HERMON, Maine — A recent controversy over the transfer of economic development revenues into the town’s checking account to meet payroll costs has prompted town officials to look at changes in the way the town handles tax billing.
Town Manager Clinton Deschene said last month that in order to address a cash flow problem related to the town’s April 1 due date for property tax payment — which comes at nearly the end of its fiscal year on June 30 — he transferred more than $500,000 in revenues from the town’s tax-increment financing district into the town’s checking account.
He said he did so because it appeared that the town did not have enough money in its checking account to meet payroll obligations. As it turned out, the funds were not used because enough cash came in to cover expenses.
“We ran short on cash. We made a transfer from one account to another. There was some concern it was a reserve fund. In the end, we [determined] it was not a reserve,” Council Chairman Timothy McCluskey said during a council meeting Thursday night.
The difference proved to be a big one. State law and the town charter both require that town councilors authorize transfers from reserve accounts, though not from revenue accounts.
Councilor Tony Reynolds was among those who questioned the move and asked that the council take a closer look at it.
“When I put this on the agenda, I thought this was a reserve fund because Clint and [economic development consultant] Ron [Harriman] and all the councilors, including myself, had called it the [tax-increment financing, or TIF] reserve for probably the 6½ or so years that I’ve been on the council,” Reynolds said.
“Well, it’s not a TIF reserve. It’s a TIF revenue, which I found out after a letter was written to the [town’s] lawyer,” Reynolds said.
Muddying the waters, he said, were “conflicting” and “confusing” statements Deschene made during the council’s March 15 meeting.
“I wasn’t accusing [the manager] of spending the money on his own but we definitely need a policy in place so everybody’s covered,” he said, adding, “We still need to know and not two or three weeks after the fact.”
Resident Timothy Richardson also questioned the transfer.
“The impression was given at the time of the [March 15] discussion that [the money] was being spent … and now it has come to light that it wasn’t spent,” he said. “That’s troubling because it seems as though [there is] a definite lack of communication between the town manager and the council.”
McCluskey disagreed, noting that Deschene informed the council last year that he likely would run short on funds because of the timing of tax payments.
Richardson also was displeased that some councilors want to revisit the concept of two tax due dates.
“You can’t seem to understand what the people said. The people said that they didn’t want two tax dates, so work with it. Work with it,” he said. “Don’t criticize, don’t condemn, don’t put the fault on me. You’ve got to come up with another way of paying your bills. Have the town manager work a little closer and you won’t have these problems.”
McCluskey said that to ensure the town doesn’t run into the same problem in the future, council members will consider policy measures for dealing with cash flow problems.
Councilor Sharon Nickerson suggested the town consider putting the tax due date matter out to referendum, noting that last year’s vote against it involved “very few people.”
McCluskey agreed, noting that turnout in November will be strong because of the presidential election.
Deschene and several Town Council members have said splitting property tax payments over two dates would smooth out peaks and valleys in the town’s cash flow. Last year, however, voters rejected a warrant article that would have done so.
Councilors learned of the transfer through a memo dated March 5, according to memos and council meeting video footage related to the issue. That Deschene did not seek council approval before transferring the funds generated some heartburn in town.
McCluskey said last week that the the council would have been informed on March 1 but a meeting scheduled for that date was canceled because of a storm.