HAMPDEN, Maine — Years of deferred maintenance, raiding accounts to keep the tax rate lower than it otherwise would have been and rising county and education costs are some of the factors that played into a property tax increase projected for this year, said Town Manager Angus Jennings.
Hampden town councilors last week adopted a $7.7 million budget that, among other things, ends budget practices that held the property tax rate steady in the short run but that eventually came home to roost.
“It was simply unsustainable to continue down the budget path we were on,” Jennings said of the first budget he has developed since he was hired a year ago.
“It’s an honest budget because it doesn’t rely on one-time revenues that aren’t there. That’s part of why there’s going to be a mill rate impact,” he said.
Though next year’s property tax rate won’t be determined until mid-August, Jennings is projecting an increase from the current $17.50 per $1,000 in property valuation to $18.50 per $1,000 in property valuation.
Among other things, he said, the fund balance had dropped dramatically over the past seven years. The Maine Municipal Association recommends that towns maintain reserves of 10 to 12 percent of their annual budgets. As of last year, however, Hampden’s was down to 4 percent.
Because of that, the town has had to take out tax anticipation notes to operate while waiting for property tax revenues to come in.
This year’s budget does not include the use of dollars from the fund balance or from the Host Community Benefit account, he said, “because we need to be rebuilding our reserves so we don’t have to borrow to pay our bills. I’d like to get to a point where we don’t need to do that. It’s not a healthy situation.”
Jennings said that while the Host Community Benefit account looks healthy on paper, it lists as assets money that was loaned to the sewer budget to cover operating costs.
“It shows up as an asset but it’s not an asset until we get repaid,” he said.
Because of a rate increase approved in February, this fiscal year will be the first in many years that the sewer budget will be self-supporting and will begin paying back interfund transfers.
“It was borrowing money from the general fund,” Jennings said. “The sewer rates were set at a level that will allow the sewer [fund] to begin to pay those loans in FY 17.”
By law, enterprise funds like the sewer budget must be self-supporting, which Jennings said had not been the case for several years.
Also affecting the budget are increases in the county tax and Hampden’s share of the RSU 22 education budget and the cost for health insurance.
The budget also includes money to address infrastructure needs, including stormwater management, he said. The town hasn’t invested in those things to the extent that it should have.
“It’s not exciting stuff but it’s got to get done,” Jennings said. “Unfortunately that’s kind of coming home to roost but the good news is that we have a very competent public works director. … We are going to be much better off making these investments.”
Planning and budgeting for infrastructure improvements will allow the town to realize some economies of scale when it comes to getting projects done, he added.