Portland Mayor Mark Dion says this year’s budget process will be more difficult than any other in recent memory and he is concerned about how deeply the city will need to cut to try to avoid a big tax increase.

The city could face a 9.5% tax increase next year unless it makes major cuts to the upcoming budget that goes into effect in July.

People always expect more, Dion said in an interview Wednesday. But this won’t be a year for expansion.

“I think citizens expect us to do everything. They want us to expand social services. We want more sidewalks, we want our roads paved. Today I heard a councilor talking about expanding trail systems,” Dion said. “And yeah those are all things I can get behind but it comes with a serious price tag.”

Dion would not say what he thinks should be cut from the budget. The city has months of work to do before a budget — and tax rate — are finalized.

Finance Director Brendan O’Connell told the City Council on Monday that the city expects to face a $20.3 million budget gap next year. That’s because of several reductions in funding – $7.4 million in General Assistance from the state, $4.3 million from the federal American Rescue Plan Act, $500,000 from the state because of property reevaluations, and $340,000 in Ocean Gateway Parking revenue. The city also has several big new expenses, including a projected $4.5 million to fill vacant positions, a $2 million increase in health insurance costs and $1.25 million to pay a pension debt.

A 9.5% increase would raise taxes by somewhere between $486 and $540 for the median homeowner, O’Connell said. Last year, the council approved a budget with a 5.9% overall tax increase.

The state gave Portland $7.4 million this year to help offset the cost of the General Assistance program, but those funds are not guaranteed in the upcoming fiscal year. The program provides financial assistance to those who are not able to pay for their own basic needs like food and housing.

“If we don’t get that $7.4 million from the state, we’re in trouble,” said Dion. “The reality is the costs are recurring because the demand continues to be there. So we have to convince Augusta to do it one more time.”

He said lobbying the State House for more funding will be at the top of his priority list. If the state were again to step in, he said the city could mitigate tax increases.

“Right now Portland really functions as a service center for the entire state, and without that funding from Augusta we can’t keep that up,” he said, referring to services the city provides for homeless people and asylum seekers.

“The cost is not going to escape us, it’s just going to get relocated somewhere else. And for better or worse we have an infrastructure here to try and respond to it.”

AIMING FOR 5% TO 7% TAX INCREASE

Dion said he has directed City Manager Danielle West to come up with a budget with only a 5% to 7% tax increase. He said he would not vote to approve anything higher.

Even if the city raised taxes by 7%, the most any of the councilors said they’d be willing to approve on Monday, it would require cutting $14 million in spending.

“If we do have to raise taxes, I want people to understand that it’s not to do more stuff, it’s that the same things we’ve been doing are costing more money,” Dion said.

Other councilors echoed this sentiment Monday, calling the budget presentation sobering. Councilor Anna Trevorrow said that the state of the budget was more dire than she has ever seen it.

“It’s just gotten worse and worse every single year,” Trevorrow said.

In an op-ed published in the Press Herald on Thursday, Dion emphasized the rising cost of all the current services the city provides. He said that talk of expanding services feels unrealistic.

“Even if we set aside any new spending on expansion of services, we’ve still got a significant menu of demands being put on the budget in terms of healthcare costs, revenue sharing and what’s going to happen at the schools,” Dion said in the interview.

In a recent presentation to the City Council, Portland School Board Chair Sarah Lentz said the district’s budget is facing a $10 million deficit. Dion said he feels added pressure to keep tax increases low on the municipal side because of the impact the school budget could have on taxes.

“If the schools see us go ahead with a 7% raise, then they’ll think they can do 7% too, and that adds up,” he said.

Dion said he hopes to see citizens get involved in the budget process early this year. He knows that cuts are inevitable and he says he’d rather make them with significant input from constituents.

After the budget is presented to the council in April it will go to the finance committee for review.

“Come to the meeting, tell us what’s critical and why it’s important. Tell us what your sacred ground is,” Dion said.

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