Lincoln continues probe of $1.5M budget errors

By Nick Sambides Jr., BDN Staff
Posted Oct. 09, 2012, at 7:36 p.m.

LINCOLN, Maine — Property tax bills will not be mailed until late next month as town officials continue to probe and fix errors that created a $1.58 million shortfall in this and last year’s budgets, Town Manager Bill Reed said Tuesday.

Reed said he, Assessor Ruth Birtz and Treasurer Gilberte Mayo met Tuesday with officials from the Bangor law firm Eaton Peabody to review the town’s Tax Increment Financing, or TIF, processes. The town’s auditor, Maine Municipal Audit Services, is writing a report on the errors and their potential remedies that Town Council Chairman Steve Clay wants councilors to have in hand by their meeting on Monday night.

The council will discuss the auditor’s findings with the auditor by telephone conference during an executive session that night, said Clay, who arranged the call.

“I want to find out what the problem is, where it lies, and have her describe the problem as she sees it,” Clay said Tuesday of the auditor. “She is the auditor. She should be able to explain to us what happened and after speaking with her today I am confident she can do that.”

The executive session will be necessary as part of the financial review to protect town workers’ right to privacy, Clay said.

“There could be personnel issues that come out of this. Once we determine that, we can start talking more,” said Clay. “We don’t know yet. I don’t want to throw anybody under the bus at this point.”

In publicly disclosing the problems for the first time on Oct. 2, Reed blamed the errors on miscommunication and a lack of understanding of a new computer financial program causing double reporting and miscalculations of revenue.

He, Birtz and Mayo said they and the auditor found a $200,000 double-booking of revenues from the state Business Equipment Tax Exemption and the Maine Homestead Exemption program accounts in the 2011-2012 budget, a $575,000 overestimation of projected revenues in the town’s four TIF accounts listed in the 2012-13 fiscal budget and an $809,000 underestimation of projected expenses in the town’s TIF accounts in the 2011-12 budget.

Eaton Peabody consultants John Holden, who specializes in TIFs, and Richard Metirier, a former finance director for the city of Lewiston, are working to review the town’s TIF and budgeting procedures, confirm the errors, devise safeguards against their repetition and find the best way to minimize the errors’ effect, Reed said.

“The situation is very fluid, and as we detangle the budget relationships, it leads to different outcomes,” Reed said. “Once you take out of the budget the TIF items, you actually have the real budget and you have to look at that — and the real cost of that — and that is something that seems to have been overlooked. When we include TIF revenues and expenditures into the municipal budget, it distorts the true growth of the budget.”

Tax increment financing is among the state’s leading tools for aiding economic development. When a town sees an increase in valuation created by an investment, it also experiences a reduction in its share of state revenues and an increase in county taxes. A TIF allows a town to “shelter” or keep the new valuation from the calculations of state revenue sharing, education subsidy and county tax assessment — in effect creating more money for the town.

TIF agreements are created in contracts with the businesses that benefit from them and are calculated as part of the town’s budget every spring and its commitment to the state to pay its share of state taxes, which typically occurs in October. TIFs create a lengthy and complex paper trail, Reed said.

“The complexity is why we thought it best to get a consultant in here to help us with a fresh pair of eyes to evaluate the situation,” Reed said. “It’s what we have been focused on for numerous days.”

Reed compared the paperwork review under way to “trying to do a whole municipal budget, which typically takes two to three months to do, over again in a two- or three-week period,” he said.

Reed has said he anticipates no immediate increase to the town’s $19.86 tax rate, but has said town officials will have to find about $575,000 in savings or budget reductions to cover the shortfalls.

http://bangordailynews.com/2012/10/09/news/penobscot/lincoln-continues-probe-of-1-5m-budget-errors/ printed on October 25, 2014