PETER BOODY PHOTO | Town Board members, Town Clerk Dorothy Ogar and Town Hall staffer Kathy Sullivan (right) at Tuesday’s 12th budget review session. The budget was finalized at a 14th session on Thursday.

The 2013 budget will conform to the state’s 2-percent tax cap, Shelter Island Town Supervisor Jim Dougherty announced on Thursday after the Town Board held a 14th budget review session at which it came close to finalizing the proposed spending plan.

The board, meeting on Thursday morning, agreed to apply $786,700 from the town’s expected 2012 $3.1-million fund balance — money the town budgeted but never spent over the years — to reduce the budget’s tax impact. That’s more than twice the fund balance allocation of $340,000 applied in the current budget.

Two weeks ago, before several rounds of cuts, the budget proposal carried a potential tax hike of more than 27 percent. The proposal on which the board agreed Thursday to set a public hearing for  1 p.m. on Wednesday, November 1 will carry­ a tax increase of 3.9 percent, the supervisor said.

That increase technically should comply with the 2-percent cap, according to Mr. Dougherty, because of a state-allowed credit from the current year.

As he explained it in an email, “Tentatively the Town of Shelter Island is in compliance with the state-mandated 2-percent tax cap for fiscal year 2013. With our carry forward from the excellent 1.1-percent increase in 2012, our tax levy limit for 2013 is $7,136,426 and our proposed levy for … 2013 is $6,995,944.”

He  revised the numbers in a second email announcement to show that, as of midday Thursday, the budget plan actually exceeded the cap limit by more than $7,000, but he said that Town Board members would find something to cut so the levy falls the state’s limit.

“The correct tax levy Limit for the Town of Shelter Island is $6,988,464,” he wrote in a second email Thursday. Town Assessor “Al Hammond has been conferring with the State Controller’s Office in Albany and with me and [Town Attorny] Laury [Dowd] and we are very confident this is the final number. As I advised you earlier, our Proposed Levy as of this minute is $6,995,944 so we are $7,480 over. I have already canvassed my colleagues and it’s just a matter of picking the item … ”

Although the fund balance to be applied in 2013 is more than twice the amount applied this year, Mr. Dougherty called it “an extraordinarily conservative amount under the circumstances” because of the town’s large fund-balance cushion and unavoidable increases in spending next year. In recent days, Mr. Dougherty has been commenting at budget review sessions that the town was in a good position financially and hinting that the ample fund balance should be hit harder to reduce the tax rate.

The biggest factors raising the town’s costs, as Mr. Dougherty listed them, are “mandated state pension cost increases, mandated union compensation increases and the new expense of approximately $200,000 to pay for our wonderful EMS volunteer services.”

“I want to express my deepest appreciation to my colleagues Ed, Peter, Chris and Paul,” the supervisor wrote in his email, referring to the four other Town Board members (Councilmen Ed Brown, Peter Reich and Paul Shepherd and Councilwoman Chris Lewis) “for above and beyond efforts in this difficult economic environment. We will vigilantly watch expenses and revenues next year on a monthly basis to make sure we are not veering off course.”