GARDINER — Gardiner city councilors are mulling whether and how to spend money they have in reserve during the budget year that begins July 1.

At the conclusion of the budget review at Wednesday’s City Council meeting, District 1 Councilor Terry Berry asked whether additional funds could be set aside to pay for a citywide property revaluation.

Other councilors had alternative ideas for how money in the city’s undesignated fund balance could be used for other city projects, including paying to fix storm-related flooding damage on Harrison Avenue and a sewer line under Church Street that is failing and was discovered earlier this month, neither of which is in the proposed budget.

The undesignated fund balance is not exactly a savings account, but it is a financial cushion. It is money that has not been designated to be spent for a specific purpose, but can be used for emergencies. Because the money comes from property taxes, it is often used to bring down the property tax rate.

City officials are proposing to spend $7.5 million in the next fiscal year, a 4% increase to the current budget. Most of the increase is for salaries and benefits.

That level of spending would add 20 cents to the city’s share of the Gardiner property tax bill, but that would not be the only increase taxpayers see. The Gardiner-area school district is finalizing its budget, which could add $1.25 to the current tax rate of $22.20 per $1,000 of assessed valuation. The assessment for Kennebec County government will add 5 cents to the property tax rate.

Since the COVID-19 pandemic, demand for Maine real estate has increased and property values have risen. While municipalities complete an annual valuation to reflect changes in the past year, a revaluation is done when a community falls below the assessing standards set out in Maine law.

In Maine, revaluations take place about every 10 years, when all property in a municipality is reviewed and assessments are adjusted to their fair market value. It is undertaken to ensure property taxes are assigned fairly.

Gardiner’s last citywide property revaluation was completed in 2008.

Many municipalities, Gardiner included, are setting aside money every year to pay for a revaluation. In Gardiner’s case, the four-year target, established a year ago, is to set aside $90,000 a year.

Berry said he is concerned that with a limited number of companies in New England doing revaluations, Gardiner might find itself paying more for the service at a time when revaluations are in high demand. He said he would like to add more money now to the revaluation line.

The city’s largest source of revenue to pay for city services is property tax.

“I’ve been in the real estate business for 43 years,” Berry said. “What I hear is that Gardiner’s mill (property tax) rate is one of the largest. When you dig into it, it’s sort of a fictitious number because the budget that runs what taxes are in a given municipality is the budget that the councilors or the select board creates.”

If Gardiner had a fairer valuation that reflects market value, Berry predicted the city’s property tax rate would plummet with a revaluation, and the city would compare more favorably on the tax rate, which would be a boon to economic development.

During the debate, Mayor Patricia Hart noted that results for individual taxpayers would differ depending on property value fluctuations. Some property taxes would increase, some would decrease and some would stay the same.

City Manager Andrew Carlton said following a conversation with Curt Lebel, the city’s contract assessor, he expects to issue a request for proposals for a revaluation this summer.

At-large City Councilor Tim Cusick said he favored the move.

“We’re never going to know (what it costs) until we throw it out and see what it is,” Cusick said, noting that if a bid were awarded this year, the work probably would not begin until the end of this year or early next year, and it would not have to be paid for upfront.

District 3 City Councilor Colin Frey said the city’s plan to fund the revaluation appears to be setting aside an appropriate amount of money over time.

“If we had hypothetically another $90,000 somewhere we could add, one of the things missing from this budget is sidewalks,” Frey said. “We only have $250,000 for the paving plan, and for the past few years we have talked about increasing that.”

Following extensive conversations last year about infrastructure, the city is still short of where it should be in paying for it, Frey said. While he said he is committed to the revaluation, he would rather see increased infrastructure funding.

Hart said the City Council has used the fund balance to offset property tax increases from the school district, and it shows.

“We need to get back on track,” Hart said.

The City Council has added a meeting Wednesday, May 31, to discuss changes to the proposed budget and set aside time for public comment.

Officials are expected to set a pair of Wednesday meetings after that: A public hearing and first read of the fiscal year 2024 budget for June 7, and the public hearing and adoption of the budget for June 14.

The council meets at 6 p.m. in the City Council chamber at 6 Church St.