With the soft economy already taking a toll, the Southampton Town Board got off to a bumpy start in its review of Supervisor Linda Kabot’s proposed $82.5 million 2009 budget, her first since taking office in January.
Supervisor Kabot’s proposed budget carries a tax hike of 5 percent, the highest allowed by town law, and sets aside $1.275 million of payments to make up for department budget shortfalls covered by the general fund in recent years, while struggling with reduced revenues from mortgage taxes and fees and permits.
But at least one Town Board member, Anna Throne-Holst, said last week that she wants to explore an alternative plan to avoid a tax hike altogether in the midst of the current turmoil in the world’s financial markets, hoping that spending cuts and other measures can delay the tax hike until the fiscal picture brightens.
Meanwhile, the town is looking at other measures to control spending, such as doing more work in-house rather than hiring consultants, and also freezing elected officials’ salaries and looking to make cuts in some departments. But although the Police Department has accumulated a $4.5 million deficit in recent years, covered by injections of cash from the general fund, the department looks to avoid the belt-tightening, adding more officers and seeking even more, and looking for $176,000 in vehicle and equipment purchases.
Meanwhile, there were tensions among board members: Councilman Chris Nuzzi walked out of the meeting on Wednesday, October 8, as the board met with the heads of various town departments in public session to discuss their budgetary requests.
Mr. Nuzzi walked out of the meeting to protest what he called a flawed process. He said he preferred the way the budget process was handled under former Supervisor Patrick Heaney, when department heads met in private with the supervisor and their Town Board liaisons before meeting with the full Town Board in public session.
Mr. Nuzzi argued that department heads would not be as forthcoming in public about the needs and concerns of their individual departments, especially in terms of personnel. “I’m not saying we shouldn’t work together,” Mr. Nuzzi said. “I just think it would be better to meet individually first.”
Ms. Kabot told the councilman he was welcome to leave, commenting that Town Board members were not required to sit in during work sessions. “It’s your choice to be here,” Ms. Kabot said. “Nobody’s making you stay.”
Mr. Nuzzi had informed Supervisor Kabot that he and fellow board members Anna Throne-Holst and Dan Russo planned to boycott the meeting. Although both expressed concerns about the process, they did not join Mr. Nuzzi in his protest.
Mr. Nuzzi’s stand angered Town Management Services Administrator Richard Blowes, who argued that each department affected the other and that the budget was too large to be worked on individually. “The whole is greater than the sum,” Mr. Blowes said. “All of this is interwoven, one decision has an impact on the other.”
“Our first responsibility is to form our own judgements, then come back and work as a team,” Mr. Nuzzi said.
“We’ve been doing it that way for the last five years, and that’s why we’re in the mess we’re in,” Mr. Blowes said, adding that politics taints the process when meetings take place in private. “People will say things to get other people elected. This should be done out in the open.”
Ms. Throne-Holst said she agreed with Mr. Nuzzi’s assessment of the process, saying it would have been better to meet with the individual department heads one on one.
“Ultimately, it’s all a matter of what gets cut out and who in that department is affected,” Ms. Throne-Holst said. “And when that’s done in public that puts a department head in an uncomfortable position.”
However, Ms. Throne-Holst said she decided to stay out of respect for, not only the individual department heads who carved out time in their schedules to attend the meeting, but also out of respect for the amount of work that went into the presentation.
Mr. Russo said he only wanted to have the same benefit of meeting with the department heads that the supervisor had. “She had her chance to meet with them in private,” Mr. Russo said. “I just would have liked to have had that same opportunity.”
Despite the disagreements, the board took its first step on Thursday and accepted Ms. Kabot’s tentative $82.5 million spending plan as its preliminary budget. The board has until November 20 to consider changes, make revisions to the spending plan and adopt a final operating budget.
Unlike in recent years when the town saw its coffers swell from the revenue pouring in from a booming real estate market, this year the Town Board has to grapple with a fiscal crisis due in large part to a softening real estate market and an overall downturn in the national economy.
Supervisor Kabot’s budget includes $1.275 million in deficit reduction allocations as part of a five-year deficit reduction strategy, a plan mandated by state law. That money will be set aside to reimburse the general fund, which subsidized shortfalls in the police and highway funds between 2004 and 2007.
Of the $1.275 million, $750,000 plus $350,000 in interest would be allocated to the police fund, and $150,000 plus $25,000 in interest would be applied to the highway fund. The total general fund deficit, compiled over the four-year period, is $7.2 million.
It’s been more than a decade, Ms. Kabot said, since the town has experienced financial turmoil. In recent years, Southampton has benefited from a healthy economy driven mainly by a burgeoning real estate market. Suffolk County collects mortgage taxes—a 1-percent levy on all money borrowed for house purchases—and returns that money directly to the town. In recent years, the town has budgeted the mortgage tax revenues conservatively, understating what was anticipated, a policy that resulted in healthy surpluses.
In 2007, for instance, according to Mr. Blowes, the town took in $12 million in mortgage tax receipts but budgeted for only $8 million. That extra $4 million allowed the town to offset spending and suppress the tax rate. For 2008, however, that once reliable revenue stream has almost dried up, forcing the town to tighten its belt for 2009.
Before the recent Wall Street implosion, Suffolk County released a report in July projecting a steep decline in mortgage tax revenues for 2008. As of June of this year, Southampton has collected only $5.5 million in mortgage tax revenue, a 36-percent drop from the $8.7 million it collected in the first six months of 2007. A lower surplus in town coffers for 2008 means less surplus money to allocate toward spending as a way of keeping the tax rate from climbing in 2009.
But that’s not the town’s only problem, according to Tamara Wright, a private consultant the town hired to help craft this year’s budget. “Overall, revenues are down,” Ms. Wright said, referring to fees for service and building permits as well tax sources. “There’s just not as much surplus for 2009.”
This is why, Ms. Kabot said, she is proposing a 5-percent tax increase for 2009, the maximum allowed under the town’s tax cap law. According to the supervisor, spending against those surpluses in prior years, along with a slowing down of construction activity and rising interest rates, made the tax hike “unavoidable.”
“It’s the perfect storm of decreased mortgage taxes, increased spending, and pulling in less revenue,” Ms. Kabot said.
But Ms. Throne-Holst said she’s not ready to concede that a tax hike is inevitable.
“This is not the time to ask taxpayers to pay more,” she said, adding that she wanted to pore over the town’s capital budget to see if there was a way to cut spending and keep the tax rate stable. “We may not be able to, but I think we owe it to the taxpayers to try,” the councilwoman said.
Ms. Throne-Holst’s focus will be spending charged to the operating budget that should be in the capital budget. For example, the town is currently replacing the roof at Town Hall. The funding source for that project is the capital budget. But there are town employees whose salary is drawn from the operating budget, yet are working full time on managing the roof replacement as well as other renovations. In such a case, capital funds could be used to cover that portion of their salaries, reducing the operating budget, she said.
“The only way to prevent raising the tax rate is to find enough spending in the operating budget that should be in the capital budget,” Ms. Wright said. That’s a risky strategy, she added, which would pay off only if the economy improves the following year—a gamble Ms. Throne-Holst said she is willing to at least consider.
Yet, should the downward trend continue, then the money used to reduce taxes now would not be available in surplus the following year. Instead of using any extra funds to keep the tax rate stable, Town Comptroller Steve Brautigam said he would rather take that money and rebuild the town’s surplus. “You don’t know what is going to happen in the next year,” Mr. Brautigam said. “If you don’t have any surplus, then that means raising taxes and possible layoffs.”
In order to make the right decision on the tax rate, Ms. Throne-Holst said she wanted to know how much would be necessary in spending cuts to offset the tax hike.
Those dollar values, according to Ms. Wright, are being calculated. “I believe the Town Board is being very prudent and sound, and that no one wants to see taxes go up,” Ms. Wright said. “I think everyone is asking the right questions and trying to avoid a financial crisis.”
In the meantime, the supervisor is proposing the use of $4.5 million of accumulated surplus funds from previous budgets to cover increases in spending enough to keep the tax rate increase within the mandated 5-percent cap. Ms. Wright would not say how much of the overall surplus would be left over, adding that coming up with an accurate figure before the end of the year is problematic.
This is due, she said, to the October 1 deadline for filing the budget and the seasonal nature of the town’s economy. “You don’t know where you are until the season ends,” Ms. Wright said. “There’s overtime for police to cover all the special events, there’s beach permit revenue, and all that information comes in after September.”
Ms. Wright said she asked Town Attorney Dan Adams to look into extensions for filing the budget and noted that Westchester and Monroe counties allow for extra time.
Ms. Kabot proposed a 2.5-percent “cost-of-living” salary increase for non-union town employees and elected officials in her initial draft 2009 budget. At the suggestion of Ms. Throne-Holst, the salaries of the town’s elected officials—including the supervisor, the Town Board members, the Trustees, the town clerk, and highway superintendent—have been frozen, a move that saves taxpayers $18,000.
Town Board members receive a salary of $60,000; the 2.5-percent increase would have meant an additional $1,500. “I certainly could use the extra money, but, in this economy, I just don’t think it was right to ask the taxpayers for it,” Ms. Throne-Holst said.
As supervisor, Ms. Kabot is paid $102,000 a year, the same annual salary earned by Highway Superintendent Bill Masterson. Town Clerk Sundy Schermeyer is paid $97,000.
The town is looking to shrink the deficit in Waste Management, but there’s a $4.5 million hole in the Police Fund that needs to be plugged as well.
The 10 new police officers, hired two weeks ago, bring the total number of police personnel to 105, three above Ms. Kabot’s budgeted 102. The 10 new hires will be offset by three upcoming retirements, which will reduce the number of personnel to 102.
At Wednesday’s meeting, Southampton Town Police Chief James Overton told the Town Board that he wants an additional seven officers, which would increase the size of the force to 109. The chief is also asking for two additional vehicles, at a cost of $68,000, plus $108,000 in new equipment.
To service the vehicles already in operation, Chief Overton said he needed an additional mechanic. Currently, four mechanics are budgeted, but Ms. Kabot said she was open to a suggestion by Ms. Throne-Holst to outsource any vehicle maintenance that the town garage could not handle.
Ms. Kabot said she was also looking to shift to a townwide “street lighting district” to more fairly spread out those payments. The way the system is currently set up, according to the supervisor, Flanders, East Quogue, and Hampton Bays are paying for the majority of the town’s street lights. “That’s an inequity that needs to be fixed,” Ms. Kabot said.
Many of the department heads, including Town Attorney Dan Adams and Town Planning and Development Administrator Jefferson Murphree, said they are doing more work “in-house” in order to save taxpayer dollars by not hiring outside consultants.
Mr. Murphree, who wanted to hire a “chief planner” to enhance his department’s ability to do more of its own work, said “90 percent” of the work done on the Environmental Impact Study for the Hampton Bays moratorium was done inside his department. “That saved the taxpayers $77,000,” Mr. Murphree said. He added that work on the 72-H program—properties allocated to the town by Suffolk County for affordable housing—was done in-house, as well as work on the ongoing Sag Harbor Gateway Study.
Mr. Adams hoped to convert a part-time attorney position to full-time to handle more work within his office, but said he understood the constraints of the budget. Mr. Adams also wants to have a full-time stenographer by 2010—a position, he said, that would help accommodate a greater in-house workload and save taxpayers dollars in legal expenses. “There’s always the reality of unforeseen legal fees,” Mr. Adams said.
The town clerk, who has been working to digitally transcribe and archive the voluminous town maps and records in her office, withdrew a request for an additional full-time staffer. Ms. Schermeyer said a full-time archivist would “increase efficiency” and aid in the mammoth task of saving the town’s records. “This is important work for the town,” she said. “But, in light of the economy, I’m going to defer that request for a year.”
Town Tax Assessor Ed Deyermond asked Ms. Kabot to raise the salaries of two assessors in his office, a request that Mr. Blowes supported. But the supervisor said she wasn’t prepared to do that at this time. Mr. Blowes said that personnel who reached a “certain level of performance” should be recognized with a bump in pay.
“I agree that these two individuals have done a stellar job, as have many working here,” Ms. Kabot said. “But while people in the private sector are losing jobs, we are not in a position to raise salaries.”
Brian Bossetta on Oct 13, 2008