Budgeting errors not likely to cause tax increase in Lincoln

By Nick Sambides Jr., BDN Staff
Posted Oct. 23, 2012, at 8:09 p.m.

LINCOLN, Maine — There’s a good chance taxpayers will be cushioned from about $1.2 million in budgeting errors discovered earlier this month in the proposed budget town leaders will unveil Wednesday.

The proposed $4.2 million municipal budget for the 2012-13 fiscal year, which began July 1, will be the subject of a special public hearing at 7 p.m. Wednesday at the town office.

The best news, interim Town Manager William Lawrence said, is that a third-party review of state Tax Increment Financing procedures revealed that the town can legally use TIF monies to pay about $366,882 in expenses that had previously been paid by taxpayers within the former 2012-13 fiscal budget.

That in effect produces a savings that should help maintain the 19.86 mill rate that had been part of that budget before the errors were discovered, Treasurer Gilberte Mayo said.

“We did the review to ensure that we are correct, and we found out that we are,” Lawrence said Tuesday.

Another reason the mill rate should not increase is that the new budget features proposed cuts of about $571,433. As of Tuesday afternoon, Mayo still was compiling the list, but said the biggest cut is about $243,000 in road paving and repair that would have been done before the fiscal year ends on June 30, 2013.

“The people who will feel it [the effect of the budgeting errors] the most this year are the ones who would have had their roads paved,” Mayo said.

Town officials have been working since early this month to overcome the effect of an approximately $575,000 overestimation of projected revenues in the town’s four Tax Increment Financing accounts listed in the 2012-13 fiscal budget. The overestimation was one of three double booking errors or overestimations of revenue that occurred in last year’s budget and in this year’s due to miscommunications, town officials have said.

Lawrence, Mayo and Assessor Ruth Birtz met on Friday and Monday with Eaton Peabody consultant John Holden, who specializes in TIFs, to verify the legality of the proposed $366,882 transfer of expenses from the town’s municipal budget to the town’s TIF budget, Lawrence said.

“It was nice to find out that it was,” Lawrence said.

Under the town’s new budgeting system, TIF accounts and expenditures are kept separate from the town’s municipal budget to prevent the errors’ recurrence, Mayo said.

The other errors — 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 and an $809,000 underestimation of projected expenses in the town’s TIF accounts in the 2011-12 budget — were covered with budget cuts and a transfer of about $800,000 from the town’s undesignated fund balance.

A TIF is a form of tax break that the state gives municipalities and businesses to encourage the development of jobs and economic infrastructure in areas that need it.

TIFs essentially allow businesses to share with host municipalities the property taxes that would normally go into the state’s general fund, provided that the municipalities and businesses reinvest the money into things that create or improve the area’s businesses or business climate.

In Lincoln’s case, the opportunity to keep most of the property tax money that would have gone to the state was a major enticement for investors who restarted what is now Lincoln Paper & Tissue Co. LLC. The town, meanwhile, has used TIF funds to pay the salary of its economic development workers, for new streetlights, and has set aside the money for an industrial park it hopes to create.

Eaton Peabody advisers have warned the town that the effect of the errors might be felt most painfully in the 2013-14 fiscal year, which begins July 1.

http://bangordailynews.com/2012/10/23/news/penobscot/budgeting-errors-not-likely-to-cause-tax-increase-in-lincoln/ printed on July 25, 2014