Jon Malia shovels in front of Portland City Hall on Jan. 16. Derek Davis/Staff Photographer

The city of Portland could raise its tax rate by 9.5% in the next fiscal year because of a $20.3 million loss in funding.

The City Council on Monday got a preliminary look at the challenging financial future in the first of a series of public workshops and discussions to be held in the coming months.

No decisions were made Monday and no public comment was offered. Much more work needs to be done to prepare and approve a budget before the tax rate is set this summer.

“I remember when we used to have budget gaps of like $2 million and think that that was huge, and it’s just gotten worse and worse every single year,” Councilor Anna Trevorrow said.

“I’m really nervous for the folks who live in this city given this increase,” Councilor Regina Phillips said.

A 9.5% increase would raise taxes by somewhere between $486 and $540 for the median homeowner, Finance Director Brendan O’Connell said. Last year, the council approved a budget with a 5.9% overall tax increase.

Several councilors said they wanted to get the tax rate increase down to 7%. In order to do that, the city would have to make $14 million worth of cuts, O’Connell said.

The city manager and then the City Council will tasked with deciding where to make major budget cuts over the coming months.

In an email Tuesday afternoon, O’Connell said it was too early to say where those cuts will come from because departmental requests aren’t due until next month.

He said the city’s budget gap is about 50% worse than the one it faced last year, and that with the school district’s expected financial challenges from a pandemic funding cliff, “this will definitely be the most challenging budget year we have had in over a decade with difficult decisions being required from both the city and schools,” he said.

Councilor Anna Bullett on Monday floated the idea of collecting money from major organizations in Portland like Maine Medical Center and the University of Southern Maine.

“I see them building these giant beautiful buildings, and I want them to pay the city, too. Help me understand how they help us meet our budget goals,” Bullett said.

While non-taxable entities do own property in the city, they often make contributions in other ways, O’Connell said, noting that some of the organizations offer free services to residents. However, “currently there is no formal process for requesting voluntary payments in lieu of taxes,” he said.

City Manager Danielle West said the city could pursue a policy like this if the council directs her to do so.

O’Connell said the single greatest fiscal challenge facing Portland will come from General Assistance, which provides money to low-income people for basic necessities like housing and food. The state’s 2024 budget included a one-time payment of $7.4 million to Portland to help offset what he described as “the significant increased social services burden being shouldered in Portland.” O’Connell said those funds could run out in 2025.

ARPA FUNDING EXPIRING

Another budget challenge will be the expiration of the American Rescue Plan Act funding. O’Connell expects the city will run out of its remaining ARPA funds – about $4.3 million – by June 30. He does not expect the city to receive any new ARPA funds next year.

The city also is expecting a $2 million increase in health insurance costs and other costs from rebuilding the city’s workforce, which was decimated by the pandemic, O’Connell said.

Dozens of key positions remain unfilled, including many in 24/7 jobs that are more costly to the city when the posts are vacant because they must be filled with overtime or with contractors. He identified 911 emergency call center jobs, department of public works snow-removal positions and homeless shelter attendants as just a few of the workforce gaps.

The costs of filling vacant jobs could be as high as $4.5 million, O’Connell said.

And the council will have to consider other budget challenges like making the expanded capacity at the Homeless Services Center permanent, increasing capacity at the city’s family shelter and the costs of operations at the newly opened shelter at 166 Riverside St.

City spokesperson Jessica Grondin said that West will begin working with department heads next month to prepare her recommended budget for fiscal year 2025, which begins July 1. The final municipal budget will be presented to the City Council on April 8, when the council will send it to the finance committee for review.

The budget is expected to come back for the council in May for public comment and a vote.

Staff Writer Dennis Hoey contributed to this report.