MOUNT DESERT – Property owners will be asked to raise $1 million more this year to fund municipal services, and the tax increase could go higher still, Town Manager Michael MacDonald said Tuesday.

“I hate to be the person to give [taxpayers] all this news,” MacDonald said, “but I wouldn’t be doing my job if I told them, ‘Oh, yeah, everything is rosy.'”

The proposed 2004 town budget of $6 million, which is still being fine-tuned for the March annual town meeting, shows an 80 percent increase in the sewer department. The increase is due mostly to new debt service and other expenses related to the $6 million Seal Harbor-Otter Creek plant consolidation project.

Debt on the project will add $260,000 to the budget, in addition to $275,000 for a new Seal Harbor sand filter. Also, the budget includes $130,000 to rehabilitate the Sea Street pump station.

The total budget, including the elementary school, approaches $10.85 million, compared with the current fiscal year combined budget of $10 million.

The town’s school board submitted a budget for 2004 that exceeds the current budget by just $312, which MacDonald called “amazing.”

In addition to an $841,000 increase in expenses, the town expects to lose about $130,000 in miscellaneous income in 2004, the manager said.

The amount to be raised by property taxation, therefore, is expected to climb by at least $1 million, to $9.2 million, MacDonald said.

The budget news gets worse, though.

A proposed new sewer rebate program would add another $150,000 to the budget. The tentative numbers also don’t yet include anticipated increases in the town’s share of the Mount Desert Island Regional High School or county taxes.

Moreover, within five years, the town will need to address its aging sewer plants in the villages of Somesville and Northeast Harbor. MacDonald said those projects could cost $5 million or more.

Rick Savage, chairman of the Board of Selectmen, could not be reached for comment Tuesday.

Nonunion municipal employees will get a 3.5 percent pay raise under the new budget, while the union contract for the public works, sewer and refuse collection staff calls for a 3 percent raise, MacDonald said.

An extra paycheck in 2004, thanks to the leap year, will increase the budget by 1.8 percent, MacDonald said.