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May 20, 2009 1:19 PMPublication: The Southampton Press

Kabot says town in the process of correcting fiscal crisis

May 20, 2009 1:19 PM

Over the next five years, Southampton taxpayers will shoulder the burden of righting the town’s fiscal ship, according to Supervisor Linda Kabot, who issued a draft report on correcting the town’s finances Monday.

In the report, the overall impact of a series of fiscal blunders over several recent years—a figure that has grown steadily in the past few months—is now estimated to be more than $10 million, with $8.7 million of that involving money from the town’s general fund.

A preliminary schedule proposed by Ms. Kabot in the report shows that the town will set aside $1 million in general fund money in each of the next five years to help cover the budget deficit, which was caused when numerous transfers from the general fund to the capital fund were never completed, although the town’s books suggested they had been. Ms. Kabot said she hopes to make up the difference by abandoning some unfinished projects and finding new funding sources to cover some of the internal debt.

Meanwhile, the town has identified more than $16 million in bonds for capital projects that had been approved by the Town Board but never issued. The town will issue $10 million of that total as soon as possible, and the report estimates that the fiscal impact will be steep: a 4.4-percent tax rate increase will be required just to cover the new annual cost of repaying the bonds.

By the end of the month, the supervisor said she hopes to have a final version of the corrective action plan to submit to state officials.

Ms. Kabot said the report is still “a work in progress.” However, it is clear from the supervisor’s report that the town’s troubles stem from three issues: the failure to complete budget transfers designed to cover the cost of capital projects, inter-fund loans to cover operational expenses that were never paid back, and numerous bonds that were approved but never issued by the town.

The biggest impact is from the more than $10 million in direct appropriations from the years 2004, 2005 and 2006—cash from the General Fund earmarked to pay for certain capital projects—that was never actually transferred into the appropriate accounts. Failure to move this money, Ms. Kabot said, resulted in an inflated general fund balance, prompting the Town Board to spend more money than it actually had.

Part of the solution, Ms. Kabot said, is for the town’s auditors, Albrecht, Viggiano and Zureck, to restate the current fund balance incorporating the direct appropriation errors during those years. So far, the firm has failed to do so.

The corrective action plan, Ms. Kabot said, proposes an adjustment to the total capital budget figure based on actual spending, which will require Town Board amendments to decrease the authorized capital budgets for various projects and diversify the funding sources. In other words, town officials must determine the status of its capital projects in order to know how much money has been spent on each. Once that is done, projects may potentially be abandoned or scrapped, thus reducing the deficit.

Town officials are also conducting an analysis of alternative sources of funding, other than the general fund—such as the park reserve and drainage funds—to determine if money from those accounts may be used to pay for capital projects that the Town Board either chooses to complete or is contractually obligated to finish.

Along with the incomplete direct appropriation transfers, Ms. Kabot said “borrowing from Peter to pay Paul” in the operating budget, along with authorized but unissued bonds to pay for completed capital projects, helped put the town in a financial quagmire.

Since 2003, Ms. Kabot said money from the town’s general fund was used to cover expenses in the Police, Waste Management and Highway funds. “These loans kept property taxes artificially lower for those taxing districts,” Ms. Kabot said. As of December 31, 2007, according to the supervisor, $7.5 million in operating deficits were reported in those funds.

In February 2008, at the behest of Town Councilwoman Anna Throne-Holst, the town hired FTI consulting, based in Manhattan, to conduct a forensic audit of the Police Fund. That report is due this summer. Ms. Kabot said the Town Board is also in the process of selecting a firm, possibly FTI, to perform such an audit of the much troubled Capital Fund.

In addition to the direct appropriation and inter-fund loan concerns, the town must now issue some $10 million in previously authorized bonds to pay for capital projects the Town Board approved from 2004 through 2007. Though the bonds were approved by prior Town Boards, the actual issuance of those bonds was deferred and other money in the capital budget used to pay for those projects. By issuing the bonds now, the town will basically be replenishing the capital budget.

Ms. Kabot has publicly criticized the practice of her predecessor, former Town Supervisor Patrick Heaney, of delaying the bond issues, suggesting that it was an attempt to simply delay the fiscal impact of the projects.

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It seems irresponsible for the paper to report Mr. Kabot;s findings as fact. Why is she preparing this info on her own when the auditor is already in the process and will release a real report in a month? This a person with an ax to grind who suddenly finds "errors" when she is criticized about her financial abilities.
By Hampton (50), Westhampton on May 20, 09 1:58 PM
So let me get this straight: a town with virtually no serious crime - except for those bleeding heart liberals who feed the illegal immigrants - has to borrow money from its general fund to pay for unspecified "expenses" in the Police Department? Classic!

By littleplains (305), olde england on May 20, 09 2:15 PM
R'uh R'oh (read using Scooby Doo voice) Now we know the inmates are running the asylum.
By ride the truth wave (125), southampton on May 20, 09 5:31 PM
Did anyone see the Newday May 20, 2009?
It will take Southampton Town at least five years to reimburse taxpayers for improper payments to the town police department that were made from the wrong accounts since 2002, Supervisor Linda Kabot said Monday.
In an interim report, Kabot said correcting those funding errors would cost $750,000 in back payments and $350,000 in interest for each of the next five years.
The good news, of sorts, is that the town owes most of that money to many of ...more
By Bob Whyte (48), Hampton Bays on May 20, 09 6:22 PM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By westhamptonboy (227), Westhampton on May 20, 09 9:12 PM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By westhamptonboy (227), Westhampton on May 20, 09 9:12 PM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By westhamptonboy (227), Westhampton on May 20, 09 9:13 PM
Linda Kabot is the last person qualified to draw up a plan of corrective action. That's the eqivelant of allowing a criminal decide their own punishment and will only lead to more cover-ups. Person's not involved in the original problem should be designing the solutions.
By westhamptonboy (227), Westhampton on May 20, 09 9:13 PM
thank you heaney and kagel
By ridiculous (214), hampton bays on May 20, 09 10:26 PM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By sjd (420), Westhampton Beach on May 20, 09 11:51 PM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By sjd (420), Westhampton Beach on May 20, 09 11:53 PM
Credit crunch in America. Get off the rampant spending and dreaming big, face the facts, you should be spending what you got. Same ole ,Same ole, pass it on to the tax payers. "I did know ", here we go again. Make the little guy pay for the big guys mistake. No wonder why everyone needs an apartment in there baasement, to pay for their taxes. Another job well done.
By frmr 1203 hauler (6), HB on May 21, 09 4:40 AM
I find it difficult to believe that not one person (comptroller, AVZ auditors, board members, supervisors, etc.) knew what was happening? How can that be? Where are the checks and balances to ensure proper procedures are being followed when entrusted with taxpayer money? This entire mess really leaves a bad taste in my mouth because now the people have to pay for the incompetence of these elected officials. We already struggle enough trying to earn a living to pay taxes besides all our other expenses! ...more
By fdp (23), southampton on May 21, 09 6:39 AM
I haven't seen this draft report, but is the solution just to pass on all these problems to the taxpayer? What about layoffs or at least furlough days or retirement incentives? The Town is a juggernaut. Every time there was a surplus (or an assumed surplus) the budget just expanded to absorb it. I can only hope November brings somebody to the table who has the conviction to make tough choices and put the good of the people able the good of the government.

By the way, does AVZ just get ...more
By diy_guy (101), Southampton on May 21, 09 7:04 AM
It seems a little suspect that suddenly our supervisor finds these mistakes when she is under the gun for overspending. I don't buy it. And re: the police payments? Those figures were traditionally tallied by the personnel office, Mr. Blowes office, not the comptrollers office.
By hillstationrd (6), Southampton on May 21, 09 7:49 AM
I recently "discovered" that I made three years worth of mistakes at my job costing $10 million, can the Town send me a check to cover my incompetance. Oh wait, I am not the Town Supervisor . . . . .
By CommonSense (71), Southampton on May 21, 09 10:28 AM
The earlier comment concerning the expansion of the budget during "surplus" years reveals the crux of the problem this Town has been facing since the demise of The Southampton Party (I know I keep harping on it but anyone who cares to check the record will see it is true). Increasing assessments in an active real estate market over the past decade alllowed the town to increase spending without large tax increases and ilts replacement of the "spending cap" with the "tax rate cap" alllowed the politicians ...more
By Doug Penny (62), Lexington, Virginia on May 21, 09 12:40 PM
Stop the spending..plain and simple...cut back on staff, cut back on projects...get a grip on reality...the values of our homes is slipping daily, people are losing jobs, rentals are down which equals less spending in the local business, etc. If you don't want to cut the staff in the town..then maybe your department heads should meet with their personnel and tell them either lay-offs or cuts in salaries. WELCOME TO THE REAL WORLD. We were all assessed in the middle of a bubble and we are stuck ...more
By BeachGal (72), Hampton Bays on May 21, 09 3:53 PM
It is really time -- no kidding -- that elected leadership of this town is held accountable. In the REAL (private sector) world such incompetence by management would result in a FIRING of that individual. Not just the one whose shoddy work led to a $ 10-plus million "error" but the boss whose failure at oversight allowed this to go on for a number of years!

Kabot and any other town official WHO SHOULD HAVE KNOWN must be asked to step down. NOW.

Elected officials -- incomptent elected ...more
By JimmyKBond (155), Hampton Bays on May 21, 09 4:06 PM
Well said Jimmy. Although they might ask for a bonus.
By ride the truth wave (125), southampton on May 21, 09 6:30 PM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By sjd (420), Westhampton Beach on May 21, 09 6:55 PM
you mean the Supivoser is going to quite ? that's the only way to solve this problem
By typical (63), southampton on May 21, 09 8:35 PM
correcting fiscal crisis? Taxpayers, grab your ankles. It will only hurt for a bit.
By C Law (331), Water Mill on May 22, 09 9:24 AM
SOUNDS LIKE WHAT MARDOFF SAID
By sjd (420), Westhampton Beach on May 24, 09 1:18 AM
Anna Throne-Holst forced this issue into the public light. She pursued this financial issue for a year and was stonewalled by the supervisor for that time. I hope that she runs...this town needs a real change in leadership....not the same old GOP still running the town. We need a town government that operates in the sunshine rather than in the Republican committee.
By SHNative (554), Southampton on May 25, 09 8:04 AM
ALL LINDA SAYS IS SHE DID NOT KNOW
IT WOULD BE ALOT EASIER FOR HER TO SAY WHAT SHE DOES KNOW
NOTHING
By sjd (420), Westhampton Beach on May 25, 09 11:50 PM
This comment has been removed because it is a duplicate, off-topic or contains inappropriate content.
By sjd (420), Westhampton Beach on May 25, 09 11:50 PM
Every home is overvalued in this town, ask anyone born in the last thirty years how their home is hunting is going in the town they were born in.

This should come as no surprise that these are the conditions fiscally in this town.

Look at the "Jones'" we have to play catch up to. They waltz into town, and get whatever their overpriced lawyers state they want, and obviously we can't afford to fight back.

The greed and incompetence is staggering not just here, but in every ...more
By Mr. Z (10697), North Sea on May 26, 09 12:15 PM

The ignorance of many comments here is unbelievable. It is undisputed that these financial shenanigans happened in 2002, 2003, and 2006 during Skip Heaney's Republican administration before Kabot's time.

Blaming Kabot for the accounting sleights of hand when she didn't have a hand in these secret, deliberately misleading financial reporting voodoo to justify massive Heaney overspending is illogical and retarded! These facts are incontrovertible!

Typical Republican fiscal ...more
By Common Sense (56), Southampton on May 27, 09 11:20 PM
Sorry, for the typos. I meant 2004, 2005, and 2006 for the shenanigan years. . Not 2002, 2003, and 2006.
By Common Sense (56), Southampton on May 27, 09 11:29 PM
Hey, Common Sense, you stole my name!! (Sshh, don't tell the heirs of Thomas Paine, we'll keep it between us).

Heads, I use it, tails you do, go ahead and flip and coin and tell me the results.
By CommonSense (71), Southampton on May 28, 09 10:16 AM
"It is undisputed that these financial shenanigans happened in 2002, 2003, and 2006 during Skip Heaney's Republican administration before Kabot's time.
Blaming Kabot for the accounting sleights of hand when she didn't have a hand in these secret, deliberately misleading financial reporting"

Well.....Kabot was on the town board during those years. Didn't she pick it up? Why was she stonewalling Throne-Holst, who was demanding financial answers, for almost a year?
By SHNative (554), Southampton on May 28, 09 12:25 PM
Because Linda spent the money in the town's rainy day fund (started by Vince and Heaney) and put millions of surplus into last years budget to cover the spending. She threw the budget together in late September--last minute as usual-- and now she is in trouble and is casting blame.
The rule of thumb is that the town should have ten percent of the annual budget as surplus. If the budget is $80 million, surplus should be $8. Anybody know the surplus figures for 2009?
By hillstationrd (6), Southampton on May 28, 09 1:29 PM
The ignorance of many comments here is unbelievable. It is undisputed that these financial shenanigans happened in 2002, 2003, and 2006 during Skip Heaney's Republican administration before Kabot's time.

When Linda ran in 2007, she couldnt stop talking about her 12 years of experience. First as Vince's "Executive Assistant", then starting as a Council Person in 2002. Way before 2005, 2006, and 21007. This is all on HER!

Bottom line, she is an ego driven pol., just not up to the ...more
By Terry (380), Southampton on May 30, 09 8:56 AM
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