SOUTH PORTLAND —  City officials have added a hiring freeze to their efforts to address a $4 million budget shortfall that resulted from a revenue reporting error discovered last month and mistakenly reduced property owners’ tax bills this fiscal year.

And while City Manager Scott Morelli and his staff say they’re confident they can close the budget gap through various budget-cutting measures, property owners aren’t off the hook for the $4 million reduction in their collective tax bills.

The shortfall in the 2023-24 budget, which ends June 30, occurred because city staff overstated non-property tax revenue when completing the Municipal Valuation Return form online.

The error led staff to set the fiscal 2024 tax rate at $14.14 per $1,000 of assessed property value when it should have been $14.69. As a result, the city collected $4 million less in property taxes than needed to cover the $127.5 million combined municipal and school budget.

Morelli announced Thursday that a hiring freeze has been implemented for some positions, in addition to other measures he announced last month to help close the $4 million gap. Those measures – such as accounting for surplus revenues, using grants and reserve funds for eligible costs, and working with department heads to reduce expenses – have already reduced the shortfall by about $3 million.

“We’re using a number of tools to close the budget gap, and the hiring freeze is one,” Morelli said in a written statement.

The hiring freeze will be in effect through June 1, although it may be shortened or extended through June 30. Morelli and Human Resources Director Stephanie Weaver will review and approve any positions posted during the freeze.

Morelli said the hiring freeze will delay the start of some new staff who are integral to a variety of city services, but the impacts on critical services over the next several months are expected to be minimal.

“Although most positions must be filled due to their critical nature, there are some where a delayed hiring of a few months will only result in a minimal impact on service delivery,” he said. “These temporary delays will result in some of the savings needed to achieve our target savings.”

Positions exempt from the freeze include non-civilian police and fire personnel, certain public works and parks employees, and bus and water resource protection staff.

“The hiring freeze will allow the city to continue to provide critical service to the public while creating savings necessary to address the budget shortfall,” he said.

Morelli said it’s unclear how many job openings will occur or how much savings will result from the hiring freeze.

“Given the (exempted positions), the savings will not be robust,” he said.

Openings that have been frozen include a sustainable transportation coordinator, recreation program assistant and economic development associate.

So far, city officials have reduced the budget gap by roughly $3 million, including $500,000 from the fund balance, Morelli said. They expect their continuing efforts will make up the remaining $1 million, though it’s possible additional fund balance revenue may be needed.

Fortunately, Morelli said, South Portland has a healthy fund balance that is at the top of the range required under the city’s financial policy, which is 9% to 12% of annual operating costs.

Billing at the correct rate would have added $163 to the annual tax bill of the average residential property owner, he said.

Morelli said property taxes that the city didn’t collect this fiscal year because of the error will be collected in the coming fiscal year, in addition to whatever property taxes will be needed to support the 2024-25 budget, which starts July 1.

Even at the correct tax rate of $14.69, South Portland has one of the lowest median tax bills among surrounding municipalities and the five largest communities in Maine, he said.

Morelli also said South Portland has a 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 Global, two leading credit rating firms.

The fiscal 2025 municipal budget will be posted on the city’s website on March 19. The city manager and school officials will present their proposed budgets on April 2.

Copy the Story Link

« Previous

Maine Republicans oppose background checks for private gun sales

Next »

Party-line committee vote spells trouble for proposed constitutional right to abortion