GARDINER — The city manager’s recommended budget for next year doesn’t call for a tax increase or for major cuts to services.

But without sufficient revenue increases, the city could face over a half-a-million-dollar budget gap in the following fiscal year.

City Manager Scott Morelli is also proposing taking $175,000 from the city’s fund balance to prevent the budget from increasing the tax rate for residents.

“It really buys us another year,” Morelli said, “because there are potentially a lot of things next year that could go our way that could be long-term solutions.”

Morelli pitched his recommendation of dipping into the fund balance to the councilors on Wednesday night as a “firewall to get through this year,” with the hope that the city receives more state funding or increases its revenue before the following year.

“Otherwise, we’re looking at some serious changes, either in terms of taxes or services,” Morelli told the council.

He said the $618,000 in cuts in his recommended budget are significant, but they maintain city services at a quality level.

“Last year we made a similar amount of cuts to our budget,” Morelli said. “Every year it gets harder because there is less low-hanging fruit, as they say.”

Without more revenue, the city could face the possibility of eliminating services instead of just “chipping away at them,” he said.

Morelli told the council that the city could potentially close the estimated $583,000 budget gap for the 2015 fiscal year if the Legislature began fully funding revenue sharing for municipalities, if a natural gas company constructs pipeline in Gardiner and if the city’s economic and community development efforts pay off with new growth.

The estimated deficit would represent an 8.1 percent tax increase, or $238 for the average homeowner, according to Morelli.

The state is supposed to give 5 percent of sales- and income-tax revenues to municipalities, but cuts have lowered that to only 3.5 percent for the current fiscal year, according to the Maine Municipal Association.

Gardiner’s proposed budget for next year doesn’t factor in the potential loss from the state cutting revenue sharing for municipalities, which is proposed in Gov. Paul LePage’s budget for the next two years.

That plan has faced strong opposition from municipal leaders and some legislators, and Morelli said he doesn’t expect it to pass.

Funding revenue sharing at 5 percent again would provide Gardiner with around $313,000 in revenue, according to Morelli.

Legislators have proposed two bills to protect revenue sharing going forward.

A bill sponsored by Assistant Senate Minority Leader Roger Katz, R-Augusta, would phase in full funding for revenue sharing over the next three years, while another bill would make it harder for the state to take it away.

City councilors will discuss Morelli’s recommended budget at their next meeting on May 1. Morelli encouraged residents to attend and voice their opinions about what’s proposed.

Paul Koenig — 621-5663
pkoenig@mainetoday.com