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Southampton audit shows losses, but cuts in expenses leave positive outlook

Publication: The Southampton Press
By Michael Wright   Aug 4, 2010 11:53 AM

Despite climbing costs and steeply reduced revenues from mortgage taxes and state and federal aid, Southampton Town finished the 2009 fiscal year on relatively sound footing and reduced or eliminated deficits in its police and highway department accounts, according to an independent audit of town books released this week.

Revenues taken in by the town fell short of expectations by more than $2.2 million, or about 6.4 percent, primarily because of steep reductions in the amount of mortgage tax collected during a slump in the real estate sales market. Mortgage tax income was $3.4 million less than had been anticipated in the adopted 2009 budget. The town also received $317,000 less in state aid and $510,000 less in federal aid than had been anticipated.

The town rased its tax rate by the full 5 percent allowed by town law in 2009 to help cover spending, which climbed 6.4 percent, according to the audit.

But the town did cut $4.2 million from its planned spending during the year on the back of a hiring freeze and more than $1 million in spending reductions implemented by the Town Board and former Supervisor Linda Kabot midway through the year, the audit showed.

The spending cuts came primarily through the elimination of several salaried positions and reductions in overtime for union workers, and the elimination of non-critical spending by department heads. Leading the list of cost-cutting, the town’s Highway Department slashed $1.3 million from its approved budget and finished the year with a $1.1 million surplus, erasing a deficit left at the end of 2008, after the town overspent its budget by $3.9 million that year.

Similarly, $1.4 million in reduced spending and $750,000 of budgeted deficit reduction reduced the police department’s deficit to $889,000, down from nearly $3 million in 2008 and more than $4 million in 2007.

Supervisor Anna Throne-Holst, who took office in January after campaigning on a platform of cost-cutting, said the largely positive audit at the end of a tumultuous year that at times had the town fearing it might face a multimillion-dollar deficit was a testimony to the hard work of its financial teams.

“I think it’s a very positive reflection on the direction the town is going in terms of its financial management,” she said. “We have erased a deficit in the highway fund; we’ve got the police deficit down to less than a million, which we’re raising in taxes this year; and the fact that we ended up with a pretty healthy bottom line here speaks to the hard work that’s gone into dealing with the reconciliation of the capital funds.”

Some town departments continued to struggle to cover costs, however. The town’s perennially costly waste management program operated at a $1.3 million deficit for the year.

Overall, the town closed out the year with a fund balance reserve of $11.6 million, about 10 percent of the town’s $117.5 million budget, despite using more than $2 million of reserves to close out several capital projects discovered to be under-funded during a yearlong internal audit.

During the internal audit of more than 200 capital projects conducted or approved between 2003 and 2007, Comptroller Tamara Wright’s office discovered that some $8 million worth of projects had never been funded, leading to initial fears that the town would have to cover the gaps with its reserves or new tax revenues. But the audit also found nearly $14 million in unused funds in the capital accounts, money that had either never been spent or approved bonds that had never actually been borrowed.

Working with accountants from State Comptroller Thomas DiNapoli’s office, the town accountants were able to direct $3.9 million of the unused funds to reconcile some unfunded projects. Another $4.6 million was deducted from other accounts, $3 million of it from the general fund balance, to cover the costs of the under-funded projects.

The capital projects fund still closed the year showing a $670,000 deficit because Ms. Wright has yet to reconcile recently discovered expenditures in a special account funded by fees from developers seeking to build subdivisions or Planned Development Districts.

Some $3.6 million in bonded money from the capital projects account that could not be put toward unfunded projects was put into the general fund balance and reserved for the payment of debt service. That money is included in the $11.6 million fund balance figure shown in the audit. Another $3.4 million of the fund balance must be held in reserve for tax stabilization in the event of major unforeseen expenses, leaving about $4.6 in unencumbered funds in the general fund balance.

Credit rating agencies have said they would prefer the town to have 15 percent of its operating budget held in reserve, or about $17 million, and Ms. Throne-Holst said the town hopes to be able to build the reserve to that level in coming years with additional cost cutting.

Moody’s, one of two major credit rating agencies, downgraded Southampton Town’s bond rating in February after the town’s reserves fell from $16.7 million in 2007 to $10.6 million in 2008.

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Let us not forget that it was totally under Linda Kabot's administration that these expense cuts were accomplished after the out of control Deficits under her predecessor, inspite of the seeming credit Throne Holst appears to be largely taking in her press comments.

It was also Linda who presented roughly a $5 Million expense reduction for 2010 that Throne Holst fought and watered down by $1.8 Million last November/December. It's all in past Press articles. Moody's is praising the Town ...more
By Obbservant (329), southampton on Aug 12, 10 7:09 AM
1 member liked this comment
I agree, Linda had a good plan in order.
By ICE (1196), Southhampton on Aug 13, 10 9:23 AM
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