By DONNA KENNY KIRWAN

PAWTUCKET — Faced with few options any better, the City Council on Wednesday approved a deficit plan that will help the School Department deal with its almost $3 million combined deficit in the fiscal year 2007 and 2008 school budgets.

The plan, which spreads out the financial impact of the deficit over four years, is contingent upon the approval of the state auditor general. It does not address a similar deficit in the schools budget expected for the 2009 fiscal year.
Finance Director Ronald Wunschel said the plan, which he designed, allows the city to whittle away at the deficit over four years with annual payments of $750,000, rather than having to come up with the entire $3 million.
He said the plan would involve the School Department not adding the extra financial aid from the city to its bottom line budget figure over the next three years, a term referred to as “maintenance of effort.”
He noted, however, that the funding for the plan will obviously have to be built into the city’s tax base.
Wunschel said the plan was developed so the School Committee would not resort to the Caruolo Act, legislation that allows school departments to sue their respective municipal governments for more funding. He said school officials have agreed to the proposal, although he reiterated that nothing can be implemented without the state auditor general’s blessing.
The deficit includes $2.8 million from the current year’s school budget as well as another $200,000 that was carried over from the previous year’s budget.
The proposal had been discussed in the Finance Committee meeting held prior to the council meeting. When it came time for a vote, there was no further discussion among council members, who appeared to glumly approve the measure by a 6 to 3 vote.
Councilor John Barry, chairman of the Finance Committee and an outspoken opponent of any tax increase, voted against the proposal, along with councilors Donald Grebien and David Moran, who have also raised concerns about deficit spending.
In other matters, the council voted to approve a request from Morris Nathanson of Morris Nathanson Design for a five-year tax treaty for a building he wants to renovate at 136 Exchange St,
Under the plan, the city would agree to reduced tax payments of $18,000 per year for five years until the completion of the project. Councilor Thomas Hodge said the proposal, which had the recommendation of the Finance Committee, is subject to Nathanson’s eligibility for the state’s historic tax credit program. The move will have no impact on the city budget, Hodge said.
In his request to the council, Nathanson said that he and his wife, Phyllis, purchased the building adjacent to his main studio facility many years ago and now want to create a Design Center. He said the building, which formerly housed the Rhode Island Cardboard Box Company, is “a complete wreck” and estimates the construction to cost approximately $4 million.
As part of a construction tax required for eligibility in the historic tax credit program, Nathanson said he is being required to come up with $90,000 —- a 2.25 percentage of the total project costs — by May 15. He said the reduced tax rate on the new construction would help him go forward with the project.