HALLOWELL — Faced with a $425,000 increase in city expenses, Hallowell officials are exploring the possibility of using revenues to lessen the impact on taxpayers.

The city’s property tax rate is now $21.30 per $1,000 of assessed valuation, but the proposed budget — in its current form — would likely increase the tax rate to $24.60, or almost 15.5%, according to Maureen AuCoin, a city councilor and chair of the finance committee.

AuCoin was the only councilor to vote Monday against approving a draft of the overall budget at its second reading.

Most of the spending increase comes from a $239,000 tax abatement the city must pay in the upcoming fiscal year to Granite Hill Estates, an apartment and assisted living complex for older adults at 60 Balsam Drive.

The city overassessed the property by $6 million, according to a mediated settlement resolved at the end of last year.

The 135-acre property is owned by Northbridge Companies, which runs more than a dozen housing developments across New England.

City Manager Gary Lamb said Granite Hill Estates added to the complex in about 2010, and a commercial appraiser assessed the changes at $18 million.

Lamb said commercial appraisers are often asked to help city assessors who are not as well-versed in large commercial projects.

When MaineGeneral Health sold the property to Northbridge Companies in 2019, the new owner balked at the assessed value, according to Lamb.

Jen Hastings, a spokesperson for Northbridge Companies, said the company began working on a request for reassessment in early 2021, and filed June 25, 2021, for the matter to be addressed by the Maine State Board of Property Tax Review.

Lamb said the matter went to court, and a professional mediator and lawyer was hired to help the city’s tax assessor and Northbridge reach an agreement that would reduce the value to $12 million from $18 million. Lamb said an agreement was reached in December.

Before this, Hallowell had about $250 million in assessed property value, according to Lamb. It also gained about $3 million in assessed value this year. With the $6 million loss coming out of the Granite Hill Estates decision, the city has experienced a net loss of $3 million in its total assessed value.

The City Council voted Monday to make changes to the proposed budget, including cuts to the cemetery and community service departments and adding funds for summer concerts and the downtown-focused nonprofit Vision Hallowell.

The changes resulted in a spending reduction of about $10,000, bringing the proposed expense budget to $7,079,529.

The projected 15.5% increase to the city’s property tax rate would “place an unreasonable burden on our residents,” AuCoin said.

“I will continue to advocate for changes,” she said. “This is why I didn’t support the motion at Monday’s meeting.”

AuCoin said the city’s finance committee is expected to meet before the council holds a final reading on the proposed budget, but a date for the meeting had yet to be set as of Wednesday.

The council discussed the possibility Monday of using tax increment financing, of TIF, funds or carryover funds from the previous year to help cover this year’s unanticipated expenses. Councilors, however, made no formal motion regarding revenues. A draft budget shows the city has $6,845,956 in revenues.

“Staff is taking a hard look at revenues with the finance committee,” Lamb said. “Obviously, the more we can put into the revenue side, the less we’ll have to increase the mill (property tax) rate.”

Looking ahead, the City Council expects to hold a public hearing on the proposed budget at 6 p.m. on June 13. And while Hallowell in the past few years has set its budget in August, Mayor George Lapointe said officials are aiming to finalize it by the end of June.

“Ideally, we will finalize the budget before the start of the fiscal year,” said Lapointe, adding councilors could pass a continuing resolution to have the budget numbers carry forward until a new budget is approved.

Lapointe said budgets are always tough, and there are tensions every year between Hallowell’s aspirations as a community and the willingness to pay for those aspirations.

“It’s always a balance of those two things,” he said. “We start the process early in the year, hearing what departments need and what people need for services. That’s the normal process, and I think this year it’s going fine from that perspective.

“The Granite Hill Estates abatement threw a wrench in the works, but we’re working our way through that. It’s here, and we have to work our way through it.”

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