Monday night he asked the Town Council to consider increasing the town's portion of the local property tax rate by 5.9 cents per $100 of assessed value, which would bring the rate to 58.1 cents.

This year, the town's 52-cent rate is less than one-third of the total tax rate of nearly $1.68 that Chapel Hill property owners paid. The rest goes to fund Orange County services and the Chapel Hill-Carrboro City Schools. Stancil predicted other elected officials also will raise taxes to pay for services next year.

"I don't think we will stand alone this year," he said. "Tax increases of 3 to 10 cents in local jurisdictions will not be uncommon."

This would be the town's first tax-rate increase in three years. Chapel Hill has been using its fund balance, or savings account, to pay its debts and avoid raising taxes.

Stancil wants to use some of the fund balance again this year, but only about $2.8 million, more than half of which came through a Durham County tax settlement with a major developer. Stancil said the town can't dig any deeper into the fund balance.

"At this point, it is depleted as low as it can get," Stancil said Monday afternoon.

While the town has nearly $18 million in its fund balance, only $6.3 million of that is not already designated for a particular purpose. That "spendable" portion of the fund balance, Stancil said, must remain above 12.5 percent in order to maintain the town's AAA bond rating.

Depletion of the fund balance comes at a time when the town's debt payments are at an all-time high and climbing. The town will pay more than $6 million toward principal and interest in each of the next two years, and that number will top $7 million for 2010, 2011 and 2012.

The borrowed money is paying for such projects as the new Town Operations Center, the planned underground parking at 140 West Franklin Street, the Aquatics Center at Homestead Community Park, the new Southern Community Park, and the public library expansion.

Running the new operations center, the Aquatics Center and Southern Community Park also will cost the town well more than $500,000 next fiscal year.

The Town Council will hold a work session on the budget at 4 p.m. Wednesday at Town Hall. The new fiscal year begins in July.