The town of Montville in recent days has started work on a budget for the next fiscal year that is expected to deliver one of the biggest tax rate increases in recent memory.

The process started last week when Mayor Ronald K. McDaniel Jr. presented a $55.7 million proposed budget to the Town Council that he said would raise spending by two-tenths of 1 percent.

Under McDaniel's budget, the tax rate increased about 8.7 percent, meaning a homeowner with property assessed at $200,000 would pay about $400 more in taxes.

McDaniel said the reason for the tax increase was mainly because of a townwide revaluation of taxable property and other lost revenue. The bankruptcy and closure of AES Thames, the defunct power plant on Depot Road and the town's top taxpayer at more than $1.2 million, was a sizeable blow to the town. McDaniel said he does not expect the power plant to make its tax payment for this year.

The budget, which includes a 6.3-mill increase and would bring the overall tax rate to 29.3 mills, included $18.4 million for general government and $638,200 for capital improvements. It also allocated $36.6 million for the town's schools.

That figure is no increase from the current spending plan, which Superintendent of Schools Pamela Aubin said last week would force teacher layoffs. The Board of Education in February passed a budget that was about $1 million more, a 2.72 percent increase. Public hearings on both the school budget and the general government budget were scheduled for earlier this week.

"While I can appreciate the mayor's dilemma in regards to revenue issues, I don't think the parents of this community want to see such a severe limitation on expenditures," Aubin said before the hearings. "That (increase) supports programs that we have for our students. (Parents) want to see improvements and continued improvements over time. They realize there are some costs associated with that."

McDaniel called his spending plan a "no frills" budget; citing the increase in spending of only two-tenths of 1 percent. The tax increase is largely the result of a recent townwide revaluation of property that dropped the grand list of taxable property by nearly 15 percent as well as of significant reduction in other revenue.

"I have referred to this document as the Southwest Airlines of budgets," McDaniel said, referencing the airline's no-frills approach. "While it will help to continue to move us forward, it does so in a way that is as affordable as possible."

Town councilors largely praised the mayor's budget. Councilor Chuck Longton called the two-tenths of 1 percent increase in spending a "phenomenal achievement."

Councilor Dana McFee also said he was pleased and that he was expecting an increase of 8 mills or more.

The bankruptcy and closure of AES Thames accounted for about 17 percent, or 1.1 mills, of the expected tax increase. Other lost revenue accounted for about 24 percent, or 1.5 mills, of the expected increase, McDaniel said.

The town in the next fiscal year will also make the first $1.35 million payment on a bond taken out to cover the Rand-Whitney Containerboard settlement. After the town and the company argued in court for years over how much Rand-Whitney should pay in sewage fees, the town was ordered to pay a court-ordered settlement of $11.7 million, plus interest.

McDaniel's proposed budget anticipates a 98 percent tax collection rate. The mayor also stressed that the town is in the midst of contract negotiations with six of its unions.

JEFF.JOHNSON@THEDAY.COM