SOUTH PORTLAND – Area municipal governments are breathing a sigh of relief this week as the final state budget has wrought a welcome surprise – lower property tax bills.

In each case, tax bills are still up from the previous year, but not by nearly as much as had been expected last month, when final budgets were passed and school validation votes conducted. How each town made out varied according to how each bet when adopting spending plans, as local councilors tried to guess how the state Legislature would resolve the biennial budget proposal of Gov. Paul LePage. The governor initially sought to balance state books by eliminating municipal revenue sharing, taking over excise taxes on commercial vehicles, eliminating the homestead tax exemption for residents less than 65 years of age, and shifting half the cost of teacher retirement pay to local school districts.

Some of the biggest changes came to education budgets. While payments into the retirement system for current employees set at 2.65 percent of salaries did become the responsibility of local districts for checks issued after July 1, the approved state budget added $19.7 million in new money for schools. The removal of many initiatives to which LePage had hoped to target state dollars added another $8.4 million to the pool for general purpose aid to schools. In addition, the minimum special education subsidy percentage was increased from 25 to 35 percent.

In South Portland, all of that meant an additional $889,125 to the school department. However, the City Council on Monday endorsed a school board decision, made July 8, to take just $300,000 of that for this fiscal year, applying it to the reserve account set aside for the high school reconstruction project. That offsets this year’s bond payment and knocks 9 cents off the property tax rate. That and an expected uptick in citywide valuation should knock what had been a 35 cent tax rate increase down to 20 cents, according to City Manager Jim Gailey. In other words, the median single family home in South Portland, assessed at $195,000, can now expect a tax hike of $39, instead of $68.25.

“If my math is correct, that means our property taxes are only going up 1.2 percent,” said Councilor Gerard Jalbert at Monday’s council meeting. “Wow. I remember a certain mayor saying he wanted only a 1 percent increase.”

“I’m very happy,” said Mayor Tom Blake, who had made the 1 percent challenge in his inaugural address in December.

“You have that crystal ball, Tom,” said Jalbert.

“Well, I did miss by two-tenths of a percent, but I’m content,” said Blake.

After the meeting, Gailey said that transferring the $300,000 into the high school reserve account “keeps that money on the city side.” That, he said, means the school department does not have to stage a second public validation vote.

“The remaining $589,125 will go into the school department’s own reserve account,” said Gailey. “That will come into play and be part of the public vote next year. They can’t take any of that and spend it this year on education because, if they did, they would be spending more than the public gave them authorization for.”

In Scarborough, which does plan to use its newfound dollars this year, the school will need a new public vote. Town Manager Tom Hall said Monday the council will hold a special meeting later this month to set a date, expected to come in mid-August.

On Wednesday, in a meeting conducted after this week’s deadline for The Current, the Scarborough Town Council was slated to approve a $788,038 increase in the school subsidy from the state, as well as a $520,283 increase in the new teacher retirement cost, based on the number of teachers in the Maine retirement system.

In May, during an attempt to get the annual school spending increase down to 3 percent, the Town Council carved $623,500 from the budget on a bet that the retirement cost shift would not pass muster in Augusta. According to Kate Bolton, budget director for the Scarborough School Department, the fact that money now needs to be added back into the budget is what drives the need for a new public vote, because one of the 11 state-mandatesd line items will necessarily need to increase above what Scarborough voters have already approved.

“The latest info we have from the attorneys at Drummond Woodsum is that we only need to go out to vote with that one supplemental change,” said Bolton on Tuesday. “We don’t need to put the entire budget back out to vote.”

The school board voted Monday to apply the difference between the increase in subsidy and the new retirement obligation $267,755 to the property tax relief, by reducing its request from taxation.

Because Hall also bet that the revenue sharing would end up fully restored on the way to passage of a state budget, and that the excise tax shift would survive, the Town Council was expected to make two other alterations Wednesday to the budget adopted last month. It was expected to add $350,000 to anticipated excise tax revenues, for a total of $4.2 million, and cut $326,432 from the line for revenue sharing, knocking it down to $782,212 for the coming year.

The net result of all the changes is that the tax rate in Scarborough remains up 7.23 percent, up from $13.80 per $1,000 of valuation, to $14.80. The rate had been expected to rise to $14.88. The 8 cent savings means the median home in Scarborough, assessed at $300,000, can now expect a property tax increase of $300, instead of $324.

Meanwhile, in Cape Elizabeth, the state school subsidy is up $427,688, to $2.6 million, while revenue sharing is off $188,236 from the projected $640,000 that would have represented no change in percentage passed on to Cape as its share of state sales taxes. The local cost of the homestead exemption program also will increase $38,242, said Town Manager Michael McGovern.

“The changes have the effect of lowering the proposed tax rate from $16.40 per $1,000 valuation to $16.28 per $1,000 valuation,” wrote McGovern in a July 8 memo to the Town Council.

The new rate represents a budget increase of 2.8 percent and is still a 44-cent hike to the tax rate. However, that is 12 cents less than the budget adopted by the council in May and subsequently approved by voters, who got to weigh in on the school side.

Because part of the council’s budget adoption in May stipulated that unanticipated state revenue would be used to reduce the property tax, the increase in school subsidy will be applied to reduce the school’s need from taxes.

“There is a concern, however, that this is only anticipated revenue,” said McGovern. “There could be a curtailment. If so, we would hold the schools harmless.

“If a curtailment of state school funding does occur during the coming fiscal year, the town will make up the difference so that school spending levels authorized by voters will remain unchanged,” said McGovern.

Town assessors are expected to commit and set the property tax rate in Cape Elizabeth and Scarborough in early August and in South Portland next week.

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