The Gray Town Council is now putting the final touches on a budget that will likely lower the tax rate by using reserve funds and forgoing road projects for the coming year.

The $5.5 million spending plan is $314,513 less than the previous budget, though the amount needed through property taxes has increased around $100,000 due to loss of revenues like excise tax and state revenue sharing. Also pushing the budget upward is an increase in debt service of $546,053 to pay for the Public Works/Transfer Station and Pennell projects, as well as the lease of six town vehicles.

The total value of the properties in Gray is likely to rise, though, pushing the estimated tax rate, now at $14.30 per thousand dollars of value, down 11 cents, according to Town Manager Deb Cabana.

Though not included in the proposed budget, residents will also have the opportunity at the May 2 town meeting to decide whether Gray should hire a contract deputy from the Cumberland County Sheriff’s Office. The item would cost an additional $146,000 next year, increasing the tax rate by 20 cents per thousand dollars valuation. Residents would also have to vote to override the property tax levy limit, the amount the town is able to spend beyond this year’s total, in order to hire a deputy without making cuts elsewhere in the budget.

The Town Council will hold a public hearing on the municipal budget at the Tuesday, April 21, meeting, after which the budget would be finalized. Residents will then vote on the budget at the town meeting May 2, and again at the polls Tuesday, June 9.

To get the budget to this point, Cabana and the councilors wrestled with how to make up for the loss of $405,981 in revenues, considering a number of options, from cutting town office hours and services to putting off scheduled projects. In the end, they were able to cut the budget without laying off town personnel or cutting hours, though there will be no salary or merit increases under this budget.

In order to do that, the budget takes $471,473 from the undesignated fund balance, the excess funds accrued from past budget items left unspent. That is $91,473 more than was used in this year’s budget. Also, the budget includes no funding for road work for the coming year, meaning Gray’s town roads will have to go without paving or repair. Instead, the limited available funds will go toward repairing the Weymouth Road bridge, which the town has cited as a critical project.

A couple of residents at Tuesday’s council meeting were worried about the impact of the budget, and whether the town was going to face an equally tough budget next year.

Resident Richard Walls said the town is taking on too much bond debt for this difficult economic climate and should consider putting off for now the Pennell project, which is turning the historic Pennell Institute into the new town hall. Gray will likely be facing a significant shortfall again next year at this time, Walls argued, and the town cannot to count on the undesignated fund balance to cover mounting debt.

“How are you going to cover a shortfall next year and the year after?” he asked the council.

Jim Monroe, another resident, wondered as well what the 2010/2011 budget would look like, and warned councilors that they could not continue to put off capital projects, like road repairs. Eventually, the neglect will catch up with you, he said.

In an interview last week, Council Chairman Peter Gellerson said eliminating the road work for a year or so was a temporary solution meant to give taxpayers relief during tough times. The town has no intention of putting the projects off for longer than necessary, he said.

“I think for one year or two years it’s doable, but longer than that, it’s just not doable,” he said.

As the budget is now proposed, plenty of money will be left in the undesignated fund balance, Cabana said. Town policy requires enough be left in the account to cover two months of town operations. This budget leaves that amount plus an additional $500,000, she said.

Councilor Tracy Scheckel said the undesignated funds are essentially unused taxes, and they should be used to help offset taxes during tough times.

“Well, it’s a rainy day,” said Scheckel, adding that using the funds is preferable to laying off town employees or burdening residents with higher taxes. “I think it is the lesser of a lot of evils right now.”

Eliminating the road program should also not be an issue, Cabana said. Gray’s paving program has over the years kept the roads in good shape, and a year off will not cause any problems, said Public Works Director Steve LaVallee.

“I don’t see any safety hazards on any of our roads,” he said.

The much more urgent need is to replace the bridge on Weymouth Road that passes over Libby Brook, he said. The road handles the largest volume of traffic of any of Gray’s town roads, and would likely have to be closed soon if the bridge is not replaced, LaVallee said.

Gray Town Councilor Mark Grover, Town Manager Deb Cabana, and Councilors Peter Gellerson and Tracy Scheckel listen to resident Richard Walls at a public hearing Tuesday on the proposed municipal budget.