Driving on a full tank

Communities can weather gas price hikes – for now

REGION — With local gas prices shooting up 8 cents in the last week, to a statewide average of $3.77 per gallon on Monday, it’s natural to face the future with some trepidation.

But while the knowledge that gas prices in Maine are up 24.1 cents from one month ago, and 38.4 cents from this time last year, has residents worried about their home budgets, they can rest assured that it won’t mean a hit on their tax bills. Officials in Cape Elizabeth, Scarborough and South Portland this week said they have locked in gas prices through the end of the fiscal year, and any increase in price won’t be enough to significantly impact next year’s tax rate.

“We don’t usually react to a weekend’s worth of news and a couple of press reports that everybody has leapt on to,” Cape Elizabeth Town Manager Michael McGovern said on Monday. “We take a longer-term perspective.”

Like officials in Scarborough and South Portland, McGovern says his town has locked in gas prices through the end of the fiscal year. And although he does not plan to lock in a large buy again until late July – long after the FY 2013 budget is adopted, but when prices historically begin to fall – McGovern is budgeting just $3.10 per gallon for gasoline and $3.25 for diesel. (Keep in mind, almost 43 cents of every gallon you buy is state and federal taxes, which municipalities don’t pay.)

“I’m not going to get to nervous based on what’s going on in Iran this week,” said McGovern. “I’m willing to budget a reasonable amount and take a reasonable risk.”

And if prices remain high?

McGovern said that, based on average annual usage in Cape, on both the municipal and school sides, a 10 percent price hike would only amount to $24,000.

“We can handle that in our unassigned fund balance if we get nailed,” he said.

Meanwhile, South Portland Finance Director Greg L’Heureux said gas will be the second biggest line-item hike in next year’s budget, after Maine State Retirement costs, of which South Portland needs to cover $182,000 in 2008-2009 fund shortfalls.

However, a lot of that is because of two new buses South Portland recently acquired from New York City. Although newer than two scheduled to be retired, they are larger, and, thus, less fuel-efficient. Combined, the new buses could add as much as $37,000 to his diesel line.

“That’s just one example,” said L’Heureux. “Then you have the police department that uses 37,000 to 39,000 gallons of unleaded gasoline each year. At an extra 30 to 40 cents per gallon, it starts to add up.”

L’Heureux said South Portland is locked in through late May on a 90,000-gallon purchase it made last year at $2.74 per gallon. The FY 2013 budget looks to spike $85,000 for increased bus use and price hikes.

Still, L’Heureux said, now is not the time to panic and try to lock in a price for fear costs will keep climbing. South Portland will pay the so-called “rack price” through June and July, he said, and then attempt to lock in a price for the rest of the fiscal year when prices fall again.

“Right now it’s not a good time to lock for next December,” he said. “We don’t know that it will come back down, of course, but we’ll monitor things. It always has, and it’s just a matter of timing.”

In Scarborough, which joined in on South Portland’s bid last year, securing the same $2.74 per gallon price, Town Manager Tom Hall is less assured.

“I wish I had the same optimism,” he said. “It’s an external force and it is one more thing in an already challenging budget year.”

Although Hall says it’s too soon in his budget process to throw out dollar figures, he said he’s planning to budget 25 to 30 percent more for gas and diesel, even if he does land another joint, volume bid with South Portland.

However, with schools budgeting a primary concern, Hall said, the price of gas alone is not likely to impact tax bills to a measurable degree.

“I don’t think any increase would be significant enough to affect the local tax bill. It’s just a blip on the radar screen in the big picture,” he said, adding that what the town will do is try and control costs by managing usage through no-idle policies and designing more efficient routes for school buses.

“We’ll try to do everything we can,” he said, “although, when it snows, the plows have to be out on the road.”

While Scarborough and South Portland expect to form a joint bid, McGovern has a wait-and-see attitude for Cape Elizabeth.

“We’re all over the place,” he said. “Sometimes we go in on a group bid, other times we solicit bids from dealers at the most advantageous times. It all depends on the market.”

Although both say they’ll be juggling numbers right up until annual budgets are approved by their respective councils, the work is, at best, a guessing game, Hall and L’Heureux agreed.

“You’re at the will of the market,” said L’Heureux, “and if you get it wrong you’re just going to have to take it on the chin for budgetary purposes.”