HALLOWELL — City officials expect to make cuts to Hallowell’s initial budget draft, which proposes an 8.58% increase in municipal spending for the 2020-21 fiscal year.

City councilors discussed the preliminary budget at their meeting Monday; the document proposes $6.79 million in spending, with $1.1 million in revenues, not including the amount to be raised by taxes. The spending plan has not yet had the first of three readings required before it can be approved.

City Councilor George Lapointe said he will “be working to make sure” the budget is cut before the first reading and its adoption.

“We increased taxes 8% last year; we can’t do that two years in a row,” he said, adding that the increase should be closer to “cost-of-living increases.”

The Social Security Administration’s website said the Cost-of-Living adjustment for 2020 is 1.6%.

Lapointe said this budget encompasses all of the needs of the city with no paring back. At this point in the budget process last year, Hallowell officials floated $6,431,267 in proposed spending and $832,067 in anticipated revenues. By the end of discussions, a final expenditure budget of $6,250,508 was approved, with $1,013,895 in revenues, with the remaining $5.2 million raised through taxes.

The proposed spending plan would be a $536,647 increase from the current fiscal year’s budget, which was exacerbated by a backlog of capital expenditures, according to city officials. The draft includes a few more expensive items that will have to be considered for cuts if the council wants to keep spending down, including $70,000 for the first payment of a 10-year lease for new fire truck, $25,000 for the first payment of a seven-year lease for a plow truck.

The draft shows a 161% increase under capital improvements, from $136,000 to $356,060. That increase includes $75,000 for repairs to the city’s bulkhead at Granite City Park, $50,000 for a new police cruiser and $35,000 for sidewalks.

The final expenditure draft proposes $6,787,155 in spending.

The initial draft keeps spending flat for the city’s portion of the Regional School Unit 2 budget. RSU 2 Business Manager Vicki Raymond was not immediately available for comment.

Last year, this initial budget was used for the first reading, but City Manager Nate Rudy said he and the city’s Finance Committee, chaired by Lapointe and including Councilors Kate Dufour and Maureen Aucoin, may make cuts ahead of an April reading. Administrative salaries are also up 12%, including a 5% raise for City Manager Nate Rudy, a 2% raise for City Clerk Diane Polky, a 7% raise for the deputy clerk and additional funding for an assistant clerk position.

Rudy said there will be two meetings of the Finance Committee that will include department heads before the April reading. He said cuts and recommendations will likely be made at those meetings.

The initial revenue budget shows a $121,550 increase from the current fiscal year, which is spurred by a 20.5% increase in state payments, from $373,791 to $450,440. There is also a new line for $100,000 in tax increment financing revenue.

Lapointe said a new line was created because it was difficult to point to where TIF funds were allocated. He said the new line makes it easier to track the TIF funds being injected into the municipal budget.

Rudy said state statutes require the city to keep TIF money in a separate account from the general fund. He said nothing has changed as far as the city’s payments and this new line is a way to link the two accounts.

Last year, the City Council used a number of “scenarios” to illustrate what items could be funded or prorated with TIF funds, eventually approving $100,875.80 in offsets from the city’s tax increment financing on July 8, with the idea of reducing the burden on the general fund.6

Last month, Councilor Maureen Aucoin said during a meeting of the council’s Finance Committee said the city did not factor in its TIF offset when filling out the tax rate calculation form, leading to the city’s collecting $104,000 in taxes “it didn’t necessarily need to raise.” The Finance Committee then recommended that the $104,000 be used to pay for capital projects put on hold during the latest budget cycle.

During that February meeting, Lapointe, the committee’s chairperson, said he would also work on a policy that would allow the City Council to set a chunk of TIF funds aside each year to help with the cost of larger projects in the future.

That issue with TIF allocation is the latest in a string of financial questions that have arisen in Hallowell since November 2018, when a budget error — amounting to hundreds of thousands of dollars — held up that fiscal year’s budget. In May 2019, Hallowell officials said they were confident in the city’s staff after more than $200,000 was not sheltered properly because it was not properly assessed as being in a tax increment financing district. In January, City Manager Rudy apologized for a financial tracking error that originally showed a small projected overage in bond spending but later said he projected wrong and there would actually be a $96,000 surplus.

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