NEWPORT — As a sobering budget season begins, it’s vital for local elected officials, union leaders and the public to understand that the city’s growth in labor costs can’t continue to outpace the state’s annually declining tax levy cap, according to one councilman.

Councilman Justin S. McLaughlin is sponsoring a nonbinding resolution, which, despite its lack of teeth, would promote awareness of the serious financial difficulties confronting Newport. If passed tonight, it would express the council’s “desire” for collective bargaining agreements and arbitration awards “to result in total annual cost increases that do not exceed the respective fiscal year tax levy caps.”

The resolution, cosponsored by Mayor Stephen C. Waluk, notes that the next 15 months will bring either arbitration awards or new contracts for three of the city’s largest unions — teachers, police and firefighters.

A new teachers contract must be negotiated before the start of the school year this fall and the police contract expires in the middle of next year. The firefighters union remains without a contract, its labor dispute with the city in the hands of an arbitrator.

Meanwhile, the amount communities can raise property taxes will drop to 5 percent next year, one in a series of quarter-point drops until the cap freezes at 4 percent in 2013.

“If we keep entering into collective bargaining agreements that don’t take into account the impact of this tax levy cap, we are closing our eyes to reality,” McLaughlin said. “The purpose of this resolution is to give it some visibility and provide an opportunity to briefly discuss something which is an important driver and which the community needs to understand.”

If labor costs consume a greater portion of the cap-limited tax revenues, he said, “what’s going to suffer is other issues — the amount of money we have to repair roads, seawalls or any other public service that isn’t related to salaries.” Other looming expenses, he said, include a new or refurbished elementary school and addressing pollution caused during heavy rains by the city’s combined sewer overflow system.

McLaughlin said he doesn’t begrudge public employees receiving “fair wages and reasonable benefits.” But the increases must remain affordable, he said. He suggested that the people who negotiate contracts — city administrators and school officials — know what kind of labor cost increases can be afforded under the cap and to use that figure as a target in negotiations.

In the current year, he said, salary and benefit costs increased by roughly 8 percent when the cap permitted to the city to collect only 5¼ percent more in taxes.

“We are spending more money in those areas than we can increase [in property] taxes,” he said.

The result, he said, is the need to cut spending in other areas, as is apparent in the budget proposed for next year by City Manager Edward F. Lavallee. The council will receive the budget during its meeting at 6:30 tonight, but not discuss it. Lavallee will present the budget at a workshop at City Hall at 6 p.m. tomorrow.

McLaughlin’s resolution sums up the myriad financial challenges confronting the city in the coming years.

“A number of economic factors [e.g. health benefit cost increases, reduced state aid, decreased revenue from real estate transactions, the requirement to address the roughly $129 million unfunded Other Post Employment Benefits (OPE) liability, and stagnant and possibly decreased property values] are expected to place increased stress in the future,” the resolution reads.

rsalit@projo.com