

St. Pierre said he and Bridgeo would work on that and have a recommendation for city councilors for their budget wrap-up session May 19.

While the tax rate increase would be reduced to 2 percent, most Augusta residents’ taxes would decrease. That’s because of a partially state-funded Homestead Exemption program that allows homeowners to declare $15,000 of their home’s value exempt from property taxes.

So taxes would decrease for anyone with a home valued at less than about $250,000. St. Pierre said fewer than 140 homes in the city are worth more than that.

Property tax bills of owners whose property in Augusta is not their primary residence, such as business owners, would increase 2 percent next year.

St. Pierre said the School Department, after the school board approved the $29.6 million school budget in March, received an additional $280,000 in state funding, which school officials decided to use to reduce the amount coming from the schools’ fund balance reserve next year. He said the schools, if directed to reduce their request from taxpayers by $280,000, could take that amount back out of fund balance and not have to cut any educational programming. St. Pierre said it will be up to school officials to decide how to make up the difference.

While the school board approves a school budget annually and school administrators determine specific budget lines, city councilors have the final say on the total amount, as they must approve the combined city and school budget.

“The schools did get $280,000 in extra (state funding) from the Legislature, so we’re not cutting the school budget; we’re just asking them to acknowledge that $280,000 flowing in,” Ward 3 Councilor Patrick Paradis said.

The school system has more than $5 million in its fund balance, well over the amount state law says schools should retain in such accounts. So school officials proposed to take $3.2 million from that money next year, to spend it down, finance about $1 million in one-time needed capital improvements, and help fund next year’s budget.

Bridgeo’s $58.1 million budget proposal included about $25,000 in funding for a new, part-time code enforcement officer position, an addition councilors expressed support for Thursday.

Mayor David Rollins said most of the city and school budget is used to pay for personnel, and few areas of the budget can be adjusted.

He suggested, longer-term, the city may need to take a harder stance in contract negotiations for employees.

“I’ve been here 10 years and I’ve seen state wages are stagnant, private sector wages are stagnant, and we pass on 2 to 2.5 percent wage increases regularly,” Rollins said. “In an environment, in the real world, where wages have been stagnant, if you’re really looking to walk the walk, that’s something to look at. I’m not against city employees or any of that, but that’s the real world you’ve got to look at. How do we sit here in a very difficult environment and not look at that big expense?”

Councilors expressed support for moving ahead with police Chief Robert Gregoire’s proposal to seek a federal grant to hire a new police officer who would be focused on youth drug education and prevention.

The federal Office of Community Oriented Policing Services, or COPS, funding would cover 75 percent of the salary and benefits of an entry level officer for three years. The city would be responsible for the remaining 25 percent, or about $15,000 a year.

St. Pierre said by the time the city learns whether it has won the grant and hires a new officer for the position, some of the year already will have passed, so the city will likely only need $10,000 to fund the position the first year. He said that money could come from a public safety reserve account, which now contains about $50,000. He said councilors could decide next year whether to include funding for the city’s share of paying that officer from the following year’s budget, or again fund it from the public safety reserve account.

St. Pierre said an item will be placed on the May 19 council agenda authorizing Bridgeo to apply for the federal COPS grant funding.

Keith Edwards — 621-5647

kedwards@centralmaine.com

Twitter: @kedwardskj