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Sep 30, 2008 12:28 PMPublication: The East Hampton Press

East Hampton supervisor calls for 18-percent tax hike in 2009 budget

Sep 30, 2008 12:28 PM

East Hampton Town Supervisor Bill McGintee released his tentative 2009 budget on Tuesday morning, a $67 million spending plan that calls for a tax hike of nearly 19 percent for most town residents to help combat the fiscal crisis gripping the town.

The proposed budget shows deep anticipated cuts in revenues but also slashes spending, yet spares the need for feared layoffs in what is expected to be the first year of a deficit financing plan. The town is expected to borrow some $15 million by the end of 2009 to cover the growing deficit and spread the tax impact over 10 years.

Nonetheless, the deficit borrowing will drive up the tax rate for residents living outside East Hampton Village by 18.75 percent and by 28.74 percent for village residents. The supervisor’s budget statement claims that for a house assessed at $5,000, the hike will mean a tax bill increase of $219 in 2009 for town residents and $145 for village residents.

The budget also includes some new and increased fees for common services like beach parking stickers and usage of the town dump. For the first time ever, town residents will be asked to pay an annual fee for beach parking stickers: $25 for most residents and $15 for senior citizens. The cost of dump stickers will also climb steeply for the second year in a row, if the Town Board approves the supervisor’s spending plan as proposed. A dump sticker for 2009 would increase from $70 to $104 for residents and from $50 to $74 for senior citizens.

Overall, the budget is some $7 million lower than the nearly $74 million in the 2008 budget, mostly due to the fact that the town’s Community Preservation Fund is no longer included; it was pulled from the spending plan in the wake of the scandal that erupted when it was discovered that East Hampton had borrowed $8 million from the fund to pay operating expenses in 2007. In the general budget, anticipated revenues compared to 2008 are down more than $16 million, also largely due to the absence of CPF income, including $1.5 million less in anticipated mortgage tax revenue, thanks to the slowing real estate market.

The tax hike, the supervisor said on Monday, will make up for broad income shortfalls in recent years from nearly a decade of flat or too-low tax rates, which contributed to the town’s current deficit—estimated to be between $9 million and $10 million. If the budget can be balanced at the end of 2009, the hike should be a one-time increase, he said, and residents could expect smaller, more prudent increases in the future.

“This is the cost of doing business,” Mr. McGintee said on Tuesday. “This gets us back to the tax level we should be at. If you had gone back nine years and just raised taxes 5 percent a year, like we should have been doing, this is the level we would be at. We have to get revenues back to the level of expenses.”

Mr. McGintee said the budget represents an essentially flat spending plan for day-to-day operations overall. Mr. McGintee said the town needs to end the 2009 fiscal year with a surplus if it is to rebuild the town’s once robust general fund balances by the time the deficit financing is paid off.

But he acknowledges that the budget’s solvency at the end of next year will likely hinge on the costs of medical benefits for employees—the town’s Achilles heel in recent years. The budget appropriated $7.1 million for medical benefits, well below what the town has paid out in each of the last three years, but a number Mr. McGintee said would be firm if the town switches its medical coverage to Empire Blue Cross/Blue Shield. Board members have resisted making the change and the town’s civil service union has vehemently objected to it—because it would mean higher co-pays for employees—but Mr. McGintee said it could save the town more than $1 million and could be the difference between layoffs being necessary and not.

“I do not want to lay people off with the way the economy is,” Mr. McGintee said. “But if we don’t meet the numbers we need with medical expenses, it may be my only choice.”

Town Board members got their first look at the budget on Tuesday morning. First impressions were positive from the elder statesman of the board. “At first glance it looks very responsible,” Councilman Pete Hammerle said. “I think the board is going to have to hang tough and get through this next year, but I think this is a budget the town can function on.”

Before the budget can be adopted, the Town Board will have to hold a public hearing, which must take place before November 6. The budget has to be adopted, by a majority vote of the five board members, and submitted to the state by November 20.

Councilman Hammerle attempted to look at the proposed tax rate jump from a positive perspective. He noted that the increase, according to the numbers offered in the budget statement, would translate to less than $20 a month for an average homeowner in the town.

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