updated 1/20/2004 9:39:49 AM ET 2004-01-20T14:39:49

Rebecca Jemison, who emerged as the true winner of last month’s $162 million lottery drawing, is suddenly even richer. This Cleveland suburb is suddenly much poorer.

South Euclid city officials were stunned to learn that they can’t collect $1.4 million in income taxes from the winning Mega Millions ticket since the city charter wasn’t updated to include lottery winnings as taxable income.

“It’s not a good day for the city,” Mayor Georgine Welo said Monday. “We were all excited until we went to go for the money and learned that we are not entitled to it. We are very saddened by the news.”

Rebecca Jemison took the lump sum payment option of the $162 million jackpot, walking away with $67 million. Now, she’s $1.4 million richer.

The news came at a bad time for South Euclid, which laid off six workers and made other cuts to help bring its $16.5 million budget down to $13 million, Welo said. The city had planed use the windfall to rehire some workers and improve parks and recreation programs.

City Law Director Michael Lograsso said former Mayor John Kocevar’s administration failed to act on a 1996 letter from the Regional Income Tax Agency advising the city to amend its charter if it wanted to tax lottery winnings.

That year, the Ohio Supreme Court ruled that in order for cities to collect the tax, they would have to specifically state “lottery winnings” as taxable income in their charters, Lograsso said.

The tax mix-up is the latest plot twist in an unusually eventful lottery drawing. Days after the Dec. 30 drawing, another woman filed a police report saying she lost the winning ticket and was later found guilty of filing a false police report.

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