WESTBROOK – A budget gap this year of more than $600,000, coupled with revenue losses and increased expenses anticipated for next year, puts Westbrook in an unprecedented financial bind.

“I think we have some pretty big mountains to climb,” Mayor Colleen Hilton said after some bleak statistics and projections were outlined at a joint meeting of the City Council and School Committee Feb. 16.

City Administrator Jerre Bryant fretted that a combination of increased expenditures and dips in revenue would make for a difficult budget in the upcoming fiscal year. A more immediate challenge is that figures in this year’s budget are way off projections.

Bryant said legal expenses and fire department costs this year have soared higher than expected, while various forms of revenue, including state revenue sharing, motor vehicle excise taxes and building and development fees, have plummeted.

Bryant presented figures to school board and council members suggesting legal expenses could be $150,000 higher this year than originally projected. He said the costs are largely due to the dispute with Pike Industries over its Spring Street quarry. Since Pike’s lawsuit against the city did not involve a monetary claim, the city’s insurance did not cover legal costs and the city had to pay out of pocket.

Similarly, he said, when Dreamers Cabaret, a planned strip club, filed for a temporary restraining order, the city had to respond immediately before insurance could take over, he said.

“That was an expense we had to bear,” Bryant said.

The fire department budget is also projected to cost $135,000 more than anticipated due to overtime costs, since it was understaffed for a “significant amount of time” while claims of sexual harassment were dealt with, he said.

Revenue figures for this year remain volatile due to the economy, but, Bryant said, he expects $350,000 less revenue than projected in the budget. There are projected shortfalls of $150,000 in motor vehicle excise tax funds, $120,000 in state revenue sharing and $80,000 in building and development fees.

Bryant said excise taxes and building fees are down because of the economy, which the city did not expect to languish for as long as it has.

“We did not budget for as long a downturn as we’ve experienced,” he said.

The projected drop in state revenue sharing is based on Gov. Paul LePage’s pending proposals to dramatically change revenue sharing. Bryant said LePage proposes freezing what is paid to cities and towns this year and making it an appropriation in future years.

“Going forward, it is not an automatic return to cities,” he said. “It will be subject to annual or biennial budget processes, which tend to erode appropriations over time.”

Taken together, the increased expenditures and decreased revenues present a $635,000 budget gap this year, Bryant said. He said there are measures in place to try to get through this year.

“It’s going to be very, very tight. We’re relatively comfortable we’re going to be able to balance the budget by the end of the year,” he said.

Bryant was on vacation this week and could not be reached for elaboration on what measures are in place.

Hilton said this week that former police Chief Bill Baker’s retirement, along with other “small moves here and there,” could help resolve this year’s budget issues.

However, the budget outlook for next year remains dire. Bryant projected revenues would continue to decrease, while debt service and contractual obligations would be up a combined $385,000, thereby increasing the gap between expenditures and revenue even more.

“These are known problems going into the budget we’ve got to contend with,” Bryant said, adding that areas of uncertainty, including state welfare reimbursements, fuel costs and the general state of the economy, are likely to come into play.

The bad news continued with the schools, which are facing a projected $3.6 million revenue shortfall in the next year, according to Superintendent Dr. Reza Namin.

Namin said a $1.2 million reduction in state general aid, combined with the drying up of stimulus funds and a decline in Medicaid reimbursements, is causing the shortfall.

He declined to talk about specifics of his budget because he has not yet presented it to the school board. He said some difficult decisions would have to be made collectively and that some “core values” would be impacted.

There was next to no feedback on the budget at the meeting, which was a surprise to both Bryant and Hilton because it marked the first workshop of the budget season.

Hilton wondered whether the silence indicated school and city officials were “overwhelmed” by the information.

During the same meeting, Bryant presented some information on the recent audit results revealing the city’s finance department was in disarray before the hiring of chief financial officer Dawn Ouellette to oversee both city and school finances. Sue Rossignol, the former city finance director, attended and recorded the meeting.

There was also no discussion among elected officials about the audit, though they did hastily enter into executive session to discuss possible litigation.

In an interview this week, Brendan Rielly, president of the City Council, echoed Namin’s assessment that the city has reached a point where budget cuts mean a reduction in services. He said to even maintain a flat-funded budget would require cuts because of the decline in revenue.

“If we’re not raising taxes it means we’re cutting what we’re doing,” he said. “At the local level, it’s the cost of services and principally, the cost of people to provide those services.”

While Rielly said there has been “zero discussion” about layoffs, he said that is ultimately the mayor’s call.

Hilton said the city would explore outsourcing some positions and consolidating wherever possible, as it has done in recent years. She said some issues may be resolved through retirement and she is not anticipating “wholesale layoffs, but there will be adjustments.”

She said she does hope to have a flat-funded budget but she does not know if that is reasonable given contractual obligations and other rising costs. She hopes members of the public attend budget meetings to help officials determine what they value most.