EASTPORT, Maine — Councilors are knee-deep in budget preparations, having received the proposed 2010 city budget this month from interim City Manager George “Bud” Finch.

Finch said Friday that it was one of the most difficult budgets he has had to put together, citing decreased revenues that include sharply cut state subsidies in education.

Although he said final state subsidy figures would not be available until next week, there is genuine reason for concern.

“Estimated losses in revenue from the state combined with increasing expenses could range in excess of $250,000,” he said. “Education costs account for close to 60 percent of the budget and losses of this magnitude will require either a significant tax increase or reduction in services.”

Finch said that in creating the budget, he attempted to keep taxes flat.

“The budget I am presenting meets the minimal level of services we can provide without making drastic cuts in those services,” he said. “The ability to project the short-term economic conditions impacting us is difficult, as I expect the downward spiral has yet to bottom out. With all that said, it is critical that we keep the city not only afloat but moving forward.”

Finch said that extra effort by town staff will allow the municipal operations side of the budget to come in basically flat.

It should be clear, Finch said, that this move will require reductions in services, specifically in the areas of maintaining and improving capital and infrastructure requirements.

“We have been able to offset additional losses of $25,854 in revenue and increases in expenses of $14,890, thus creating a total tax increase of $29,358,” he told the City Council recently. “This increase would set the mill rate at $20.24 — up 24 cents or 1.2 percent over the current fiscal year based on the current level of mu-nicipal valuation.”

Finch said the parts of the budget that the city actually can control — administration, public works, police, fire, cemetery and airport — would increase by only $4,255 over the current year budget.

He said that 51 percent, or $494,565 of the municipal operations side of the budget, comes from revenue other than property tax.

Other budget details include increases in insurance, hydrants and solid waste. The two areas of major concern are hydrant fees, up 18.6 percent to $242,546, and solid waste disposal, up $10,000 or 7.1 percent to $150,000, he said.

He said the city’s debt service has been set at $171,386, down by $18,529, while county tax has been set at $157,311, down $7,141 from the current year.

An analysis of the municipal budget over 20 years shows a decrease in expenditures in the municipal operations portion of the budget of more than 15 percent, while municipal programs show an increase of 33 percent, Finch said.

A budget committee will be appointed and a schedule set for budget workshops at the City Council’s meeting Monday, March 8. The final version of the proposed budget will come back to the City Council for ratification.