South Portland is considering adding zoning to pave the way for new homeless shelters and ward off a potential property tax increase of 6% to over 20%.

The tax increase is likely if the city is forced to pick up more of the tab for hotels operating as temporary shelters for asylum seekers and other unhoused people, the city manager said Tuesday.

The City Council is exploring options to avoid that increase, including moving the city away from the costly hotel model by creating zoning that would allow new shelters to be built.

The city has been grappling with an influx of asylum-seekers and a rise in domestic homelessness since the onset of the pandemic when unhoused individuals and families were placed in local hotels by other communities and social services agencies.  The hotels were paid to operate as shelters with state and federal funding, but state Emergency Rental Assistance funding has expired and federal funding is only guaranteed through January.

The costs once covered by the state and federal funding are estimated at $7,200 per month per hotel room, City Manager Scott Morelli said Tuesday at a council workshop. South Portland raised its general assistance budget by 1,460% this fiscal year to $12.2 million, including $2.4 million in federal ARPA funding, to account for those funds running out, Morelli said.

“As these state and federal funds begin to run dry, our general assistance program becomes responsible for 30% of those expenses with the state taking on the remaining 70%,” Morelli said.

If the city maintains a $12.2 million general assistance budget next year, Morelli said, he anticipates a tax increase of 6% for city property owners. The city has just $700,000 remaining in ARPA funds.

However, because the state sets maximum amounts on what it will pay for rent, food and other general assistance, anything in excess of those caps will fall to the city.

If the city is required to pay the excess, and the hotel-shelter model continues, South Portlanders could face a tax increase next year of 20% or more.

“That doesn’t include additional school enrollment costs, additional public safety costs – things of that nature,” Morelli said.

Creating new zoning for shelters could allow hotels to continue operating in that way, but the hotels would be subject to any conditions the city would place on new shelters, such as requiring a 1,000-foot buffer between the shelter and the abutting properties. Conditions would also include that security and other services be provided.

South Portland resident Russ Lunt said he agrees with the conditions the council is considering, “especially with the security and safety,” and stressed the need to limit the tax impact that the status quo would call for.

“There’s no way in this good Earth that this city could afford a 20% tax increase,” Lunt said. “No way.”

Resident Brendan Williams urged the council to consider the use of a particular shelter when setting conditions. When people hear of a shelter, he said, they often think of shelters like Oxford Street and Preble Street in Portland.

“A lot of people forget the different kinds of shelters,” Williams said. “You have shelters for women, you have teen shelters, you have shelters for veterans; you have different categories.”

The council expects to hold another workshop on a potential zoning ordinance for shelters in January.

“I want to make sure that we get it right,” said Councilor Richard Matthews.