I have written several times in the past about the irresponsible spending in South Portland. While there can be some weak arguments made to support the current level of spending, there should be no debate about raising excessive taxes from budgeting errors. The resulting accumulation of surpluses and assets – well in excess of South Portland’s needs and well in excess of surrounding communities and cities of similar size – should never be allowed.

The size of the budgeting errors and excessive surpluses is outrageous, especially when city officials are claiming there would be significant financial impact if the state of Maine reduces revenue sharing. Last month, South Portland’s finance director testified in Augusta on a bill to restore state revenue sharing to the cities and towns. While I agree that this revenue sharing should be restored and will have a significant impact on many cities and towns, South Portland is not one of those cities. The total proposed cut to South Portland would be about $800,000. This $800,000 needs to be compared to the average budgeting errors of $3.1 million a year for the three years ended June 30, 2013. South Portland’s budgets for the past several years can best be described as dishonest, non-transparent and prepared with very little concern with the many taxpayers who struggle to pay the yearly unnecessary tax increases.

The South Portland budgeting errors resulted from both understating revenue and overstating expenses. For the three years ended June 30, 2013, the actual revenue was $4.9 million more than budgeted and the actual expenses were $4.5 million less than budgeted. Accordingly, the total actual to budget favorable variance was $9.5 million over the last three years. The result of these budgeting errors is that the property tax rate has been at least 5 percent too high each of the last three years. While the final actual numbers for the year ended June 30, 2014, will not be known for several months, the budget contains the same budgeting errors as in prior years and it is reasonable to expect the same results. The excessive tax collections over the past several years have created massive surpluses far greater than any other cities and towns.

The city will argue that it needs to have a surplus, so slightly overcharging taxes is required to build a responsible surplus to cover future unexpected costs and to pay for non-bonded capital acquisitions. I agree that the city does need to have a reasonable surplus, but the facts make it clear it has accumulated excessive surpluses. The city’s net assets, which is the value of its assets (cash, investments and property) less its liabilities (short term accounts payables and debts) is the best measure of its financial position. The June 30, 2013, audited financial statements reported total city net assets of $163.4 million. This is approximately $15,000 for each of the 10,900 households in South Portland. If you exclude the business-type assets (sewer district and other) the governmental activities net assets were $102.2 million. The $102.2 million, when compared to Augusta, Auburn, Bangor and Biddeford illustrates how excessive South Portland’s net assets are.

Because Bangor is slightly larger than South Portland and the others cities are slightly smaller, to get a true apples to apples comparison between these cities one needs to look at each city’s net assets as a percentage of its yearly revenue. On average, the net assets of all these comparable cities was 61.6 percent of yearly revenue in 2013. South Portland’s net assets of $102.2 million was 119.1 percent of 2013 revenues. In 2005, South Portland’s net assets were $84.4 million, which was 109.8 percent of 2005 revenue. Clearly South Portland’s net assets were excessive in 2005 and the excessive amount has grown the past eight years. The calculation of the excessive amount is debatable, but clearly it is at least $10 million too much. This is based on the fact that South Portland’s net assets are $53 million more than the average of the comparable group and $17.9 million more than the city with the next highest net asset amount.

During the year ended June 30, 2013, South Portland’s net assets from governmental activities increased by $3.7 million (from $98.5 to $102.2 million). This compares to the cities of Auburn, Bangor and Biddeford that saw their net assets decrease and Augusta with a net-assets increase of only $95,000.

Based on all the facts, the current talk of a significant tax increase for the 2014-2015 year is absurd. Just correcting the yearly budgeting errors alone would eliminate any need for a tax increase in 2014-15. In addition, the tax rate should be reduced by spending some of the $10 million in excessive taxes collected in the past several years. On the school side of the budget, there is a state statute that requires the school to spend its accumulated surplus or lose it. That law was suspended for the past several years; however, that suspension will end with the 2014-15 school year. The school excessive surplus at risk of being loss is currently at least $2.5 million. With all the budget problems at the state level, I am sure the state will gladly take South Portland’s excessive school surplus. When the state comes and takes our money, don’t forget to thank your city and school officials for their help funding the state budget.

Al DiMillo is a retired CPA who lives in South Portland.