I read a recent email, by Ellen Scarborough, claiming that the Village of Southampton ran “massive deficits for the last 15 years.” I also saw a full-page ad in the August 20 edition of the Eastern Edition of The Southampton Press claiming that the Village of Southampton is in dire financial condition, with more than $100 million of long-term debt.
These claims need clarification.
I was the village administrator through early 2019 and managed the financial affairs of the village from 2007 through 2019.
The village ran deficits totaling $1.2 million for the years 2008 to 2011. Hardly massive. We all remember the fallout in 2008. The unrestricted fund balance increased from $960,000 as of May 2011, to over $6 million by May 2018. During those years, the village also utilized $6.175 million from the unrestricted fund balance to complete capital projects, such as replacing all of the sidewalks in the village, with no debt. Between the $5 million increase in the fund balance and the use of $6 million, that represents an $11 million surplus.
With respect to the claim of the village having long-term debt in excess of $101 million, one just has to read the disclosures in the financial statements, as certified by independent Certified Public Accountants as required by law. I know reading and understanding 48 pages of financials is not the most enjoyable experience, but I am sure it is a good cure for insomnia.
Of the $101 million in long-term debt, $77 million is due to the adoption of GASB 75 (state accounting standard), requiring disclosure of post-retirement employment benefits. These benefits are based on actuarial assumptions and are payable based on assumptions of each employee’s life span and years of service. The financial statements clearly state that this “will be funded by future years’ resources.” Does it have to be paid? Yes — but the term could be over 50 years. The balance of the deficit is pension liabilities and other accounting disclosures as required by law, all explained in the financials.
As of May 31, 2019, the village had $10.8 million in free cash and investments, and a positive fund balance of $21.2 million, before the required accounting standards adjustments. Our independent auditors also publicly stated that the village had the lowest debt ratio of any East End village.
During my enjoyable 12 years at the village, it’s bond rating increased from Aa2 to AAA, the highest possible rating. We were able to refinance two tranches of bonds to lower interest rates, saving hundreds of thousands of dollars.
Do you think that the rating increase or the refinancings would be possible if there were truly “massive deficits” and $101 million in actual debt?
Stephen Funsch, CPA
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