HALLOWELL — The city will not be “subject to any penalties or actions from the state” to address tax increment financing issues raised by a city councilor in April, according to a memo circulated by City Manager Nate Rudy at a Monday finance committee meeting.

Rudy’s memo, which is informed by a letter sent to him from City Assessor’s Agent Rob Duplisea, said “the City Council is not obligated to capture the full value of the TIF district.” Therefore, the state statutes governing TIF districts were not violated.

City Councilor Maureen Aucoin voiced concerns with the city’s TIF districts last month. Aucoin, a member of the Finance Committee as well as a former assessor’s agent and Hallowell’s former interim city manager, asserted that property in one TIF district and portions of the Downtown TIF district — one for the Woodlands Senior Living of Hallowell, a portion of the Summit Natural Gas pipeline and two properties on Winthrop Street — was not assessed correctly.

By Aucoin’s estimate, which she said she came up with through a meeting with Duplisea, a total of $208,765 in property and personal property taxes was put into the city’s general fund in fiscal years 2017, 2018 and 2019, based on $10.7 million in cumulative captured property value. That tax money should have been sheltered for downtown projects but instead was placed in the general fund.

Rudy said Monday that Aucoin’s assertions were correct, but had the assessed value missed been captured, it would have actually raised property tax rates.

A May 16 letter from Duplisea to Rudy said he used a TIF financing figure from 2017 in budget processes for fiscal year 2018, which excluded the numbers Aucoin asserted in April. Rudy’s memo states the correct value would have reduced general fund revenue by $20,404, which would have increased the property tax rate by 10 cents per $1,000 in property value.

Duplisea said he spoke with state officials who confirmed that Hallowell officials can “determine what amount they want to capture” as long it is less than the maximum calculation. He said the Maine Revenue Service told him “he did not mismanage this process and no illegal assessment was made.”

“We captured an appropriate value that gives us the state TIF finance amount,” Duplisea wrote. “The Council wanted a flat (property tax) rate for 2018, and we accomplished that using the duplicated TIF financing amount.”

Both Duplisea and Rudy said the errors came down to a lack of knowledge about an amendment made to the Woodlands TIF district in 2014. Rudy previous told the Kennebec Journal he was not aware of the amendment because he was not briefed when he became city manager in 2016.

“It was a misunderstanding,” Rudy said Monday. “It was a lack of knowledge transfer.”

“It is disappointing that this crucial information was not passed onto me from the previous assessor,” Duplisea said in his letter to Rudy. “It is my opinion that the transition could have been handled in a more professional manner.”

The Kennebec Journal reported that the implications of the error could have long-term effects, because the city’s total tax valuation and property value assessment are used in formulas to determine state revenue sharing and school subsidies.

Rudy said the aforementioned effects would be minimal and could be corrected over the course of a few months when the city finalizes their fiscal year 2020 budget. State officials have declined to meet with the Kennebec Journal to discuss these implications.

“The long-term effects are fairly limited to the school evaluation and the differences in the mil rate and the property owner’s taxes,” he said.

Duplisea also referenced an error on the original Downtown TIF document in his May 16 letter. Duplisea said the original Downtown TIF document was “in error” because it declared the original assessed value of property in the district was $30,497,600, but “a correct calculation” was $41,097,700. He said the error was not discovered and was signed off on by the city’s Board of Assessors. He recommended correcting this error immediately.

Rudy said he felt like the $10.6 million value discrepancy was a “bookkeeping issue.” When asked if the effects of that mistake had been examined, he said he would like to review it with state officials.

Duplisea said he found errors “that started in years prior to his arrival” regarding personal property calculations for the Kennebec Ice Arena TIF. He said the city incorrectly captured a total of $3,930.23 over fiscal years 2016-18. He said the error, along with other errors, will be amended going forward.

Rudy said the second reading of the city’s fiscal year 2020 budget is being held up by TIF concerns discussed on Monday.

“Until everyone’s clear on where we are with the TIF districts, it’s going to be hard for them to make decisions about carryover (funds),” he said. “I feel like (these issues need) to be addressed so the council can get a clear-eyed view on the second budget reading.”

The Finance Committee meets next on May 30.

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