HALLOWELL — Instead of using excess funds to reduce the tax burden, the City Council’s Finance Committee has recommended the money be used to pay for capital projects put on hold during the latest budget cycle.
During last week’s Finance Committee meeting, Councilor Maureen Aucoin, who sits on the committee with fellow Councilors Kate Dufour and George Lapointe, said the city raised about $104,000 more than needed through property taxes to support projects that could have been funded through tax increment financing funds.
Councilor-at-Large Maureen Aucoin speaks Jan. 4, during a Hallowell City Council retreat at Maple Hill Farm Bed & Breakfast Inn and Conference Center in Hallowell.
Aucoin said the city did not factor in its TIF offset when filling out the tax rate calculation form, leading to the city’s collecting $104,000 in taxes “it didn’t necessarily need to raise.”
“I honestly feel like we made a mistake in the tax rate calculation form,” Aucoin said. “It’s not what our intent was. Was there anything illegal about it? Absolutely not, and we had every right to calculate it the way it was. I would like to give that back to the community.”
When asked why the money is not being returned to taxpayers, Lapointe said there is not a way to refund general fund expenses to taxpayers in the current fiscal year and money for TIF funds has to be used for certain uses, and refunding taxpayers is not one of them.
“The ideas that we discussed to using an equivalent amount of TIF funding for other ongoing needs, such as renovation of the bulkhead, would save taxpayers money by saving on future spending,” Lapointe said.
Aucoin supported using the general fund money to fund the $104,000 worth of projects because, she said, if the city uses TIF funds, it would look like the city taxed its residents more than needed.
She said if that money were not raised, the city’s tax rate — $21.30 per $1,000 of assessed property value — could have been decreased by $0.40 per $1,000, or 1.8% less.
The average taxpayer with a property valued $182,000 is now paying $3,876.60 in taxes. With a 40 cent decrease in the tax rate, that would drop to $3,803.80, or $72 less.
“TIFs are so tricky to explain,” Aucoin said. “It’s hard to say to the taxpayers that we raised an extra $100,000 in the general funds.”
Lapointe said Saturday he was not aware of any similar issues happening in years past.
City Manager Nate Rudy suggested using the TIF funds to offset the budget, allowing the $104,000 to roll into surplus for next year, but all three members of the committee supported using the general funds.
The total amount of TIF funding collected through property taxes in some areas of Hallowell is about $266,000, according to numbers discussed at Wednesday’s meeting, but some it gets paid back to developers through their TIF agreement.
As for how the extra $104,000 in funds may be used, Aucoin suggested repairing the decking on the city’s bulkhead at Granite City Park. That job was axed from the city’s budget this year to mitigate a looming increase. Lapointe said that job may cost $75,000.
In order to make sure a similar error does not happen next year, the committee, Rudy and City Treasurer Dawna Myrick discussed ideas for how to factor TIF money into the city’s budgeting process, so expenditures would not have to be prorated or funded by two sources in the expenditure budget spreadsheet.
Lapointe, the committee’s chairperson, said he would also work on a policy that would allow the City Council to set a chunk of TIF funds aside each year to help with the cost of larger projects in the future.
The city’s TIF agreement names many projects that can be done with TIF funds, including downtown Wi-Fi, streetscape improvements or public restrooms. Lapointe said he envisioned an annual council action to determine what percentage would be set aside.
This TIF allocation is the latest in a string of financial questions that have arisen in Hallowell since November 2018, when a budget error — amounting to hundreds of thousands of dollars — held up that fiscal year’s budget.
In May 2019, Hallowell officials said they were confident in the city’s staff after more than $200,000 was not sheltered properly because it was not properly assessed as being in a tax increment financing district.
Last month, Rudy apologized for a financial tracking error that originally showed a small projected overage in bond spending, but at Wednesday’s meeting said he projected wrong and there would actually be a $96,000 surplus.
Aucoin, Dufour, and Rudy did not respond Friday to two emailed requests for comment.
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