MECHANIC FALLS – Property owners will see on their tax bills later this month a tax rate slightly lower than the one approved by voters at this year’s town meeting.

Town Council members Monday approved setting the tax rate at $29.20 per $1,000 of valuation, instead of the anticipated $29.80. The new rate, which affects the 2004-05 fiscal year, is an increase of $1.20 over 2003-04. Town voters had approved a $1.80 increase at the annual town meeting held in May.

Members of the Budget and School committees wrangled over the anticipated increase in light of several school budget cuts. Budget Committee members had recommended a $1.50 increase, while the School Committee proposed a $1.80 increase. School administrators had originally hoped for a $2 tax rate increase.

Council members on Monday could have legally approved up to a $30.40 tax rate so that the town would have a 5 percent budget carryover. They also could have legally gone as low as $28.90, which would have allowed a zero balance.

Town Manager Dana Lee recommended the $29.20 rate, which leaves the town a $22,670 margin.

“I think this is the lowest responsible number that we can do,” said Lee.

Tax bills will go out at the end of this month with the first half of payments due Oct. 15. The second half will be due May 15 of 2005. Late payments incur a 6.5 percent interest penalty.

Total town property value, assessed as of April 1, rose to about $88.4 million, up from the previous year of about $87.1 million. The increase allowed the $2.45 million needed to fund town-approved spending to be spread out at a lower tax rate.

However, property values did not meet earlier projections by the town manager to reach $100 million or more for new and improved properties.

Lee pointed out during Monday’s meeting that new assessments reflected in this year’s budget are not the same as the total town revaluations being conducted now.

Those new numbers will apply to the 2005-06 budget and should further reduce the tax rate, Lee said.

According to the town’s 2004-05 tax rate analysis presented to Town Council, local real estate value added to just over $79 million. Personal property came in about $4.6 million.

While homestead exemptions of about $4.4 million brought the total value to about $88 million, the town’s tax rate has to be figured without the exemptions and a final figure of about $84 million. That bottom line number is up from last year’s $82 million total property value without exemptions.

The town only gets about $129,000 in reimbursements from the state for homestead exemptions.

That reimbursement is factored into the deductions from the overall $3 million approved to be spent for town, school, county functions.