By Leann Schenke

MILFORD — With the goal of striking a balance between “realistic budgeting,” utilizing American Rescue Plan Act funding and raising taxes, Milford City Council is set to take a vote on its fiscal year 2022 budget during its next meeting set for Monday.

The proposed FY 2022 revenue budget totals $47.5 million, representing an increase of $3.4 million or 7.8% over the FY 2020-21 budget.

The proposed operating budget, not including debt service and capital expenses, constitutes an increase of $1.96 million or 4.79% over the prior fiscal year.

As it stands and following budget workshops in May and June, the budget includes a property tax increase of $0.02275 per $100 of assessed value, which is a decrease from what staff originally proposed — a $0.065 rate.

With property taxes accounting for 41% of the city’s general fund revenue, the tax increase will permit continued funding of five police officers added to the Milford Police Department in 2017.

Per staff recommendation, the increase also will help the city phase out (over five years) $500,000 in transfers of real estate transfer tax that has been used to fund general police expenses. Utilizing real estate transfer tax to fund police expenses is “not sustainable” due to the fluctuation and unreliability of steady income, City Manager Mark Whitfield’s executive summary of the budget reads.

Staff recommend real estate transfer tax revenue be used toward capital improvement projects.

The real estate tax is proposed to remain at $0.48275 per $100 of assessed value.

After delaying a rate increase due to the pandemic, the city’s water rates are proposed to increase by 3.6% and the city component of sewer rates will increase by 4.9%, which equates to a blended rate increase of about 3.2% after factoring in the Kent County component of the sewer rates.

For an average household using 3,800 gallons of water a month, the proposed rate increase could mean a monthly increase of $0.49 for water and $0.88 for sewer.

While the city is holding off on drastically raising rates, Mr. Whitfield noted in his executive summary of the budget that Milford needs to generate “sustainable, reliable, annually recurring general fund revenue” in the form of real estate taxes. Further, the city is balancing its FY 2022 budget using “roughly $570,000 worth of ARPA monies,” Mr. Whitfield said.

“That is not sustainable,” he said during this week’s Monday meeting. “Again, those monies will need to be made up at some point in the near future in terms of either taxes or cuts, or growth.”

Per the executive summary of the budget, the City Council Finance Retreat highlighted a “potential shortfall between $1 million and $2.6 million,” which would require a tax hike of $0.108 to $0.283 to balance the budget.

After the council “expressed concerns” at the retreat over the city’s history of conservative budget practices, staff refined the budget through “more realistic revenue and expense budgeting, revenue diversity initiatives” like applying ARPA funding where applicable and “broad cost-cutting measures across departments,” the budget packet reads.

Louis Vitola, city finance director, said Monday it’s OK for Milford to be conservative with its spending, but he noted the city has been able to roll over money at the end of each fiscal year.

“You never want to overestimate revenues in case they don’t materialize and you want to make sure that you’re budgeted in a way to provide all the expenses that you need to run the city. But you can go too far there,” he said. “How can you justify increasing taxes if there’s always a buffer in there anyway. So we trimmed a lot of that out.”

Mr. Whitfield noted in his executive summary the current fiscal condition of the city is stable. He wrote raising taxes is never popular, but must be done to ensure fiscal stability.

“Keeping Milford a great place to live means adequately funding public safety, infrastructure, parks, recreation opportunities and great public services,” he wrote. “Just as our forefathers left us this great city, today, it is our opportunity to impact the future of the city for the better.”