Tax au­dit re­sults in wind­falls, tax bills for Mid-Shore towns

Dorchester Star - - Regional - By CON­NIE CON­NOLLY cconnolly@ches­pub.com Fol­low me on Twit­ter @con­nie_ star­dem

EAS­TON — It was feast or famine just be­fore Thanks­giv­ing as Mid-Shore towns re­ceived ei­ther an un­ex­pected wind­fall check or omi­nous phone call from the Mary­land comp­trol­ler’s of­fice.

An in­de­pen­dent au­dit com­mis­sioned by Comp­trol­ler Peter Fran­chot for tax years 2010 to 2014 iden­ti­fied dis­crep­an­cies in lo­cal in­come tax rev­enue.

In a Nov. 16 let­ter to lead­ers of each af­fected ju­ris­dic­tion, Fran­chot wrote that the comp­trol­ler’s of­fice be­came aware of some is­sues con­cern­ing a small num­ber of lo­cal in­come tax dis­tri­bu­tions for lo­cal­i­ties in Mont­gomer y County in tax years 2010 to 2014, re­sult­ing from lim­i­ta­tions of the of­fice’s 30-year-old tax sys­tem.

Fran­chot wrote that the mis­takes were “un­in­tended con­se­quences of our tran­si­tion from pa­per to pre­dom­i­nantly elec­tronic fil­ing, and in­ac­cu­rate tax­payer in­for­ma­tion.”

“While I do want to em­pha­size that 99.9 per­cent is a very good suc­cess rate in tax ad­min­is­tra­tion,” Fran­chot wrote, “it does not meet my ex­pec­ta­tions, or the high stan­dards we set for our­selves in the comp­trol­ler’s of­fice.”

Discovery of these is­sues prompted Fran­chot to launch an ini­tial in­ter­nal in­ves­ti­ga­tion, which led to a third-party, in­de­pen­dent statewide au­dit. This re­cently com­pleted au­dit re­vealed that 0.1 per­cent of the to­tal lo­cal in­come tax rev­enue pro­cessed dur­ing that pe­riod had a statewide im­pact.

Ac­cord­ing to the comp­trol­ler’s of­fice, an in­de­pen­dent au­dit iden­ti­fied dis­crep­an­cies with $12.7 mil­lion out of the $14.9 bil­lion in lo­cal in­come tax rev­enue it pro­cessed for for tax years 2010 through 2014.

Fran­chot’s press sec­re­tary Alan Brody pro­vided a “list of win­ners and losers,” but told The Star Demo­crat they were “not pro­vid­ing a list of spe­cific dol­lar amounts.”

“It’s their money and it’s their in­for­ma­tion to give,” Brody said.

Within the five-county MidShore area, 15 towns re­ceived checks while 18 will have up to 17 years, be­gin­ning in 2024, to pay back the money, in­ter­est-free, to the state.

“My first thought was, I guess we’ve got to pay some­thing back. Wrong,” Eas­ton Mayor Robert Wil­ley said at the Nov. 21 town coun­cil meet­ing. “We ac­tu­ally got money back to the tune of $618,393.”

Eas­ton’s wind­fall has al­ready been al­lo­cated to pay for unan­tic­i­pated ex­penses.

“The largest storm drain we’ve ever had col­lapse on us had to be re­paired,” Wil­ley said. The price tag for that re­pair project, which is al­ready un­der­way on Cream­ery Lane, is $320,000.

Two more ag­ing storm drain re­place­ments will re­ceive the un­ex­pected funds. The West Street storm drains will cost $112,000. The Branch Lane storm drain on Howard Street cost to­tals $50,000.

The rest of the funds will be used to pur­chase a new $142,500 dump truck to re­place the one lost in a fire on Nov. 15.

“Of $618,000 we’re get­ting back, we’ve spent $624,000, so that takes care of that,” Wil­ley said.

Den­ton town administrator Don­ald Mul­rine had mixed feel­ings about the re­fund.

A $30,000 “un­funded state man­date” to up­grade the town’s police ra­dio sys­tem will use up the $17,704 the town re­ceived on Nov. 23.

“It’s good that we got it,” Mul­rine said, but the re­main­ing cost of the up­grade will have to be fi­nanced.

“We’re pleased the comp­trol­ler’s of­fice is do­ing these types of au­dits and that we’re the ben­e­fi­cia­ries,” Cam­bridge City Man­ager San­dra Tripp-Jones said. The $194,000 the city re­ceived hasn’t been ear­marked yet, but the funds are go­ing into the gen­eral rev­enues.

For Pre­ston town com­mis­sion pres­i­dent Jerry Stallings, their $39,341 of “found money” was an­other shot in the arm for a town chal­lenged by the ex­pense of re­plac­ing its waste­water treat­ment plant.

A whop­ping $683,000 landed in Cen­tre­ville’s trea­sury, but the town will go through its reg­u­lar bud­get process to de­ter­mine how it will be used, ac­cord­ing to Town Man­ager Steve Walls.

“My first re­ac­tion was, let’s hear the ex­pla­na­tion about what hap­pened in the past, so we can bet­ter ex­plain (the re­fund),” Walls said. “But I’m cer­tainly very pleased. It’s a size­able amount (that) goes a long way.”

Other towns that were un­der­al­lo­cated, with money com­ing back into their cof­fers, are Tem­pleville in Caro­line County; Church Creek, East New Mar­ket, Sec­re­tary, Vi­enna and Galestown in Dorch­ester County; Ch­ester­town and Milling­ton in Kent County; and Church Hill and Bar­clay in Queen Anne’s County.

Towns that were over­al­lo­cated and re­ceived a tax bill are Fed­er­als­burg, Golds­boro, Greensboro, Hills­boro, Mary­del, Ridgely and Hen­der­son in Caro­line County; Hur­lock, El­do­rado and Brookview in Dorch­ester County; Queen­stown, Sudlersville, Tem­pleville, Queen Anne and Milling­ton in Queen Anne’s County; and Ox­ford, St. Michaels, Trappe and Queen Anne in Tal­bot County.

Hur­lock’s bill is a lit­tle more than $1,000.

“We’ll just go ahead and pay it and be done with it,” Hur­lock Mayor Joyce Spratt said. “I’m not blam­ing (the comp­trol­ler’s of­fice) for it all. It’s just some­thing that hap­pened.”

Ox­ford’s Town Administrator Ch­eryl Lewis was more con­cerned. She hasn’t got­ten the bill yet, but she re­ceived a phone call from the comp­trol­ler’s of­fice and was told the town will have to pay back about $51,000. She no­ti­fied the town com­mis­sion­ers, who will dis­cuss the bill at their Dec. 13 meet­ing.

St. Michaels’ Town Man­ager Jean Weis­man said she was “sur­prised that I’d got­ten a phone call be­fore a let­ter” in­form­ing her of an over­al­lo­cated $277,491 that the town has to pay back to the state.

“I haven’t dug into it yet,” Weis­man said. She re­ceived the let­ter from the comp­trol­ler’s of­fice on Nov. 28, about 10 days af­ter the phone call.

“State in­come tax comes di­rectly from the state,” she said. “We don’t have any­thing to do with col­lect­ing it.”

Milling­ton, which strad­dles Kent and Queen Anne’s Coun­ties, was the only town that re­ceived both too much and too lit­tle money. It has a net re­fund of $8,245 that prob­a­bly will be used for street re­pairs, “or it will be added to the lit­tle pot of street re­pairs,” Town Administrator Jo Man­ning said.

Man­ning, who is also administrator of nearby Sudlersville, copied her emails to the town com­mis­sion­ers that the small town with a pop­u­la­tion of 500 owes $16,145 to the state.

“They prob­a­bly won’t know any­thing about it till the meet­ing (on Dec. 7),” she said. “And they’ll all fall out of their chairs.”

Man­ning be­lieves that “the state will prob­a­bly take out a piece of the credit against the lo­cal in­come tax bill.”

In his Nov. 16 let­ter, Fran­chot wrote that his of­fice has put in a place a series of en­hance­ments to avoid sim­i­lar is­sues in the fu­ture.

Those im­prove­ments in­clude “tech­no­log­i­cal up­grades and pro­ce­dural mod­i­fi­ca­tions to en­sure that our sys­tem is equipped to our unique tax­payer cod­ing needs; bi­en­nial third-party au­dits, and con­tin­u­ous ad­dress ver­i­fi­ca­tion,” he wrote.

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