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Apr 1, 2009 1:54 PMPublication: The Southampton Press

Capital budget error bolstered budget surplus, which was used to cut taxes

Apr 1, 2009 1:54 PM

Part of the proposed corrective action plan, which the Town Board must adopt in order to take effect, is an analysis of those reserve funds to see how much, if any, of those surplus dollars can be used to repay the capital budget deficit.

Ms. Kabot’s plan also proposes amending the 2005 and 2006 capital budgets to indicate the source of funding for the various direct appropriations, and also to be decreased based upon a further analysis of actual spending and spending commitments. Basically, town officials are still trying to determine the status of those projects for 2005 and 2006 to figure out exactly where each project is in terms of completion and how much the town still owes on each.

Ms. Kabot said town officials are still trying to determine how much the capital budget deficit really is. It could be as much as $4.9 million, but the supervisor said nearly $500,000 has been accounted for so far, though calculations are continuing, and further analysis is needed. “This is going to need more time, energy and thought,” she said.

The supervisor also said that direct appropriations for capital projects in 2004 might also be at issue, but said it was too premature to give a figure. “This muddies the water even further,” she said.

Another measure outlined in the corrective action plan is to adjust fund balances for 2009 and 2010 through the town’s operating budget—which must be made by Town Board resolution—to reimburse the capital fund obligations for 2005 and 2006.

It is likely that property taxes will have to be raised for 2010, according to the supervisor.

Ms. Kabot said she is also looking at modifying the town’s 5-percent tax cap law. As of now, non-discretionary spending—such as federally mandated maintenance costs at town transfer stations—are included in that calculation. The supervisor said she wants to exempt such non-discretionary spending, as well as the costs associated with the police and highway fund deficit reduction plans. “People should have paid higher taxes from 2004 through 2007 when those deficits accrued,” Ms. Kabot said. “But we shouldn’t have to include payments for those old expenses when calculating the tax rate.”

What is also being proposed in Ms. Kabot’s correction plan is a fundamental change in the direct appropriation process. Though most capital projects are financed through the issuance of bonds, some—usually less expensive projects—are paid for with money from general fund surplus, or actual cash the town has in the bank. That was the case in 2005 and 2006.

But bonds have two safeguards in place: Town Board approval of the project, and the Town Board vote to actually issue the bond. Direct appropriations have only one safeguard, that being only the project’s approval.

In the past, once a direct appropriation for a project was authorized, the town comptroller had the authority to make the appropriate cash transfers to fund it. The Town Board never had a second look. Now, as with bonds, the Town Board will have to approve the actual movement of cash after it has authorized a direct appropriation for a given capital project.

Additionally, the Town Board, at the time it approves of the cash transfer, will have to note the source of funding for the project. This process, Ms. Kabot argues, will create a traceable paper trail similar to bond issuances. To further illuminate that trail, the plan requires two staffers in the comptroller’s office to sign off on the transfers to certify that the transactions were, in fact, made. The plan also requires that the comptroller compile a year end report listing all direct appropriations for capital projects to supplement the periodic reports on the status of authorized bonds and issued bonds during the course of the year.

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I seem to recall in a past article that LInda said all these problems will be straightened out by April 3rd. Well, Friday's almost here.
By westhamptonboy (227), Westhampton on Apr 1, 09 1:39 PM
An audit from the state comptroller’s office is the best thing that could happen. People in charge now do not appear to know what they are doing.
By Lefty46 (56), Westhampton on Apr 1, 09 2:06 PM
Linda, the buck stops with you.
By dagdavid (646), southampton on Apr 1, 09 2:06 PM
why focus on the budget? We have soup kitchens to shut down and illegals with mustaches to run out of town!
By littleplains (305), olde england on Apr 1, 09 2:32 PM
As the chief financial officer of Southampton Town I think and I EXPECT that you Madam Supervisor will resign your post now that you have made it clear you are in over you head,,what is the line of succesion
By Tianard (6), Hampton Bays on Apr 1, 09 3:02 PM
I cant understand how this went unnoticed by Linda for so long. Tianard is right, she is in over her head and casting blame. It seems to me that surplus should go back to the taxpayers, Heaney did it the right way. The more they collect, the more they spend. Give the surplus back to the residents.
By Hampton (50), Westhampton on Apr 1, 09 3:21 PM
Fire Blowes, Brautigan and whoever else participated in this slovenly, incompetence. Like East Hampton, they are going to raise taxes to cover their errors or worse their criminality. A STATE AUDIT IS AN ABSOLUTE MUST!
The money has flowed in for too long without strong oversight and transparency.
By Phanex (83), Southampton on Apr 1, 09 3:41 PM
Linda has to fix this ASAP - While perhaps guilty by association in this error I'm surprised Mr. Heaney is being defended here; as long as mortage tax money was rolling in the error was allowed to continue, and he used it for political purposes. It's imperative that a) the blame games ends, b) an audit is conducted by the State; c) and Town spending is cut so that the ensuing tax bill increases do not ruiin us all.

To Linda's credit I recall her asking good questions as to how the Town ...more
By North of Highway (280), Westhampton Beach on Apr 1, 09 4:18 PM
The 5% tax cap is there for a reason, to protect taxpayers when politicans want a quick budget fix. If Southampton residents/taxpayers care anything at all about the Town they live in, do not let the Town Board alter the tax cap law.

Even if the Board claims a modification of the tax cap is a one time event, do not buy it. If you believe that, there is a nice bridge in Hampton Bays I can sell you!

By CommonSense (71), Southampton on Apr 1, 09 4:18 PM
ahhh....the shell game is finally over. Instead of increasing taxes to fund their outrageous speding increases, they borrowed from this fund and that fund to keep the general fund escalation in spending hidden from the taxpayers by not raising taxes.

I can appreciate their effort in keeping my tax rates low, but doing so by shuffling money from this fund to that fund isn't kosher in my book and certainly not a long term solution. How about actually spending less?

It is indeed ...more
By C Law (354), Water Mill on Apr 1, 09 4:19 PM
Mike you so correct. Where were these guys? Perhaps we can look to the "Arthur Andersen" effect; alls well because we said so and hope no one looks and when they do we can blame it on the next guy.
I recall as a young budget analyst circa 1975 NYC budget crisis the budget director for the City of New york was essentially handed his walking papers when he couldn't answer the question of how many employees did the City have. He didn't even guess, he said he didn't know.
The Town needs real ...more
By North of Highway (280), Westhampton Beach on Apr 1, 09 5:02 PM
The thing that boggles my mind is tha this is not rocket science but rather Municipal Accounting 101. Clearly some training on basic budget and accountng skills are needed. As we used to say in the audits I was involved in "Tic and Tie." This is what you report, where's the back up documentation.
By number19 (111), Westhampton on Apr 1, 09 5:05 PM
Regardless of who's to blame, the Town Finances should be more visible
with an Independent Auditor at every step of the way. It's outrageous, that
we have such a Fiscal mess as our own Federal Government shows.

There's just too much Greed, Graft and Pork every step of the way !

Cut the spending, across the board and force our politicians to work for
$1 a year. Make the word " Public Servant" as it should be !
By Fordfern (6), Quogue on Apr 1, 09 8:14 PM
Forget budget & accounting training. Our tax dollars are not for training elected officials to do their jobs. They are the ones we elected to hire competent professionals to manage Town funds. CLEAN HOUSE. STOP UNECESSARY SPENDING. Cut salaries, benefits, perks, town paid vehicles, the list goes on. There's plenty of fat to cut out of the budget that the public is not even aware of, before cutting our services and raising our taxes. Forget the new courts in hampton bays, cancel any contracts ...more
By lol@hb (20), hampton bays on Apr 2, 09 9:20 AM
... the problem is that nobody understands what they are reading. Financial reports and spreadsheets are usually beyond the scope of elected officials at this level. The accountants know it, the comptrollers know it, the auditors know it, the politicos know it.

When this info is presented to a board they all nod yes - they understand - it looks good. When the financial management guys start to double talk and talk in jargon that nobody grasps - everyone simply nods yes.

I would ...more
By William Rodney (561), southampton on Apr 2, 09 3:02 PM
Tax rates, assessments, capital budgets, operating budgets, caps on tax increases; on and on it goes--a shell game to confuse the general public and manipulated to keep existing politicians in office--especially during an election year. THERE IS ONLY ONE THING THAT MATTERS AND ONLY ONE WAY TO KEEP A HANDLE ON PROPERTY TAXES--A CAP ON TOTAL SPENDING. They will argue that necessary services will have to be curtailed; blah, blah, blah, but THE SOUTHAMPTON PARTY did it successfully during the early ...more
By Doug Penny (64), Lexington, Virginia on Apr 2, 09 5:31 PM
That is exactly the case Mr Rodney, so shouldn't Mr. Blowes bear some accountability?
Doug, do you agree?
By Terry (380), Southampton on Apr 3, 09 10:09 AM
This problem appears to be the result of the same accounting practice used by the Bush administration. . . . do all republicans shift numbers like this to suit their own or party purposes and lie?
By lulubelle1956 (24), Westhampton Beach on Apr 3, 09 1:42 PM
The problem is that politicians like the last supervisor are more concerned with getting re-elected than they are with the well-being of the Town and taxpayers. Using surpluses to keep taxes down is purely to get votes, not a sound fiscal policy. Get a backbone and make some tough choices, if you want your pet projects to be funded, you have to increase taxes. If you want to keep taxes stable, stop promising new services. If the demand is there, the justification will be a no-brainer. In any ...more
By eagleeye (82), Sag Harbor on Apr 4, 09 1:42 PM
The issue is that the Photog is still stalling……what is the fund balance can u tell us now….I am sure you can’t. How much have you spent so far Photog…doesn’t anyone get it? How much are you spending of surplus……….i hear the number is about 15 million so far and I hear there is no surplus left……..is the transfer station funded for the year?.......nothing but lies and stall tactics….what is the increase going to be in taxes this year…..hey whose budget was that last one……you submitted 70 resolutions ...more
By Hamptonman911 (14), Southampton on Apr 5, 09 3:40 PM