The Town Council set its goals and priorities for the upcoming year in a retreat held at the town offices May 6.

At the retreat, Town Manager Russ Marcoux warned the town and school district could be facing an annual $4 million hit to their budgets from lost state revenues and increased costs in the statewide retirement system.

Marcoux suggested the Town Council form a committee to look into how the town should address the problem. Earlier this year, he sounded the alarm over the budget proposed by Gov. John Lynch, which included cutting revenue to towns and cities from the rooms and meals tax.

The state ultimately decided to restore most of that money and instead is plugging its budget hole with one-time federal economic stimulus dollars, according to Marcoux.

But he said the town and school district could be facing an even more severe budget impact in 2010 and 2011.

“I don’t see that really being talked about,” he said. “I don’t see the state government realizing the impact on local communities. It’s severe.”

He said that impact could be $4 million between the town and school budgets, which is about $1.40 on the tax rate. On a home assessed at $400,000 that would mean $560 more in taxes.

Marcoux said the town needs to examine the services it offers. Town Councilor Michael Scanlon said any cuts would result in layoffs. The three departments most likely to see reductions in staff would be fire, police and public works, according to Marcoux.

Scanlon also said the town should sue the state over the issue.

Otherwise, Marcoux said he did not know whether the town would turn to higher taxes, budget cuts or a combination of the two. He said that was a political decision that would have to be made by the Town Council.

The $4 million estimate is based on three state revenue sources and spending on the retirement system. In 2009, the town was due to receive $1.2 million from the rooms and meals tax and about $150,000 in state revenue sharing. The school district was slated for roughly $1.5 million in building aid from the state.

Once increased costs in the state retirement system are factored in, Marcoux said the total impact on the town and school budgets could be around $4 million.

Other town council goals include forming an energy committee to examine energy savings for the town and educate the public; establishing another committee to assess the status of all town-owned buildings and what future needs may be; implementing the recommendations of the Economic Development Commission; and looking at ways of funding the expansion of water and sewer service along Route 101 and South River Road.

The council also resolved to figure out what to do with the town road program. In 2008, funding from two bonds totaling $20 million was set to run out. Proposals for new bonds in 2008 and 2009 failed at the ballot box.

A recent report from CMA Engineers, a consultant, gave the green light to continuing the road program as it is currently structured. But Town Councilor Bill Dermody said he still was not convinced the program had been working.

“I don’t know that we’re doing the right thing with the roads,” Dermody said. “Somebody has got to explain to me why a brand new road has stress cracks in it within a year of the macadam being laid down.”

Dermody said he was referring to North Amherst Road and Hardy Road.

Scanlon said the new roads would still get cracks.

“We’re not building superhighways here,” he said. “We’re not doing total road reconstructions. We’re not building the Everett.”

Town Councilor Chris Bandazian said the Public Works Department had let the roads sit through the winter before putting on a wearing course.

Several councilors floated the idea of a roads committee, but it was unclear at the retreat exactly what its purpose would be. Bandazian was open to the idea if the committee would be supportive of the Public Works Department – not looking over the shoulders of its officials.

Council Chariman Michael Izbicki said a roads committee could sell the program to the public. And Town Councilor Paul Roy said the committee should examine the financing of the road program.

Another concern for the upcoming year is what to do with the Stevens-Buzwell School, which is located across the parking lot from the town offices.

The former school later served as the town offices and police station. From the late 1990s to 2007 it was the Marconi Museum, but now mold, asbestos, a leaking roof and other problems make the building unusable until it is cleaned up and renovated, according to Marcoux.

Marcoux said that removing the asbestos and mold as well as fixing the windows, leaking roof, and other problems in the building would be expensive. He estimated that restoring the building would cost about $700,000 while tearing it down and replacing it would be $430,000.