BLUE HILL – Disagreement over a funding formula for School Union 93’s plan to relocate the superintendent’s office threatens to derail the project and could even lead to a breakup of the four-town union.

For more than a year, the union searched for new space to replace the cramped superintendent’s quarters at the Blue Hill Town Hall.

Then earlier this year, school officials reached an agreement with the town of Blue Hill to build new office space on town-owned property and to lease the new building to the union.

Although no formal agreement was signed, officials had agreed that the annual lease costs would match the amortization rate on the estimated $200,000 project. The annual costs were estimated at between $20,000 and $24,000.

In September, Blue Hill voters authorized their selectmen to borrow the money for the construction project, but amended the proposed article adding the phrase “if they find it in the best interests of the town.”

Don Eley, the chair of the Blue Hill School Committee, told a joint board meeting Thursday that the selectmen now had concerns about the funding and that a large increase in Blue Hill’s share of the overall union budget might not be in the town’s best interest.

Under a long-standing agreement, the cost of operating the superintendent’s office or “central office” as it is referred to, is split equally among the four towns in the union – Blue Hill, Brooksville, Castine and Penobscot. That formula has been deemed fair over the years, for while Blue Hill is by far the largest school in the union, it has provided the space for the office.

From the start of the project, the union had considered another type of formula to address the new construction, but had not really discussed what that formula might be until Thursday.

Eley, however, had discussed the possibility with the Blue Hill selectmen in an executive session last week.

“The town’s feeling was that if they’re going to give up the selling price of that property and the taxes going forward, that amounts to a big donation to the union,” he said.

Selectman James Schatz said Friday that the selectmen met with Eley and mainly listened to what he had to say about the funding and the possibility that representatives from some of the towns might want to change the formula, possibly linking each town’s costs to the student population. Under that formula, Blue Hill, with almost half of the total number of students in the entire union, would pay almost double what it does now. Schatz said neither the Blue Hill School Committee nor the selectmen favored that proposal.

Although Schatz said the selectmen took no formal position on the matter at an executive session meeting with Eley. But Schatz added that changes in the funding formula could change the town’s view of the union.

“We do feel that if the town is going to get into funding the building and taking on that responsibility, then the allocations should be very close to the way they are now,” Schatz said.

This type of discussion provides “an opportunity to discuss the benefits of being in a consortium like this,” he added. “Is this good or not?”

At the Union board meeting Thursday, Eley conveyed that sentiment, suggesting that the smaller towns received certain benefits by having Blue Hill in the union.

“There are economies of scale,” he said. “If we each had our own part-time superintendent and staff, the sum of all the schools would be greater than what we pay [now] as a group.”

Richard Read of Castine, the chair of the Union 93 board, said it sounded as if Eley were saying that if Blue Hill didn’t get the 25 percent equal split, that it would pull out of the union. Read suggested that Blue Hill also has received benefits over the years at the expense of the other towns in the union.

“Blue Hill has been providing the space,” he said, “but they’ve also been getting something out of it. Blue Hill has 50 percent of all students in the union. If the costs were divided by students, Blue Hill would be paying $130,000 a year compared to what they’ve been paying, about $66,000. Blue Hill has received a subsidy from the other towns.”

Eley said several times that he was not trying to argue in favor of or against any one formula, but added that whatever proposal the union adopted, would have to be presented to the selectmen.

“I’ve still got to sell this to the selectmen,” he said.

Eley added that he would not be able to sell a formula that had Blue Hill paying 49 percent of the bill.

He proposed that the annual rent be included in the total union budget and that the funding formula remain as it is with each town paying one-fourth of the total cost. With only Blue Hill favoring that option and representatives from Brooksville, Castine and Penobscot opposed, that motion failed.

Union members discussed several options, including a split formula, in which half of the budget would be divided under the existing formula, with the other half divided based on student population.

After discussion, however, Read proposed that they proceed with the new office project and leave things as they are, with each town paying 25 percent of the central office budget, including costs related to the new office space, as long as Blue Hill continues to provide the space at no cost to the union. In an informal straw poll, that proposal passed with only Brooksville opposed.

The union board will meet again Dec. 14, at which time it must adopt a budget and a funding formula.