MEXICO — Selectmen set the 2010-11 tax rate at $21.50 per $1,000 of property valuation Tuesday night. It’s $1.65 more than this year.

Tax bills are expected to be mailed next week, with the first half due Oct. 22 and the rest by March 4, without penalty.

The increase could have been more if a slim majority of people who attended a special town meeting held prior to the board meeting hadn’t agreed to take $125,000 from the undesignated account to put toward the tax liability.

The 45-minute meeting was sometimes contentious.

Resident Betty Barrett had motioned to take nothing from the undesignated fund.

“We’ve tried to keep the budget down and we’re not getting anywhere,” she said. “There is less income coming in. I am looking at having to sell my house because taxes, insurance are going up, Social Security is staying the same and investments are down. We cannot continue to live this way.

“You’ve got a town manager that convinces (selectmen) to borrow $2 million to fix the roads,” Barrett said. “I’m so damn sick and tired. There’s no reason to go to the surplus again.”

Albert Aniel, a Budget Committee member, said any surplus money should be saved because the economy will get worse.

Barrett’s motion was defeated.

So was a proposed amendment to use $5,000 from surplus.

Town Manager John Madigan said that without using $125,000 from surplus, the tax rate would go to $22.50 per $1,000 of valuation.

He said with a surplus of nearly $540,000, now is the right time to use some of it.

“When I first came, we had a negative surplus. (Using some undesignated funds) manages the surplus,” he said.

The state recommends that a town maintain about 10 percent of its overall budget in an undesignated/surplus account so that borrowing isn’t necessary to pay bills before taxes are paid.

The town’s total budget, including school taxes, is $3.8 million. The municipal budget is $2.6 million.

Also at the special town meeting, voters narrowly agreed to use another $5,000 from surplus to establish a reserve account that would be used to deal with tax-acquired, dilapidated or dangerous buildings.

Board Chairwoman Barbara Laramee said the sales of tax-acquired properties would go into the account. Also, Madigan said a line in future budgets would request money to deal with such properties.

All selectmen except Byron Ouellette agreed to take $125,000 from surplus for taxes, and $5,000 to set up the special account. He said he expects less money from the state each year, which could mean a continued higher tax rate for Mexico property owners.

“I’d really like to see some cuts (to the budget) in the future,” Ouellette said. “If we don’t cut our tax bill, we’ll see 30-mill tax rates.”

eadams@sunjournal.com

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