HOWELL — Municipal officials are scrambling to find more places to cut the 2010 municipal budget in order to avoid leaving only $1,500 in the town’s surplus account.

Howell Township Council members were slated to meet on July 19 to make a decision regarding the budget so that August tax bills can go out on time.

Chief Financial Officer Jeffrey L. Filiatreault told the governing body at the July 13 council meeting that the state had refused to sign off on the proposed 2010 municipal budget which totals $42.4 million.

The budget funds the operation of the municipality: police, public works, local government, code enforcement, planning, zoning, and every other department that makes Howell run.

Filiatreault had anticipated using $510,000 in surplus from the township’s capital fund in the budget.

“They (the state) have ruled that any money coming to support the budget from the capital fund is going to offset debt service,” the CFO said. “Debt service is outside (spending) cap calculation. They counted (the use of surplus) as a reimbursement of debt service, which reduced our cap base and put us $487,000 over the (spending) cap.”

Filiatreault said he was able to fix the problem.

“We’ve made up the difference,” he said. “The amount to be raised by taxation has not changed and our tax rate has not changed.”

But the solution comes at a cost. It would leave Howell with only $1,500 in the municipality’s surplus (savings) account. The surplus account pays for unexpected emergencies that may arise during the course of the year.

“The only thing I am uncomfortable with is the fact that we are pulling our surplus down very low, into the $1,000 figure,” Filiatreault told the council. “We can use every penny of surplus we have. There’s nothing wrong with that.”

The CFO’s announcement stunned Mayor Robert F. Walsh and council members.

“I have a lot of respect for you,” Walsh told Filiatreault. “I have to tell you, this is unacceptable.”

Filiatreault had asked the council to approve an amendment that would have allowed him to increase the anticipated surplus in the police department’s salary and wage accounts because of retirements.

But every member of the governing body said more cuts would have to be made rather than adopting a $42,455,590 budget with a $1,500 surplus cushion.

“I can tell you that I am extremely uncomfortable going forward with $1,500 in our surplus account,” Deputy Mayor Angela Dalton said. “We are a 64-square-mile township. Most people’s surplus cushion in their personal accounts is more than $1,500. This is an extreme situation. We need to look at everything. We cannot be without emergency money, without a surplus. We just can’t.”

“We need to take a very hard look at this,” Councilwoman Susan Schroeder Clark said. “This is frightening. It would be a disservice to the public not to look at this further.”

Council members suggested either cutting out bulk pickups entirely or passing on the cost of bulk pickup tipping fees (i.e., the cost of disposing items at the landfill) to residents as a new source of revenue.

But Filiatreault said brand new revenues have no track record, so the state would not allow it. He urged council members to approve the amendment he suggested because the August tax bills have to go out on time.

“We are pretty much out of money,” Filiatreault said. “I need to get the tax bills out. We borrowed tax anticipation notes in anticipation of what we needed for July. I only have enough money to last until the end of the month.”

Howell does have more than $600,000 of capital surplus left, but Filiatreault said he would prefer to use that for capital projects.

“It’s not like the township is without any fund balance (savings),” he said. “The coffers are not empty. I am aware that this is not acceptable. My job for the next six months is to create and replace as much of the surplus as we can.”

Filiatreault said he had not been aware of the state’s position on using money from the capital account until the day of the July 13 meeting.

“They are our boss,” he said. “They have complete final authority over us in this. We are not going to get the budget approved without fixing it.”

Had he known earlier, the township could have possibly increased the number of unpaid furlough days for employees, Filiatreault said.

Walsh noted that employees have made concessions, after Filiatreault mentioned the furlough days.

“I am not going back on my word,” Walsh said. “Anybody here who wants to go back on their word?”

The mayor instructed Township Manager Helene Schlegel to come up with between 12 and 15 cost-cutting measures so council members could familiarize themselves with the options before the July 19 meeting.

In 2010, Howell’s municipal tax rate will rise from 28.2 cents to 32.5 cents per $100 of assessed valuation. The owner of a home assessed at the township average of $355,000 will pay $1,155 in municipal taxes this year, up from $1,001 in 2009.

A property owner’s tax bill also includes Howell K-8 School District taxes, Freehold Regional High School District taxes, Monmouth County taxes and other assessments.