HALLOWELL — Hundreds of thousands of dollars were miscounted in the budget recently approved by the City Council, but officials say the errors probably won’t result in changes to tax bills that were sent out late last month.
City Manager Nate Rudy said in an interview that he didn’t know exactly how the errors happened and officials haven’t had a chance to discuss the mistakes.
“Because I don’t understand fully, exactly what happened, and we haven’t had everyone at the table to talk this out, I’m reluctant to give any opinions or say anything that commits anyone to any outcomes because that’s not my job or my jurisdiction,” said Rudy, who has been Hallowell’s city manager since spring 2016. “What I think happened is we were eager to get the third reading to council and get the budget passed so we could send out the tax bills and start this year’s work. What should have happened was that the assessor have a chance to look at our budget numbers and just double check to make sure.”
At City Hall, the city assessor’s agent, Rob Duplisea, Treasurer Dawna Myrick, Rudy and the Finance Committee will discuss the errors in more depth at 5:15 tonight.
City Councilors are now suggesting training for city personnel would work on the budget to ensure the errors do not happen again.
Here’s what city officials say happened: $150,000 in carry-forward revenue was not included in the revenue budget approved by the City Council on Aug. 13; and about $253,040 in revenue was double counted on the city’s tax rate calculation sheet.
Because some of the money was not counted while some was double counted, the errors effectively reduced their own impact to about $103,000 on the tax rate calculation sheet.
Rudy said that the errors will not likely affect the mill rate or the tax bills sent out on Aug. 21.
The errors were first acknowledged publicly in a Sept. 7 memo from the Finance Committee to the City Council, Myrick and Rudy.
The budgeting process begins between February and March when Rudy asks department heads — like the police chief or public works foreman — to submit a budget based on the City Council’s goals for their department.
“I consider them to be the subject matter experts in their fields,” Rudy said. “I generally take it on faith that they know their business better than I do.”
Those numbers constitute the first draft of the budget. This draft is the first of three readings that are done by the Finance Committee — a three-person committee — and three separate readings by the City Council. The Finance Committee is chaired by Councilor George LaPointe and includes Councilor Lisa Harvey-McPherson. Former councilor and former City Assessor’s Agent Maureen Aucoin was on the committee before she stepped down from her Council position in August.
After the first reading is accepted by the Finance Committee and the Council, the budget enters a second reading that includes Rudy’s own estimate of what the departments need to operate. Once that reading is approved, the third and final reading includes the Finance Committee’s recommendations. Once the Council approves their third reading, the budget is set.
Rudy said he and Myrick are “the point people on the budget working with the finance committee.”
The city assessor’s agent receives the budget after it is approved.
After the Council approval of the 2019 budgets on Aug. 13, the memo states, “City Manager Rudy and City Treasurer Myrick were made aware of a mistake” on Aug. 16 by Duplisea, of RJD Appraisal.
The city’s revenue budget, as accepted on Aug. 13 after the third reading, does not include any carry-forward revenue. Past council documents show, during the second reading, there was $150,000 dollars on that line.
The final budget also shows $175,000 to be carried over from fiscal year 2017 to fiscal year 2018, but it shows no money under the “actual” amount on the line. Rudy said the city does not count carry-forward in readings of the budget until the money enters the next fiscal year from the last.
Similarly, the city’s draft budget does not account for property taxes until the end of the fiscal year. Rudy said that number can vary based on revaluations of property so it is not included on the revenue budget. However, he said, an estimation of property tax revenue is used on the tax commitment sheet.
He said city officials were “really focused” on achieving a flat mill rate — which they did — and the carry forward was simply forgotten.
“My impression is that we got really focused on that and just didn’t see that in the third budget reading that number, somehow, got zeroed,” he said. “I don’t know what happened.”
Next, the town counted for homestead exemption and state revenue sharing twice in the tax rate calculation sheet — an Excel document provided by the State with formulas that calculate the minimum and maximum tax rate and overlay. Those revenue figures are $107,365, $15,675 and $130,000 respectively.
Those numbers are entered separately into the tax rate calculation sheet, but the city also included them erroneously in their revenue, which is also plugged into the sheet.
This mistake led to $253,040 being included incorrectly in the revenue budget when already accounted for in the sheet. These errors do not compound with the forgotten $150,000 in carry-forward; it actually reduces the total impact of the error.
Rudy said during the interview that the city’s budgets, aside from the omission of the carry-forward, are sound.
“This is a fine point. Our revenue budget and expense budget, internally to the city, was fine except for this zero that should have been $150,000,” he said.
Rudy also said the city is not short money, just not all the city’s money was counted properly.
“It’s not that we’re short money; it’s that we didn’t count it,” he said. “We made an error, but we don’t think, as of today, it will change” the tax rate.
The change affected the minimum and maximum mill rate on the tax rate calculation sheet, but the tax rate of $19.70 fits within the range in both scenarios, according to documents provided by Rudy. The only thing Rudy thinks will change is the amount of overlay — a municipal cash reserve in case property tax revenue is lower than expected — from $56,888 to $39,529.
The new draft tax calculation sheet shows an added $21,118 to be raised by property taxes to cover the errors.
Rudy cautioned that his recollection of the errors may not be “accurate,” and he would be more confident when all parties involved met to clear up the errors and their causes.
Duplisea, Aucoin and Lapointe were not available for comment.
The Finance Committee will bring a revised fiscal year 2019 budget to the City Council’s Oct. 9 meeting, according to the memo.
“We believe that Council action should be delayed until the October meeting because the City Assessor isn’t available to meet with the Finance Committee until after the September 9 Council meeting. Importantly, these changes will not affect the tax bills recently sent to Hallowell property owners and will not affect the budget amounts approved for the various expense revenue items approved in the FY19 budget,” the memo reads.
The memo also said Rudy contacted the Maine Municipal Association “to confirm that this was a viable and legal approach to resolving the issue prior to the commitment being made and tax bills being issued.”
Municipal Association spokesman Eric Conrad said he would not comment on that because the matter was “local and fact-specific.”
The memo said the committee believed the mistakes were avoidable and that it also bore responsibility for the errors.
“We will make sure that we focus more attention on these important budget numbers and issues in future budget discussions,” the memo reads.
Sam Shepherd — 621-5666
Twitter: @SamShepME
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