HALLOWELL — A new year of spending that could soon be approved by city officials is on track to slightly reduce property taxes, marking a significant turnaround for a city whose budget raised taxes by about 20% last year.

Pending wrapping up spending for the current budget year, Hallowell’s tax rate could end up about 5% lower than the current rate, which was set last summer at $19.90 per $1,000 of assessed property value and could be lowered to about $18.90, if the proposed budget is given a final confirmation during the Aug. 11 City Council meeting. City Council members unanimously approved a first reading of the budget during their July 7 meeting.

The city’s spending plan — not counting obligations to Regional School Unit 2 or Kennebec County — adds up to about $3.26 million, significantly less than each of the previous two budget years.

Mayor George Lapointe said he attributes the likely decrease in both spending and the tax rate to detailed work by City Council members, and to Hallowell residents, who participated much more often in this year’s process than last year’s.

He also said city officials had been caught off-guard last summer by the impacts of a last-minute property revaluation that rebalanced the tax base, shifting more tax burden to homeowners. Without a revaluation during this cycle, Lapointe said city officials have been much more sure of the impacts the budget will have on property taxes.

“I don’t think anybody anticipated it, and it came right at the end of the budget process,” he said. “That just caught everybody by surprise. And if we had something like that again this year, it would have gotten much rougher.”

In the month following the unanimous approval of the fiscal year 2025 budget last July, which raised property taxes by about 20% and caused outrage among residents, city officials made $231,000 in cuts under the impression that they would be able to reduce the tax increase to about 10%.

But such a move, as the City Council learned almost a quarter of the way through the budget year, was illegal; tax commitments cannot be undone, and tax rates cannot be easily changed mid-year.

That news led the council to direct former City Manager Gary Lamb to freeze about $239,000 in spending to roll over to the 2026 budget and reduce its property tax burden. Lapointe said at the time that it was “most unfortunate” that the council could not move forward with its original plan to cut more spending more immediately.

Lamb left city staff last month, and new City Manager Ross McLellan’s first City Council meeting was July 1.

City Council members agreed during that July 1 meeting to use about $325,000 in fund balance — that is, leftover money from prior budgets, plus funds saved from the spending freeze last fall — to reduce this year’s tax burden.

While councilors agreed last fall to save that $325,000 total for lowering the 2026 budget’s tax burden, the actual savings fell well short of that number. Council members nevertheless agreed to carry forward $325,000 — or about 60% of the city’s fund balance — using funds saved up from previous years. Councilors appeared to support continuing to use fund balance to pay down tax increases in future years, too.

“We would be maintaining our promise of how much was going to be factored into this year, and still save some for the following years,” Ward 1 Councilor Karen Knox said during the July 1 meeting.

The council also voted 4-3 to not fund a fifth police officer position, with At-large Councilors Walt McKee and Scott Cooper, along with Knox and Ward 5 Councilor Lauren McPherson choosing to eliminate the $100,000 position. Ward 2 Councilor Michael Frett, Ward 4 Councilor Danielle Obery and Ward 3 Councilor Benjamin Gagnon voted to fund the fifth officer.

Finance committee members began their deliberations in January, and almost immediately saw heightened public interest in the budgeting process, Mayor George Lapointe said. He said both the finance committee and City Council received much more public input this year than last.

“All the hard work and the pain last year resulted in a lot more people paying attention to the budget process,” Lapointe said. “I think that helped.”