PEPPERELL -- The Finance Committee is notifying department heads that they could be facing a 5 percent budget cut for fiscal 2015 if voters elect to not pass a Proposition 2 1/2 override to counter the town's growing structural deficit.

"The big issue that we face is if we propose an override and it doesn't pass, based on the projections it looks like were going to be facing at least a minimum of a 5 percent decrease in the operating budget," Finance Committee Chairwoman Melissa Tzanoudakis said.

"If an override is passed, then based on what we've previously talked about with staying modest with the budget and not having a money grab, we could probably do a 1.5 percent increase and at least keep services where they are and hopefully try to build things up a little bit."

The town's deficit, at about $218,000, is projected to grow to $2.2 million by fiscal 2018.

In a letter to department heads, the committee is asking for proposed budgets in case the override passes and budgets can increase by 1.5 percent. The letter also asks department heads to be prepared to discuss the potential impacts of a 5 percent cut if an override does not pass.

"No matter how we spin it, there's no way to prepare the departments without doing it un-sugarcoated," Tzanoudakis said.

Tzanoudakis said the committee is considering several options if it proposes an override, including a three-year $600,000 plan, a four-year $800,000 plan and a five-year $1 million plan.

"The three-year plan would address the imminent need for the structural deficit, but it would not deal with any issue of a capital plan, nor would it give us any portion of it if there was any kind of uptick in the school assessments," Tzanoudakis said.

The four- and five-year plans would allow the town to begin developing a capital plan, Tzanoudakis said.

The committee is inviting selectmen to its next meeting Dec. 12, and is expected to make a recommendation to selectmen on their preferred plan early next year.

Town Administrator John Moak said the estimates for expenses over the next five years were conservative, and didn't account for possible large increases in costs that the town can't control, such as school budgets.

"Even with an $800,000 or $1 million override, if we don't stick to those strict guidelines (expenditure projections), we're going to be using that up without a capital plan," Moak said.

The committee also discussed Selectman Michael Green's suggestion to do a smaller, one- or two-year override, allowing the town time to survey residents and former residents on what services they are looking for in town.

"I do think that putting together some kind of survey and getting an idea of what people want, I think that would be great. I'm just not sure that that's something you could do effectively in a one-year period," Tzanoudakis said.

Committee member Holly Seiferth said people's demands would not necessarily align with the town's operational-budget needs.

"I'm just concerned that ultimately the survey results aren't actually going to correlate to areas where we're flagging in terms of spending," Seiferth said.

The committee is planning to have a budget prepared by the time the North Middlesex Regional High School building project goes before voters in a March Special Town Meeting.

That way, Tzanoudakis said, voters can have a better idea of the town's finances before voting on the $89.5 million high-school project.

"When we go to that Special Town Meeting in March, because we are different from Townsend and Ashby who only have to think about the building, we have to deal with the fact that we have such a huge operational deficit, and we have to give people a realistic expectation on what happens if we don't do anything," Tzanoudakis said.

Seiferth said that the town simply isn't bringing in enough revenue to have a sustainable budget.

"It's becoming mathematically evident that we just can't keep going at this rate," Seiferth said. "I think this is a correction that's long overdue in terms of being really head on about what we need to do."

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