Portland expects to receive about $1.3 million in disputed state reimbursements for spending related to the city’s homeless shelter, officials said Tuesday.

The announcement came after Maine’s largest city and the state Department of Health and Human Services settled a two-year-old lawsuit over Portland’s General Assistance program.

Superior Court Justice Thomas Warren had ruled in August that the state improperly withheld more than $1.6 million in General Assistance reimbursements for the cost of temporary housing at city-run shelters for adults and families, the city said in a news release. The state appealed that ruling to the Maine Supreme Judicial Court, but city attorney Danielle West-Chuhta worked with the state Attorney General’s Office on a settlement, which was finalized Monday. The DHHS is dismissing its appeal under the terms of the settlement.

“We’re extremely pleased that we can put this matter behind us now. Reaching this mutual settlement with DHHS allows the city to recoup almost all of the reimbursement monies we were owed and put an end to the costly legal proceedings,” City Manager Jon Jennings said in a written statement. “I want to thank Corporation Counsel Danielle West-Chuhta for the excellent job she has done in handling this case from the beginning and for working through all the details of the settlement.”

DHHS SATISFIED WITH CITY CHANGES

The state emphasized in a written statement that the city has since corrected its billing practices for some General Assistance expenses.

“Portland has successfully completed their corrective action in the GA program to the state’s satisfaction, which will save state taxpayers,” said DHHS spokeswoman Samantha Edwards. “Instead of pursuing costly legal appeals, the department has agreed to pay Portland about $1.3 million of the more than $1.6 million in outstanding reimbursement requests. DHHS looks forward to working with the city of Portland to ensure the GA program is properly administered.”

The settlement closes a long-running dispute over Portland’s program, which provides last-resort assistance using a combination of city and state funding. After the city came under fire from the LePage administration over its emergency assistance programs, the DHHS released a preliminary audit that was critical of the city’s operation of its Oxford Street homeless shelter for adults.

The audit claimed that 13 of the shelter’s long-term users had more than $20,000 in their bank accounts, and faulted the city for not reviewing the financial status of people staying at the shelter before billing the state program. It also said the city inappropriately billed for operating costs.

The city, however, pointed to an agreement dating to 1989 that allowed billing for operating costs. That arrangement originated as a cost-saving measure, because the city’s shelter was overcrowded and providing hotel rooms was deemed to be too expensive. During that period, the state allowed the city to presume individuals were eligible for General Assistance reimbursement if they stayed in the shelter.

MAYOR COMMENDS CITY STAFF

Even though the practice was never questioned in previous audits – including some by the LePage administration – the city agreed to change its practices to address issues raised in the DHHS audit. The state tried to retroactively withhold its reimbursements from June 2014 to February 2015, prompting a city lawsuit.

Mayor Ethan Strimling on Tuesday commended city staff and the former mayor for fighting to preserve the emergency assistance.

“I’m pleased that a settlement was reached, and I’d like to thank City Manager Jon Jennings and Corporation Counsel Danielle West-Chuhta for their hard work in ensuring a favorable result for the city and its taxpayers,” Strimling said in a written statement. “I’d also like to thank former Mayor Michael Brennan for his leadership on this matter back when it began, as he understood the importance of this program and the services it provides to our most needy residents.”