MARS HILL, Maine — Town officials received a Christmas present in early December, in the form of a reimbursement check for more than $500,000 for funds that had sat dormant for nearly two decades.

Town Manager Dan McClung said that while reviewing the town’s municipal finances, including expenses, one particular record came into question.

It was during a discussion with the director of the Maine State Retirement office that McClung discovered the town was entitled to a major reimbursement to the tune of over a half-million dollars.

“Stephanie Bractow, MSR director, sat with me and we went through the benefits and what the town could do and what it would cost. I saw a line item that said ‘surplus.’ She explained [that] in 1995, MSR had changed the system to mirror what Social Security does — one big pool that everyone pays into,” said McClung.

When the change was made in 1995, all towns, including Mars Hill, bought into the new model, he said. Funds remained in the old account to cover those who already had retired. People still employed with the town at the time were transferred to the new retirement system.

“Stephanie told me the town had a surplus balance of more than $500,000 just sitting there, that was ours to do with as we wanted,” said McClung.

He said that prior to 1995, money had been put into a town account to cover employee retirements.

“A revenue stream had to be there. Under the current model, similar to Social Security, all towns pay into a single program, with employees drawing from it upon retirement,” said the town manager, who has been on the job for a few years now. When he was hired, McClung said, he was offered a retirement plan through the Maine State Retirement program.

“The town hadn’t hired anyone in 20 years,” when he was hired, McClung said. Today, “only two are currently drawing retirement from the town and neither are from the pre-1995 account. We no longer have any retirees drawing benefits dating back to that program.”

McClung presented that information to the Town Council during an August meeting.

“Nick McCrum, chair of the Town Council, and the councilors discussed the town’s retirement program. We’ve been with MSR for 17 years and no one ever asked for it [the balance in the old account],” McClung said.

Councilors requested that the town manager provide them with more information.

“I went to MSR and got a letter from the director. There are no strings; this money belongs to the town,” said McClung. “I presented that information to council and they approved pursuing reimbursement.”

McClung said town officials did the necessary paperwork, submitted it to Bractow’s office and recently received a check for the balance in the account.

“In mid-December we received a check for $536,164.40. It’s not earmarked for anything and will be placed in a capital reserve account for now,” said McClung. “It’s at the discretion of the council” to determine how the funds will be used.

“The money has no intended purposes or restrictions. It’s ours to spend as we see fit,” said McClung. “We look at it as a blessing to the community.”

McClung said the reimbursement has no effect on past or present retirement benefits.

Given the continued financial difficulties facing communities dating back to the economic downturn in 2008, McClung said he considers this an extremely fortunate turn of events for his town.

“We’re fortunate to get this. It’s a huge boost to the town as far as increasing savings in capital reserve. The town is in a good financial position to start 2013, but this increases that tenfold,”said McClung.

He said the money could be used to buy new equipment, set up a development fund or otherwise used to benefit the municipality.

“For example, we’re looking at buying a new plow truck, which could cost about $175,000. If the council wanted, we could write the check, rather than go out and borrow and finance the purchase. Or we could pay a portion to lower our payments,” said McClung. “This gives us options.”