ANTRIM — Town Administrator Galen Stearns explained the town’s financial crisis in more detail Thursday, pointing to one area as the source of more than half of 2008’s $1.24 million deficit.

Stearns delivered a presentation Thursday at the Town Hall to more than 60 residents in attendance. The audience learned that of the total deficit, which includes costs from all corners of town finances, more than $720,000 is the result of the incorrect handling of a Tax Increment Finance district. According to Stearns, town officials didn’t have a full understanding of TIF funding when they established the district in 2000.

A TIF district is a municipal financing tool that uses anticipated increases in property value within a district to fund infrastructure improvements within the district. Ideally, the improvements will help to ensure an increase in property values. When a town creates a TIF, it begins by taking a snapshot of property values for the specific area to be included in the district.

According to Stearns, the value of the downtown TIF district properties in 2000 was approximately $4.9 million. For the next 10 years, any increase in that combined value over time is kept separate, at least on paper. The property taxes raised on that separate amount — including school and county taxes — are directed to the TIF district fund. That fund is in turn used to pay for improvements within the district. Annual contributions to the fund are calculated in advance of setting the tax rate, said Stearns, and should be added to the operating expenses of the town.

A total of $361,000 has been spent on streetlights, sidewalks, and storefront renovations in the name of TIF over the past nine years, said Stearns.

That money, however, was not factored into the tax rate and was therefore never raised by taxes. The money to pay for the improvements was instead taken from the general fund.

This doubles the error’s impact for a total of $722,000, Stearns said. Citing a “confusing” state document governing TIF calculations, Stearns said the town has since learned the proper way to account for the TIF district money, one year before the 10-year district expires.

The TIF money accounts for more than half the $1.24 million deficit identified in the town audit conducted by The Mercier Group of Canterbury and reviewed by the Select Board on Nov. 9.

The deficit also includes $185,000 in over-expenditures in the general fund over the last four years, $62,000 in accounting and budgeting errors, and $270,000 in bridge and road improvement expenses, said Stearns.

The $270,000 includes a $98,000 overrun for the North Main Street Bridge and $83,000 for the White Birch Point Bridge.

The remaining $89,000 was spent on improvements to Bryer’s Lane, which were meant to be bonded and paid back by residents of Bryer’s Lane, but were instead expended from the general fund.

Town officials have begun chipping away at the deficit, including a $207,000 “overlay” factored into the 2009 tax rate.

The overlay contributed to an increase in the tax rate of exactly $1 per $1,000 over last year’s rate, from $24.14 to $25.14.

The extra tax money raised through the overlay will go toward the deficit.

At Thursday’s meeting, Select Board members said they would likely present a warrant article at March Town Meeting for between $200,000 and $300,000. That money would also be directed toward the deficit.

In addition, Stearns said, every penny of an anticipated $246,000 in state bridge aid will also offset the deficit.

Stearns said the town would be making recommendations where possible to delay some projects.

Even if half of the deficit were to be made up by March, Stearns said, it will take some time to repair all the damage.

“We’re in a deep hole,” he said. “It’s not going to be quick or easy to get out.”

Of more immediate concern is how the town will meet a series of financial obligations before year’s end.

A $1.3 million tax anticipation note is due in full by Dec. 31, as is nearly $1.3 million owed to the ConVal School District.

Combined with $250,000 in other outstanding debts, said Stearns, the town owes more than $2.8 million.

At Thursday’s meeting, that number went up after Mary Allen, Antrim School Board representative, noted that county tax bills are also due on Dec. 17.

At the meeting, Stearns he had not factored that amount into his presentation. On Monday, he said $293,000 is owed to the county, which must be paid on time. At present, Stearns estimated the town has roughly $50,000 on hand until tax payments come in. After tax bills went out on Monday, Stearns said he hoped enough people would pay them early so the town could meet its obligations. Residents have until Jan. 7 to pay their tax bills, and Stearns estimated the town would raise $3,455,000 when tax bills are paid. If residents do not promptly submit their tax bills and the town does not have the $293,000 for the county by Dec. 17, Stearns said the town would begin paying a 10 percent penalty.

At Thursday’s meeting, members of the Select Board began paying for their part in the town’s financial turmoil, as resident after resident expressed their disappointment to the board.

“What I’m about to say is no reflection on you as individuals,” said resident Tom Streba. “But there is a culture at that table that disturbs me. And that culture is, ‘We know best. Keep everybody in the dark.’ ... I’m disappointed as a resident and a taxpayer.”

Although some praised Stearns for his work on town finances as a new town administrator, resident Kara Penny asked for his professional accounting credentials.

Stearns, a 17-year selectman in Windham, said he had not gone to school for municipal accounting.

“The four of you are trying to fix this, but none of you are experts,” said Penny. “That makes me really uncomfortable.”

Town residents again urged the Select Board to pursue a more thorough audit of the town’s books, and selectmen said they are in the process of soliciting bids for the work.

“It’s not that we’re hiding anything,” said Chairman Steve Schacht. “I don’t think you’ll find anywhere that there’s any money missing or anything like that.”

Residents again questioned why they hadn’t been notified of the deficit earlier. Some suggested the knowledge might have changed the town’s perspective on a number of expenses approved at last year’s Town Meeting. Among the articles approved at Town Meeting in March was a $75,000 transfer from the TIF fund to the general fund, a further $6,000 withdrawal from the TIF fund, $21,000 for a Parks and Recreation tractor and $12,500 for preliminary design of a police station.

By the time the town had learned how dire its financial situation was, design plans for a police station in the downtown Antrim Mill building had been 80 percent completed, according to Selectman Gordon Webber. He said the selectmen elected to complete the plans for another $2,000 or so, rather than cancel the work and receive nothing at a cost of more than $8,000.

Webber went on to agree that residents should have been presented with more information sooner.

Although selectmen knew of the deficit in years past when it was nearly half its current scale, voters at this year’s Town Meeting remained unaware.

“We failed to inform the residents of Antrim that we had a $700,000 deficit,” said Webber. “That’s our fault. We thought we had it under control. We screwed up.”