HANOVER — The Selectboard is scheduled to hold a public hearing on Monday to discuss a proposed $39.1 million town budget for the fiscal year starting July 1.

The budget is up 9.7% from the current spending plan, but a large chunk of the town’s increased costs will be paid for using cash reserves to minimize the effect on the tax rate.

If the budget is approved as proposed, it would result in a projected 5.3% increase in the municipal property tax rate. Residents can vote on the budget at Town Meeting on Tuesday, May 13.

Selectboard member and secretary Jarett Berke was not yet on the board during budget season last year.

“I was in the audience and paying keen attention to what everybody around me was saying and the message was: Taxes keep going up and people don’t like it, and that the undesignated fund balance is really large,” Berke said in a recording of the March 10 board meeting.

Hanover is projected to have a general undesignated fund balance of almost $5 million at the end of fiscal year 2025.

The proposal includes using about $1.9 million in general undesignated funds, of which $1.5 million is allocated to the building capital reserve fund for repairs and improvements to city owned buildings which includes the police station, Howe Library, Town Hall and the R.W. Black Community Center.

The town is “expecting some costs down the road,” a recent assessment of Hanover’s capital buildings by AG Architects based in Dover, N.H., found, Town Manager Robert Houseman said in the recording of the meeting.

Personnel costs, especially increases in health insurance, account for the remaining bulk of the budget increase, Houseman said during the meeting.

Also in the March 10 meeting, Berke voiced concerns about the tax rate increasing more than inflation, which was 3.9% in the Northeast as of February, according to the U.S. bureau of labor statistics.

“We’ve had several years of increases in excess of inflation, and I just think it would be pretty great if we could not be facing multiple more years of that,” he said in the meeting’s recording.

There are enough cash reserves to buy down the tax rate to around inflation, and keep the fund at the required level, Hanover’s finance director Ellen Bullion said during the meeting. But board member Jennie Chamberlain expressed her opposition to that idea and advocated for adding more of those dollars to the capital buildings reserve fund.

“We have a lot of really smart investments that we can make coming up that will help serve more people and be more sustainable and be cheaper in the long run that we won’t be able to make if we don’t start planning for them,” she said in the recording of the meeting.

A multi-use path to “create a safe and inviting connection” from downtown to Sachem Village is one example of an upcoming investment in sustainability Hanover can make, Chamberlain said in an email to the Valley News.

“We want this community to survive and thrive,” she said during the meeting. “There’s a cost to doing nothing.”

Municipal taxes make up 26% of property taxes in Hanover.

If the proposed budget is approved the municipal portion of the tax rate would be $4.88 per $1,000 of assessed valuation. This is a 24 cent increase over last year’s tax rate and does not include the fire district, education or Grafton County taxes.

A house appraised at $700,000 could expect to pay $3,416 in municipal property taxes.

Of the total budget, $23.1 million go toward the general fund, while the fire, water, sewer, ambulance and parking funds make up the rest of the dollars.

In order to raise fees for future debt payments for bonds approved in 2023 for water and sewer projects, the town is considering increasing water and sewage rates by 4% in the upcoming fiscal year.

Similarly, to cover parking costs projected for the 2026 fiscal year, the town would like to raise parking fees, fines and permits by 3%. The rates can only be increased if the budget is passed and the Selectboard passes the rates and fees schedule in June.

In a phone interview Tuesday, Bullion said she did not have data on how these rate increases may affect households yet, but is preparing information for Monday’s hearing.

A public budget hearing is scheduled for Monday at 7 p.m. in the board room of the Municipal Building located at 41 South Main St. and can be viewed on channel 1085 on Comcast.

Emma Roth-Wells can be reac hed at erothwells@vnews.com or 603-727-3242.