The massive budget books for the next fiscal year arrived on city councillors’ desks Monday, showing the projected $472.2 million it will take to run the city — an $8.1 million, or 1.8 percent, increase from the current year that will need a possible 6.5 percent increase in tax levies on property owners — on the way to being approved sometime between May 23 and June 9.

But in the public hearings and votes before approval, councillor Craig Kelley warned, there will be at least one debate for the council to settle: Kelley said that he plans to ask that the Law Department’s $2.1 million be removed from the budget so “future expenditures [would] come before the council.”

Because having the council approve how the department spends its money would involve current, ongoing litigation, it was likely that closed-door meetings would be necessary to discuss the idea ahead of a vote, he said.

“Now people have however many weeks to talk to the the Law Department, talk to the city manager and, within the open-meeting laws, talk to each other about what the impact of passing something like this might be and whether it’s something they feel comfortable with,” Kelley said after the meeting. “In the past, this is something the council hasn’t felt comfortable with.”

The department has eight full-time attorneys, three support staff and a part-time investigator. Kelley believed removing its budget for council approval would apply also to the hiring and paying of outside counsel for specific cases.

He declined to say if he had any specific case in mind. In the 2010 fiscal year, the latest for which real figures are available, there were 161 claims and 49 lawsuits filed against the city.

The Monteiro case

The most prominent ongoing litigation faced by the city, though, is that of  Malvina Monteiro, who once ran the Police Review and Advisory Board. In 2008, a Middlesex Superior Court jury awarded her $4.5 million in damages after finding City Manager Robert W. Healy retaliated against and fired her because she had complained about racial discrimination. Of that, $3.5 million represented punitive damages.

At Healy’s insistence, and despite the qualms of some councillors, the city is pursuing an appeal. With interest, and $70,000 a month in interest as the case drags on, the potential cost to the city would now be $7.4 million.

If an appeals court finds for Monteiro again, the actual cost to the city will approach or exceed $10 million. That is because the city’s legal fees have already passed $2 million, according to documents turned over by the city to Cambridge Day but not broken out in the Law Department section of the budget book given to councillors.

Middlesex Superior Court Judge Bonnie MacLeod-Mancuso, who rejected the city’s initial appeal, wrote in a 2009 decision that Healy’s testimony had been “inconsistent and incoherent” and that the jury had evidence to find his conduct “reprehensible” and were “free to draw their own conclusions as to whether he was covering up his wrongdoing.’’

The case arrives in a state appeals court May 4, The Cambridge Chronicle said Tuesday.

The overall budget

The increase in the overall budget results mainly from an 11.8 percent rise in employee health insurance and a 5.5 percent increase in employee pension costs, despite the loss of three full-time positions, according to the budget’s summary. At $140.7 million, education is the single biggest expenditure in the budget; the district is looking at converting its JK-8 schools to a model that includes four “upper schools” for middle-schoolers; while the planning for that will be done by existing staff, according to the district’s chief operating officer, Jim Maloney, $3 million in bond proceeds in the next fiscal year will go toward architectural design on rebuilding or renovating a city school, followed by $30 million in bond proceeds for planning and construction the next year.

After education, the top expenditures will be public safety, at $104.2 million; community maintenance and development at $97.4 million; and general government at $52.9 million.

It’s paid for primarily with taxes — $333.3 million of it from residents and business owners, or 71 percent — and then by charges for service ($68.5 million, or 14.5 percent); money coming from other government sources, including state and federal grants and education reimbursement ($37.7 million, or 8 percent); miscellaneous ($16 million, or 3 percent); fines and forfeits ($9.6 million, or 2 percent); and license and permit fees ($7 million, or 1.5 percent).

As more finance information comes in from other government sources, the feared 6.5 percent hike in property taxes is likely to drop below 6 percent, said Marjorie Decker, chairwoman of the council’s Finance Committee. In the current fiscal year, as revaluations were under way to ensure assessments reflect market value, most people saw a drop in their property tax rate.

Looking outside and in

“I also want folks to know that this year it looks like we will lose $1.3 million in local aid, which is significant, but I sort of breathed a sigh of relief because I actually thought it would be larger than that,” Decker said, noting the effect a poor economy, unemployment and impoverished federal government is having as it trickles down to the city level. “In the last three years, folks, we’ve actually lost over $10 million in local aid. While each year it seems to only be a couple of million, that’s quickly adding up.”

Without the loss of the $1.3 million, property tax would be going up only 3 percent, she said.

“While we certainly are in a very fortunate position in Cambridge to have very strong fiscal health, $10 million makes a significant difference,” Decker said.

Later, there was talk of how the city might extract more revenue from the city’s tax-exempt institutions — including such giants as Harvard University and the Massachusetts Institute of Technology — that remove land and property from the rolls and instead offer smaller payments in lieu of taxes. Because it came up during talk of late policy orders and resolutions, Kelley used his “charter right” to end conversation on the topic until next Monday’s meeting, when it could be taken up more formally.

The portion of this story discussing Monteiro quotes extensively from the writing of Walter V. Robinson and Jesse Nankin.