Town Faces Shortfall of $600,000 in Tax Calculation

In a joint meeting of the town council and school board in Dec. of 2017, there was a discussion of a revenue shortfall due to an anomaly in a form submitted to the State Department of Revenue that caused a little over $600,000 shortfall in revenue according to town council Chairman Tom Dolan. The good news for the taxpayer was that this meant a $600,000 tax reduction. It is now up to the town council to resolve this issue and fill the revenue hole that was created by this error.

At 6:30 p.m. on Dec. 18, two members of the school board and two members of town council met to discuss how to resolve this issue. That night at the town council meeting, Vice-chairman John Farrell discussed what was spoken about in the private meeting. The town manager received the MS-1 tax form, a form filled out by the tax collector and tax assessor, on Oct. 19. On the same day, Peter Curro, the business manager for the school district, received the same form and acknowledged the receipt. On Nov. 22, after the forms were received by the state, it came to the attention of the Chairman and Vice-Chairman of the town council that there were some issues on the MS-1 tax form. Ultimately, this error on the tax form has caused resulted in a revenue shortfall, of which the council claims the town’s portion was $114,000 and the school district’s portion was $440,000.

According to Farrell, the town’s legal counsel did a lot of research when this issue arose including finding out that the commissioner of the DRA (Department of Revenue Administration) must verify that all calculations are correct before they send out a tax bill. This step was obviously missed before the bill was sent out. A possible solution for the town would be to pay the county and local piece out of the undesignated fund balance, while school portion of the funds could be paid via issuing a supplemental tax bill should the council decide on that option. However, this is only one solution and a permanent decision has not made by either the school board or the town council.

It should be known that only the town can collect tax revenue from the taxpayers the town collects the funds then distributes the collected funds to cover each departments approved budget including fire department, police, highway department, library and school.

This has been a learning experience for both the school board and the town council, but what does this all mean? According to Farrell, the town holds roughly $8.9 million in an undesignated fund balance. At this time, the town can only use $3.7 million of the undesignated fund balance, because they returned $500,000 to the taxpayers in a tax refund. Another roughly $4.7 million dollars is used for catastrophic funds, that can only be used in emergency situations. Also, another $2.3 million dollars is being used for the new communications system for first responders.This means that the town needs to be careful how they choose to spend their undesignated funds, because they are limited. During the school board and town council joint meeting on Dec. 12, the school board explained that it has been permitted to have an undesignated fund balance for only a few years  Its balance is about $400,000 which would put the school district in a deficit. It should be noted that during this meeting, school board vice chair Jenn Ganem inquired about what the town was doing in regard to the county’s portion.  It was stated that they paid the county’s portion.

Although this issue of a shortfall was met with urgency from the town and school, a decision does not have to be made until the spring, giving both the town council and school board more time to figure out the most direct action forward and come to a mutually agreed upon decision.

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