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.
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 its own residents.
The basic error was that the town paid its police expenses over several years from accounts that contained money from every taxpayer in Southampton, known as whole-town taxes.
By the way, does AVZ just get ...more away with "woops"? Why are we still paying these people? Must be nice.
When you add bookeeping errors into the mix, it can become a real disaster.
Kabot and any other town official WHO SHOULD HAVE KNOWN must be asked to step down. NOW.
Elected officials -- incomptent elected ...more town officials -- are putting the TAXPAYERS is a terrible position and our town taxpayers will suffer increased property taxes at a time of economic distress and reduced home values.
But for Linda Kabot it is all about blaming someone else.
IT WOULD BE ALOT EASIER FOR HER TO SAY WHAT SHE DOES KNOW
NOTHING
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 facet of government from here to the federal.
For Providence's sake, look at the "Jones'" we have to play catch up to.
Can't imagine why we're broke...
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 policies a la Nassau County's Gullotta which nearly bankrupted them while the rest of the country were enjoying surpluses.
Many of these comments obviously are from Heaney admirers in whose watch and administration these shenanigans occurred! Truth hurts! Better attack others to change the subject.
For the ignoramuses, all these will come out in the real audit, not from the joke firm AVZ auditing firm that is also starring in that financial catastrophe in East Hampton.
Heads, I use it, tails you do, go ahead and flip and coin and tell me the results.
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?
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?
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 task.
Adios Linda, take the Assistant GSA Manager with you.