South Portland aims to plug $4M budget hole caused by billing error
Photo / Renee Cordes
The city of South Portland said a billing error led to a $4 million shortfall in this year's budget.
The city of South Portland says it will try to fix a $4 million budget shortfall — the result of a billing error — without raising taxes for residents.
“The city is working to fully close the gap by looking at a number of areas for surplus revenues and expense reductions that will not impact city services,” according to a Jan. 17 news release.
The $4 million gap, which represents about 3% of the current fiscal-year municipal budget, happened because South Portland failed to bill enough in taxes.
South Portland’s tax rate is $14.14 per $1,000 of a home's assessed value, but should have been set at $14.69 last summer after the City Council approved the budget. Billing at the higher rate would have resulted in a yearly tax increase to the average residential property owner of $163. This increase would have fully funded the city budget.
“This error is significant, and we want to be transparent with the public and own up to this mistake,” said Scott Morelli, city manager. “Fortunately, the city has capable problem-solvers in our finance and other departments who have responded quickly to help resolve the issue and prevent it from repeating.”
Instead of sending out higher tax bills to make up the difference, officials came up with a plan that aims to absorb the loss in tax revenue in ways that do not undercut city services, according to last week’s announcement.
The plan includes anticipated non-tax revenues this year that may come in higher than expected, and department budget tweaks to identify and defer non-critical spending. Grant and reserve funds were also used for eligible costs.
Ellen Sanborn, South Portland’s finance director, said the administration has put additional checks and balances in place to ensure that the error is not repeated.
“South Portland is proud of its strong fiscal standing and remains one of only two communities in Maine to receive the highest bond ratings from both Moody's and S&P, two leading global credit rating firms,” the city said.
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