GARDINER — Councilors are considering an $8.8 million municipal spending proposal that results in a 1.5 percent increase in the tax rate.

A homeowner with property valued at about $146,900, which the city says is the average property value in Gardiner, would see a $41.07 tax bill increase. The tax rate would go up from 19.9 to 20.2 per $1,000 of property value.

City Manager Scott Morelli said he provided the council with two budget scenarios for the 2013 fiscal year. Both include a reduction in the city’s assessment for education and the county, $97,090 and $5,570, respectively.

The second budget scenario would require him to cut $658,000 from departmental requests.

Morelli said he found $543,000 in potential savings through 56 budget request cuts. Significant cuts to departmental requests include delays in purchasing a new police cruiser and plow truck, a reduction in computer purchases, reduce the road paving account by $29,000, and shifted costs from the city to contract assessor.

“If the council elects not to have a tax increase, we need to find $658,000 to cut and that’s the result of increase departmental requests and the loss of about $140,000 in revenue this year,” Morelli said.

He said the city has been shifting $91,000 a year from the Libby Hill fund, which is supported by tax increment financing districts, to the general fund to help cover other costs. The city also has been using $25,000 of that money for marketing.

Morelli said the Libby Hill fund has a deficit of $700,000.

“We can’t continue to take money out of a fund that’s in deficit,” he said. “So the loss of revenue has shifted from the Libby Hill Business Park TIF Fund to the taxpayers.”

He said the business park deficit will continue to grow two more years, to just under $1 million, without any lot sales there. After that, starting in fiscal year 2015, the deficit will slowly start to go down, and by fiscal year 2024 it will start turning a surplus, he said.

“Again, this will all be without selling a lot,” he said. “The primary role of (the city’s community economic director) is to help market Gardiner and its business park. Our goal is to get that fiscal year 2024 a lot closer to where we are today.”

Morelli said he’s hopeful the lots will sell as economic conditions improve in the coming years.

The city saw a $2.6 million reduction in personal property tax revenue, which Morelli said is largely the result of the stagnant economy and the loss of Associated Grocers of Maine, which closed last spring.

Eventually, some of that revenue will be replaced when Pine State Trading Co. is fully moved into the former Associated Grocers property, he said. Pine State acquired the property at auction last summer.

Councilors will think about the budget options Morelli has offered and talk more about it at a meeting at 7 p.m. Wednesday at City Hall.

Morelli said the city has found a number of ways to reduce spending to prevent larger tax increases, including a reduction in staff, refinancing loans, sending out request for proposals for services that resulted in a $40,000 savings in property and casualty insurance, buying office furniture from state surplus and switching electricity providers at an annual savings of $18,000.

Mechele Cooper — 621-5663

mcooper@centralmaine.com

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