PORTLAND – This is a week of hard choices for city and school officials as they work to balance Portland’s budget while minimizing tax increases for the fiscal year that starts July 1.

A majority on the City Council’s Finance Committee wants property taxes to increase by no more than 1 percent. That could mean further cuts to schools and municipal services.

City Manager Joe Gray has proposed a $196 million municipal budget, which would eliminate 40 positions and add 1.4 percent to the municipal portion of the tax rate. The School Committee has proposed an $89.9 million budget, which would eliminate 44.5 positions and increase taxes by 1 percent.

For a tax increase of 0.9 percent — below the Finance Committee’s threshold — school and city officials will have to identify $475,000 in cuts or find new revenue, such as tapping into the city’s rainy day fund or using proceeds from a land sale.

Another $350,000 would be needed if the City Council rejects Gray’s plan to raise revenue by increasing the cost of pay-as-you-throw trash bags. The council appears divided on the issue.

If the council rejects price increases for trash bags — by 25 cents for the small bags and 50 cents for the large ones — there would be cuts to programs and services, Gray said.

“This is the week for making difficult but important decisions as they relate to what is the level of services we are willing to continue and what cuts we are willing to accept,” Gray said Monday.

The Finance Committee will meet with the School Committee at 5:30 p.m. today and vote on a recommendation that will go to the City Council for a public hearing tonight, starting at 7:30.

The council will take final action on the school budget Monday and send the issue to voters in a referendum on May 11.

At 11 a.m. Friday, Gray will meet with the Finance Committee and provide options for trimming the municipal budget. The committee is expected to vote Friday on a recommendation to the full council. The council is scheduled to have a first reading of the budget on Monday and final vote on May 17.

Some councilors say the city could use a portion of its rainy day fund to pay for capital expenses such as police cars and computer upgrades. But that has risks.

In 2008, the city’s credit rating was downgraded after school officials dipped into the rainy day fund to close a budget gap and the city took out $1.2 million to pay off a legal settlement with Scotia Prince Cruises.

Gray said the city has worked since then to maintain its credit rating, which is important because a good rating makes it less expensive to borrow money.

To prevent any further downgrades, the council established a policy a year ago that the city would aim to maintain a fund balance of 12.5 percent of expenditures. The city now has nearly $27 million in reserve — 11.7 percent of the total budget.

Councilor John Anton, a Finance Committee member, said he believes the city can use part of the rainy day fund for capital purchases and not run afoul of the rating agencies.

The City Council has added hundreds of thousands of dollars to the fund during the past couple of years.

“To me, it’s about smoothing,” Anton said. “We are trying to smooth over a certain period.”

Ellen Sanborn, the city’s finance director, disagrees. Because of the city’s past financial problems, she said, credit agencies will be less forgiving if the city draws money from its fund balance again to pay the bills.

Gray said the fund balance should be the last resort.

Councilor Jill Duson, chairwoman of the Finance Committee, said she supports raising the price of trash bags rather than spending money from the fund or raising taxes.

Another revenue option for the council is the $900,000 that’s expected from the sale of a city-owned parcel on Riverside Street to Lucas Tree Experts.

City officials have planned to use the money to move the Public Services Department from Bayside to city land on Riverside Street.

Now, some councilors say the money could be put into the budget to offset capital costs.

Other issues include public safety on Peaks Island, where residents oppose staffing cuts that could save the city $200,000.

Also, the city staff will meet with library officials this week to look for ways the city and the Portland Public Library system could save money by working together, and to discuss how much it would cost to keep the Riverton branch open.

Riverton is one of three branch libraries slated for closure.

 

Staff Writer Tom Bell can be contacted at 791-6369 or at: [email protected]