BAILEYVILLE – For years, this mill town had the proverbial goose that each year laid the golden egg, but no more. With Domtar Inc.’s downsizing over the last few months, residents can safely assume it is going to cost more to live here.

For years, the town’s largest employer picked up about 70 percent of the property taxes. That meant the rest of the people had a smaller piece of the property-tax pie to share. But no more.

Last year, the Montreal-based Domtar shut down its paper machine, tossing 150 people out of work. Although it continues to operate its pulp business, there are no guarantees as to how long the mill will function. The company now is asking for a decrease in its valuation, which could affect everything from the school budget to the municipal budget.

On top of that, the town has lost about $245,000 in state school subsidy, “which is actually just over $39,000 less than last year,” Union 107 Superintendent Barry McLaughlin said Monday. “Of course we did take a reduction last year from what we were supposed to get.”

Last year, the total school budget was $4.6 million. This year’s proposed budget is $4.55 million, down $88,000 from last year. The proposed local share, McLaughlin said, is $2.93 million, about $287,000 less than last year.

Although the town took a hit in its school subsidy allocation, the overall school budget will decrease because the school board decided to dip into its reserve account and take about $200,000 from surplus to balance the budget.

Voters are expected to act on the budget at a town meeting Wednesday, May 28.

Under state law, voters will have a final say at a referendum vote on June 10.

The revaluation for the mill is expected in 2010.

Interim Town Manager Dottie Johnson said Monday that town officials are working on the municipal budget. It is not expected to go before voters until sometime in June.

Johnson agreed with McLaughlin that the town faces some challenging times. She said the mill no longer would be paying 71 cents on every dollar spent by the town. “Domtar is asking for a reasonable decrease in their valuation” because the paper machine is going down, she said.

The town also is going to have to look at cuts in services. “We are over budget in heating fuel and gasoline and we are going to have to make allowances for that,” she said. Johnson said it was too early to talk about those cuts.

The town also is in the process of putting in place a sewer ordinance. For the first time ever, Baileyville residents will be hit with a sewer bill. “Baileyville has been lucky that the tax rates have covered the cost of the sewer; that no longer is going to be the case,” she said.

To make the necessary repairs to the sewer system, the town will have to go to the bond bank for money. “And the bond bank no longer considers Domtar the only viable taxpayer, so to be sure they get their payment back, they demand that we put in sewer usage rates,” she said. “We have been skating on the backs of Domtar or Georgia-Pacific or St. Croix [Paper Co.]. But those days are gone,” she said of the former paper companies.

Sewer rates are expected to go into effect July 1.