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Oct 1, 2008 9:50 AMPublication: The Southampton Press

Kabot releases proposed budget for Southampton Town

Oct 1, 2008 9:50 AM

The midnight oil burned Tuesday evening at Southampton Town Hall as Supervisor Linda Kabot scrambled to meet the state-imposed filing deadline for her first budget.

Deputy Supervisor Richard Blowes and Town Comptroller Steve Brautigam helped Ms. Kabot crunch the numbers for the 2009 tentative budget, which is just under $80 million. Proposed spending would increase 4.3 percent over the $76.7 million budgeted in 2008.

The tax rate for the 2009 budget, according to Ms. Kabot’s office, will be set at $1.32 per $1,000 of a home’s assessed value. That is a 5.6-percent increase from the 2008 tax rate, which was $1.25 per $1,000. A local “tax cap” law prohibits the tax rate from being increased more than 5 percent from the prior year; town officials say the tax rates are rounded numbers, and the actual proposed increase is below the 5-percent cap.

In order to comply with the 5-percent “tax cap” law, just over $4.5 million was taken from budget surplus funds and applied toward tax rate reduction, Ms. Kabot said.

For a taxpayer with a home valued at $500,000, the $1.32-per-$1,000 tax rate means that a homeowner will pay $31.45 more in taxes for 2009. That tax rate encompasses the general, police, highway, part town, and emergency 911 funds. The total tax levy proposed in Ms. Kabot’s budget is $53,181,822.

The supervisor said the tax increase was “unavoidable” due to downturns in the economy and “artificially” low tax rates set in 2007 and 2008. In those years, Ms. Kabot said, “town spending substantially increased—in particular, the police fund.” Police expenditures total $22 million for uniformed patrol and civilian support services in 2009. The supervisor added that for 2009, deficit reduction allocations were needed, along with increases in tax levies to cover operating expenses.

At the same time, Ms. Kabot took aim at the policy of her predecessor, Patrick Heaney, who similarly used surplus funds to offset the tax rate in several recent years, during which the economy was stronger.

Now, Ms. Kabot said, the town is facing economic challenges that stem from a softening in the real estate market, a slowdown in the construction industry, and less-than-favorable interest rates from financial institutions. “Revenues which the town is dependent upon to keep property taxes down are declining,” Ms. Kabot said.

Despite the town’s recently improved bond rating by Standard & Poor’s, from AA+ to AAA, the supervisor acknowledged that the unreserved general fund balance is “not so healthy.” A year-end audit for 2007 revealed more than $7.2 million owed to the general fund. That includes a $4.5 million shortfall in the police fund and $2 million deficit in waste management.

Those deficiencies arose between 2004 and 2007, a time when the town, under Mr. Heaney’s direction, had been tapping a reserve of budgetary surplus funds as “one-shot revenues” to artificially suppress the tax rate, Ms. Kabot said.

The supervisor labeled the town’s fiscal strategy over the past few years as one of “borrowing from Peter to pay Paul, Mary, and Sue. Now, Peter has a bunch of IOUs in his wallet from Paul, Mary, and Sue, and very little cash on hand.”

Ms. Kabot said this borrowing practice has resulted in a “negative financial condition” for the town. “Property taxes must be increased to not only cover current operating expenses and prior deficits, but also to ensure adequate reserves are on hand to maintain the town’s high bond rating for its capital program,” the supervisor said.

In 2009, the practice of borrowing from the surplus will continue—the $4.5 million injection of funds into the budget will reduce the tax rate and soften the impacts on taxpayers—though police and highway district tax levies are being increased to pay down debt owed from spending in prior years. To do that, Ms. Kabot is tapping $577,775 from the part town fund, and $1.5 million in surplus from the land management enterprise fund.

An additional appropriation of $175,000 in surplus is being used from the E-911 fund, and $2.25 million from the tax stabilization reserve fund is being withdrawn and moved to the general budget to offset spending increases.

“Under this new administration,” Ms. Kabot said, “the 2009 tentative budget takes the necessary steps to implement true deficit reduction efforts and cost-cutting strategies as part of the Town Board’s fiduciary duties to taxpayers.” Ms. Kabot said her proposed budget addresses the “inter-fund loan” repayment obligations through a five-year deficit reduction plan with a corresponding line item on the property tax bills, reflecting debt owed for operating expenses paid out over the prior years that exceeded budgeted appropriations and actual revenues.

Ms. Kabot is proposing that mortgage tax receipts, which are more volatile than the predictable revenue stream of property taxes, be dedicated to capital, or long-range, projects. Those projects are financed over time as opposed to being considered operating, or day-to-day, expenses, which keep the wheels of town government turning.

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Kabot has done exactly what she criticized Heaney for doing. She used the surplus. When he tried to do that, she accused him of "smoke and mirrors"
Add that to her hiring her campaign manager's husband to a new $70,000 job and hiring her own office public relations assistant for $45,000 ( brand new position) she is exactly like him. Hypocrisy.
By Hampton (50), Westhampton on Oct 1, 08 2:37 PM
With all do respect to the Supervisor increasing discretionary staff at a time when most of us are cutting back signals that she just doesn't get it. The famous line of "just say no" requires more backbone and management skills then town government can muster.
By tom (53), Hampton Bays on Oct 1, 08 9:26 PM
Be assured there is trouble in town hall and jobs will be lost by the end of the year. It better be last in the door, first out!!
By BeachGal (72), Hampton Bays on Oct 2, 08 3:57 PM