New London - The budget approved by the City Council would raise the city's tax rate by about 10.5 mills to 38 mills, but because of revaluation, not all property owners would see the same tax increase.

The council approved the first reading Monday night of an $85 million budget for fiscal year 2014-15, which represents a 5 percent increase in spending over the current budget.

The city's taxable grand list dropped nearly 25 percent as a result of state-mandated revaluation last year. The value of some properties, including many waterfront homes on the city's south side, went up. But many other properties diminished in value.

"This is one of those years that there will be a lot of flux," Finance Director Jeff Smith said. "Revaluation causes an increase in the mill rate because in order to collect the same amount of revenue, the mill rate has to go up."

The amount of tax a property owner would owe can be calculated by multiplying the city's proposed tax rate by the property's new assessed value and dividing by 1,000.

A house assessed at $100,000 last year would have generated a tax bill of $2,737. This year, a house assessed at $100,000 will generate a tax bill of $3,800.

But, because the taxable grand list decreased as a result of revaluation, many city residents could see their tax bills go down. Most downtown property owners will not see a large increase, the mayor has said.

"This is one of the few times when a property tax increase will fall largely on those most able to pay," Mayor Daryl Justin Finizio said in his State of the City address April 1. "Many of the people with the least breathing room in their personal budgets will see their taxes rise only slightly, or even fall."

The council's proposed $85,285,812 budget is nearly $2 million less than that proposed by Finizio. It includes $44 million for general government spending and $41.3 million for education.

Finizio called the council's proposed budget "a solid, stable budget ... that starts to move us in the right direction." He also lauded the council for not cutting his proposed $500,000 for fund balance replenishment and for not changing the amount of revenue the city expects to collect.

"Accurately estimating revenue is essential, and over-estimation of revenue in the past led to reoccurring deficits, the diminishing of our fund balance and was one significant factor of our current cash flow problems," he said. "The fact that revenue estimates were done correctly and conservatively is very positive."

A public hearing on the budget will be held at 7 p.m. May 7 in the auditorium of the Science and Technology Magnet High School of Southeastern Connecticut on Jefferson Avenue.

The council is expected to give its final approval of the budget, in what is called an appropriation ordinance, on May 27. The mayor could then sign the ordinance, or veto all or parts of it. The council would need six out of seven votes to override a veto.

c.young@theday.com