Fran­chot’s of­fice misdirected $21 mil­lion

Tax pay­ments were sent to the wrong lo­cal­i­ties; ‘our prob­lem,’ he ad­mits

Baltimore Sun - - NEWS - By Erin Cox ecox@balt­sun.com twit­ter.com/Eri­natTheSun

Mary­land’s chief tax col­lec­tor said Wed­nes­day that his of­fice ac­ci­den­tally misdirected $21.4 mil­lion of lo­cal in­come tax pay­ments for years, a mis­take that af­fects nearly ev­ery mu­nic­i­pal­ity in the state.

Comptroller Peter Fran­chot told a panel of state law­mak­ers that the scope of misdirected tax pay­ments was broader than he pre­vi­ously thought.

State au­di­tors re­ported in Septem­ber that the comptroller’s of­fice had sent $8.7 mil­lion to the wrong mu­nic­i­pal­i­ties in Mont­gomery County. On Wed­nes­day, Fran­chot said his of­fice found another $12.7 mil­lion in misdirected money since 2010.

Over the next cou­ple of days, 89 cities will re­ceive checks for money they should have re­ceived over the past five years. Some checks will be for hun­dreds of thou­sands of dol­lars.

Another 83 cities, which re­ceived money in er­ror, will be re­quired to re­pay the state. The cities will be put on pay­ment plans that start in 2024.

Fran­chot, a Demo­crat, has been comptroller for nearly 10 years.

“I’d love to blame this on our pre­de­ces­sors, but this is our prob­lem,” he said. “It is some­thing that went un­der the radar.”

Bal­ti­more City, which in tax cal­cu­la­tions is treated as a county, is not af­fected.

Towns and cities set their own tax rates, and the taxes are col­lected by the comptroller’s of­fice. Many ar­eas have spe­cial tax dis­tricts that have ir­reg­u­lar bound­aries. The comptroller’s of­fice col­lected the cor­rect amount of money from tax­pay­ers, but the tax­pay­ers were not al­ways clas­si­fied in the proper tax­ing dis­tricts. As a re­sult, mu­nic­i­pal­i­ties’ shares of the money were sent to the wrong places in some in­stances.

The comptroller’s of­fice is work­ing on a two-part patch to fix the prob­lem with its tax-pro­cess­ing soft­ware, which was writ­ten in the 1980s and in­stalled in the early 1990s.

Fran­chot said his of­fice cor­rectly pro­cessed more than 99 per­cent of the $14.9 bil­lion in lo­cal in­come tax rev­enue col­lected over the past five years. He an­nounced “Project Per­fect,” a plan to prop­erly dis­trib­ute all tax money to lo­cal ju­ris­dic­tions. That ef­fort in­volves bian­nual au­dits, new soft­ware and ad­di­tional ver­i­fi­ca­tion mea­sures.

A shift in the way the state pro­cessed re­turns in 2010 in­creased the like­li­hood that tax­pay­ers would be mis­clas­si­fied, Fran­chot’s aides said. Fran­chot and staff mem­bers blamed the prob­lem in part on old geocod­ing soft­ware that re­lied on ZIP codes, not street ad­dresses, to process in­for­ma­tion on tax re­turns.

Del. Ana Sol Gu­tier­rez, co-chair of the Joint Com­mit­tee on the Man­age­ment of Pub­lic Funds, called the mis­take “a se­ri­ous er­ror.”

“I don’t buy that geocod­ing and bor­ders were wrong,” said Gu­tier­rez, a Mont­gomery County Demo­crat and sys­tems en­gi­neer. “For years, these bor­ders had ex­isted.”

The comptroller noted, some­what in jest, that he hasn’t heard much from the ju­ris­dic­tions that are now re­ceiv­ing a wind­fall.

“I wouldn’t mind get­ting a few thank-yous,” he said.

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