BATH — The City Council on Wednesday discussed options for dealing with a potentially significant increase in the city’s cost of education, including possible withdrawal from Regional School Unit 1.

The discussion came after the Regional School Unit 1 Board of Directors voted unanimously April 23 to change its cost-sharing formula so that a law that created the school district would apply to its entire local tax calculation.

With the change, residents of Bath, Arrowsic and Phippsburg could shoulder a greater share of school costs than in a previous version of next year’s proposed budget. Meanwhile, Woolwich and West Bath taxpayers could see substantial decreases in their share of the fiscal 2013 costs.

By the cost-sharing method RSU 1 has been using, Bath would be assessed $8.3 million next year, a 1.5 percent increase over the current year. Under the revised formula, that assessment would climb to $8.6 million, a nearly 5.7 percent increase.

After an executive session that followed the public portion of Wednesday’s meeting, the council voted unanimously to have city’s attorney send a letter to the School Board expressing the council’s “reaction to, and displeasure with, the recent board action to change the funding methodology,” Chairman David Sinclair said.

City Manager Bill Giroux told the council Wednesday that the RSU 1 budget would have to be reduced by about $682,000 for Bath’s assessment to remain at the original, 1.5 percent increase.

He said the budget could be reduced when the School Board votes on the budget Monday, May 7, or at the district budget meeting on June 5, at which the public will vote. From there the spending plan goes to a second public vote, at a June 12 budget validation referendum.

One thing the council should strongly consider doing, Giroux said, is to work with a committee – that would be formed by the RSU 1 board and would be composed of representatives from the school district communities – on a cost-sharing formula that would “be more fair, at least certainly more fair in Bath’s mind.”

The cost-sharing formula used by RSU 1 since 2008 “is something very similar to what the rest of the state of Maine uses,” Giroux said. Under the new interpretation, he said, Bath’s share of school costs would “put us in the top five of the (approximately) 480 … communities in the state of Maine. … Certainly a very high burden.”

“If Bath were not in the RSU, we would get $5.3 million in subsidy from the state because of our financial situation,” he continued. “That subsidy, while we’re in the RSU, ends up coming into the RSU, not into the city of Bath, and gets spread among all of the RSU communities.”

The city could litigate the School Board’s decision, which would likely be expensive and time-consuming, Giroux said. And some have suggested Bath consider withdrawing from the RSU because of the new cost-sharing method, he added.

The city’s attorney, Patrick Scully, said the withdrawal process would start with a petition, which must be signed by 10 percent of the number of Bath voters in the last gubernatorial election – about 385 signatures. The petition would go to the City Council, which would prepare a warrant for a special election to decide whether to begin the withdrawal process. The language would include a dollar amount the city would raise to cover the costs of pursuing that withdrawal process.

If voters initiate the process, a withdrawal committee would be formed to negotiate a withdrawal agreement with the RSU, Scully said. That agreement must address several issues, such as how all students of the city would receive appropriate educational services. Maine’s education commissioner would have to approve the agreement, which would then go to a second city vote requiring a two-thirds majority for passage.

“This is an item that is incredibly important to our community,” Sinclair said. “We’re talking about the education of our children. And I think everyone recognizes (that there are) certain economies of scale that we benefit from by joining together with the surrounding communities.

“But when those benefits are swallowed by a cost allocation methodology that erodes that benefit to the point where we might end up paying for more than we’re actually benefiting (from), that’s when we have to look more closely at what we’re doing, and whether we’re responsibly managing both education and public funds.”

Councilor Andrew Winglass criticized the timing of the School Board’s vote to change the formula.

“I think everyone was used to and had accepted a certain formula that from the very beginning we have all been using,” Winglass said. “… To go ahead and accept a change of this magnitude in the last month of budget season, it just seems odd. It just seems not the best way to do business.”

The RSU 1 board sought a new legal opinion last month on whether the law that formed the unit should apply to all or part of the local tax calculation. Bryan Dench, an attorney with Skelton Taintor & Abbott in Auburn, recommended all the calculations be determined by that law.

Several residents questioned the use of two formulas at a RSU 1 Board of Directors meeting earlier last month. Some, like Woolwich Selectman David King, argued that the law should have always applied to all of the local calculation.

The local contribution from RSU 1’s five communities – the funds raised through taxes – has been split into two pieces: a minimum amount that the state requires, and a portion over and above that amount. State subsidy to the district has been presented on a form based on the essential programs and services model.

The other local contribution piece is the additional amount each community must raise, beyond the EPS model. That contribution stipulates a cost-sharing formula based on equal thirds: student population, state valuation of a community and the community’s population in the most recent census.

RSU 1 Board Chairman Tim Harkins said last month that in 2008, when it was time to approve the district’s first budget, there was ambiguity about how the EPS formula should be applied to the local share. If RSU 1 applied that formula to the entire local share, he said, “we felt there was a possibility that one community might not reach the state-required minimum, therefore putting us in potential jeopardy of not complying with the state requirement, and not receiving state funds.”

William Shuttleworth, superintendent of schools at the time, received conflicting opinions when he sought legal advice, Harkins noted. William Stockmeyer, who wrote the state legislation, said it should be applied to the entire local share; Roger Therriault, Bath’s city solicitor, said it should only have been applied to the additional amount, Harkins explained.

The School Board voted unanimously in 2008 to apply the formula to just the additional funds, and to allocate the other required costs according to state policy. The district had used that breakdown ever since.

Alex Lear can be reached at 781-3661 ext. 113 or [email protected]. Follow him on Twitter: @learics.

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