The City of South Portland is working to close a $4 million shortfall in their current fiscal year budget they identified earlier this month — a gap the city attributes to mistakenly not taxing residents enough to support the City Council-approved budget.
According to the city, South Portland’s current mill rate is $14.14, meaning property owners must pay $14.14 out of every $1,000 of their property’s assessed value. But it should have been raised to $14.69 this past summer following the approval of the current fiscal year’s budget by the City Council.
That increased tax rate would have resulted in the average South Portland property owner paying an additional $163 in taxes, which the city says would have fully funded this fiscal year’s budget — if it had not been “mistakenly not billed.”
“This error is significant, and we want to be transparent with the public and own up to this mistake,” said South Portland City Manager Scott Morelli in a Wednesday press release. “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.”
Opting not to send higher tax bills to make up the shortfall, the city’s Finance team reviewed its options for non-tax revenues anticipated this year, looking to identify revenues streams which may “come in higher than anticipated,” including grants and reserve funds.
City department heads were also asked to review their budgets in order to identify and defer non-critical spending.
“While staff is confident that this process will be successful, it is possible that the City may need to utilize some amount of fund balance to finish out the year,” the city’s press release reads.
According the city, the reason why property taxes were not raised in accordance with the city’s budgetary needs was due to the city double counting certain reimbursements from the state, leading the city to overestimate revenues by $4 million and therefore to assume that much less in property taxes needed to be collected.
“This is of course a very unfortunate thing to have happened,” said South Portland Finance Director Ellen Sanborn. “We have put additional checks and balances in place so that something like this is very unlikely to happen in the future.”
The tax revenue that was mistakenly not collected for this year’s budget will be a topic of conversation for next fiscal year’s budget, covering July 1, 2024 through June 30, 2025.
The South Portland City manager and School Department will present their proposed budgets at the April 2, 2024 City Council meeting.
“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 stated Wednesday.