HILLSBOROUGH - Town Manager Eric Peterson has proposed a $7.14 million operating budget with a chunk of new spending on the future Gold Park and Riverwalk projects.

The budget recommends no new town employee positions.

THE TAX RATE

Peterson's budget would increase the town property tax rate by 7.9 percent for fiscal 2008-09.

The rate would rise 5 cents to 68.5 cents per $100 valuation. The owner of a home assessed at $200,000 would pay $1,370 in town property taxes, or $100 more than this year.

The town tax rate is part of a Hillsborough property owner's total tax bill, which also includes the countywide property tax. The Orange County manager has not released her proposed budget yet.

WATER AND SEWER

Hillsborough's water and sewer rates also would go up under Peterson's budget. For in-town customers using an average 3,000 gallons a month, the monthly water and sewer bill would rise $3 to $44.49.

For out of town-customers, who pay higher rates, the monthly bill would rise $5.84 to $86.75.

WHY RATES ARE GOING UP

"The economy has really made it difficult," said Peterson, who noted that Chapel Hill and Carrboro also are facing local property tax-rate increases.

In addition to its much-anticipated park projects, Hillsborough also has to replace old equipment, including a 15-year-old Fire Department ladder truck, Peterson said.

Meanwhile, growth in town has largely come in public projects such as the new Durham Technical Community College campus that don't pay taxes, he said.

To keep taxes from going even higher, Peterson wants to reduce the town's fund balance, an account used to manage cash flow, from 48 to 37 percent of the budget. That's well above the legal minimum but below the 65 percent average for towns of 5,000 to 10,000 people, he said. Hillsborough has 6,240 residents, he said.

Mayor Tom Stevens said he did not know whether the board would try to trim the proposed tax increase.

"A lot of the increases are investments that need to be made if we want to realize the next stage of Hillsborough's growth," he said.

WHAT'S NEXT

The Town Board will hold a public hearing on the proposed budget May 29 before approving a final spending plan in June.