FREEPORT, Maine — A 4.3 percent increase in municipal spending is expected in the 2016 fiscal year, according to Town Manager Peter Joseph and Finance Director Jessica Maloy.

Joseph and Maloy on May 5 reported to councilors that this year’s budget of $8.9 million is expected to increase to $9.3 million next year. The increase of just over $388,000 would bring a tax increase of 1.18 percent, or 4.5 cents per $1,000 of assessed value.

Much of the increase is due to an insurance-rate increase of $165,000.

“The health care increase is something we’d see regardless of what plan we’re on,” Joseph said.

Another factor contributing to the budget is an increase of 1.69 percent, or $64,000, for salaries. Other increases included $35,600 for buildings and grounds; $35,500 for heating costs; $20,000 for the new METRO bus service going into effect this summer; $32,500 for tipping fees and trash hauling; and $20,000 for a grant match.

Joseph and Maloy also presented figures factoring in the Cumberland County budget and the Regional School Unit 5 budget. They said there will be a total increase of $2.1 million, or 8.7 percent.

The RSU 5 budget is not finalized and the board was expected to meet May 6 to discuss it. Also, the Town Council and RSU 5 will hold a joint budget workshop on May 11.

Councilors had little to say about the budget, except to thank Joseph and Maloy for their work. They will hold a budget workshop on May 19 and a public hearing on June 2.

Denney Block

In other business, the council officially approved contract zoning for the demolition and reconstruction of The Denney Block at 56-58 Main St.

Councilors initially deemed contract zoning appropriate in January, and have now given the developers the OK to build. The motion passed 6-1, with Councilor Andy Wellen opposed.

The Denney Block, owned by George Denney of Freeport, is being purchased by Berenson Associates, the development company that built Freeport Village Station. Berenson wants to demolish part of one building and construct an addition in an open courtyard between two existing buildings.

Contract zoning is allowed, by council approval, when a unique or unusual circumstance arises. Berenson needed contract zoning because of building height restrictions.

Maximum building height in Freeport is 35 feet. The height of a building isn’t determined by its highest point, but by the average height of all four sides. Because the Denney Block is built on a slope, the back is much taller than the front and the average height is greater than 35 feet.

Wellen said contract zoning isn’t justified in this case because the situation “isn’t unique enough.” He also said approving contract zoning for this project would create a “slippery slope” and set a bad precedent.

Developer Al Yebba said he was pleased to receive the council’s approval.

“This is a contract I think is very workable for us,” he said. “Hopefully when it’s built all of us are proud of what is in that location.”

Yebba is still looking to finalize the purchase of the building, but in the meantime will be working on submitting final building plans to the Project Review Board. He said he hopes to receive approval in July and start construction shortly thereafter.