WINTHROP — Town Manager Peter Nielsen is resigning from his job because of a tax error that was made last year, leaving the town with a $166,000 shortage even as it was trying to overcome a much larger funding mistake.

The more recent error was discovered last month, and Nielsen’s announcement, made at the end of a Monday night Town Council meeting, may have given some residents a sense of deja vu.

Peter Nielsen

For almost a year, town officials have been debating the best way to recover from the larger funding error that was made two years ago and discovered many months later. Town and school officials have disagreed about which side was responsible for the earlier mistake, which led to a $717,000 shortfall in the school budget that has since snowballed.

But when Nielsen announced the $166,000 shortfall this week, he accepted blame for it.

He said the mistake happened last August, after the town’s previous tax assessor died and an interim assessor was working in his place. It was a busy time for town employees, who had recently discovered the $717,000 school funding error and also were trying to send out residents’ tax bills.

In the rush of things, they mistakenly overcounted the amount of state revenue they would be receiving, Nielsen told the council Monday, reading from a prepared letter. What’s more, that mistake exacerbated challenges already presented by the school funding shortfall.

“I offer no justification, only explanation that we were under pressure to get tax bills out last August, our attention was focused on school funding issues and I had scrambled to assemble a team following the death of our assessor,” Nielsen said. “Perhaps I relaxed too soon. The error meant we did not collect enough tax, worsening the town’s financial condition by compounding other errors we were examining.”

Nielsen was not directly responsible for the mistake, according to Sarah Fuller, the council chairwoman.

Fuller said the interim assessor, who was unfamiliar with the town’s taxation protocols, didn’t realize that the revenue from two state programs — the Homestead Exemption and the Business Equipment Tax Program — already was included in one of the budget’s line items, and he counted that revenue twice. So when the town was collecting local property taxes, it brought in less revenue than expected.

“It was an honest error that wasn’t caught,” Fuller said.

But Nielsen thinks the buck stopped with him.

“This error occurred on the municipal side,” he said. “That makes it my responsibility. Following the town’s history with financial errors over the last 10 months, it was a crushing discovery.”

In an interview Tuesday, Nielsen, who is 64 and lives in Winthrop, reiterated that explanation.

“I feel the weight of responsibility for that mistake heavily,” he said. “It’s a big decision, but it was a very easy one.”

The $166,000 tax mistake was discovered about two weeks ago by Melody Main, the town’s finance director, Fuller said, but she added that the town already has addressed it as it has responded to the larger budget error.

Officials made the larger error when they were putting together a 2015-2016 budget and mistakenly overcounted — by about $717,000 — the amount of revenue the school district would be receiving that year.

The mistake was not noticed until more than a year later, when it already had been carried into this year’s budget and more than doubled in size.

The town has been diverting funds to make up for that mistake, and in doing so, probably made up for the $188,000 error, Fuller said. On Monday, the Town Council also authorized the town to borrow up to $2.5 million, to help cover its operating costs at it bounces back from the deficit.

Nielsen was planning to leave his position next spring, but he said the discovery of the $166,000 error is “accelerating my plan.” He said he will work until June 30, then hopes to work as a school bus driver — a position he has held in the past.

He began working for the town in 2015 and is just finishing the second year on his three-year contract. His salary was about $80,000 a year.

It’s not clear when or how the town might try to replace Nielsen.

On Monday, the Town Council held a closed-door session after Nielsen announced his resignation, and it plans to hold another on June 19, after next week’s election, Fuller said.

Fuller called Nielsen’s departure “distressing” and said she doesn’t think the council would have demanded his resignation for the $166,000 error. At the same time, Fuller said the council appreciates his gesture.

“Peter’s one of the most well-respected and well-regarded town managers in the state” Fuller said. “He’s done an admirable job on many fronts. The council and staff and many in town will be saddened to see him leave this post.”

Since 1990, Nielsen has worked as a town manager for several other central Maine communities, including Clinton, Wayne, Wilton and, most recently, Oakland. He has also served on the executive committee of the Maine Municipal Association, including 18 months as its president in 2013 and 2014.

Eric Conrad, a Winthrop resident who is a Maine Municipal Association spokesman, also praised Nielsen’s work, citing the larger challenge of running any town in a time of shrinking state revenue and diminished confidence in government.

“We came to view (Peter) as an incredibly intelligent guy who’s fair but firm,” Conrad said. “He can give broad and specific responses, and in a way that everybody in the room believes. Those are not easy lines to walk. You want everyone to believe you and understand you, but these are skeptical times.”

Conrad said he’s not aware of another town or city manager who has chosen to resign for the reason that Nielsen has, but he noted that the past year has been unusual for Winthrop, given its financial challenges.

“People need to understand, these are really tough jobs,” Conrad said.