Gurney's Inn
October 10, 2007

Jay Decries "Bogus" McGintee Budget

East Hampton Town Supervisor Bill McGintee's preliminary budget "creates a false picture of the town's finances, as if everything's OK," his predecessor, Legislator Jay Schneiderman said this week. "I care about this because we worked so hard to get the town on its feet to reverse the trend of failing credit ratings and get four credit rating increases to the highest town in all the state at the time. I hate to see our reputation destroyed," he explained. Schneiderman's former budget officer Len Bernard added, "It makes you want to cry to see what's going on."

The projected budget calls for a modest $3.6 percent spending increase and a two percent rise in the tax rate, less than one percent in the village. Schneiderman and Bernard believe the "most startling" item in the budget is a potential illegal use of Community Preservation Funds.

"The reason it's going up only two percent is they have bogus revenues in the budget that should be taxed," said Bernard.

The town grossed $18.3 million in last year's budget and added $1.75 million in surplus funds from the previous year to bring the total amount to $20.1 million. For 2008, the town is estimating $23.4 million in revenues, despite the fact it has spent all the surplus and has nothing left in the tank to contribute. That means the town needs to increase revenues by almost 30 percent to make the 2008 numbers work.

McGintee's budget lists $7.762 million-plus in CPF revenue. It lists $5.035 million needed to pay CPF debt service and another $227,213.27 in CPF administrative costs. That leaves $2.5 million in CPF money unaccounted for. "This would appear to be an attempt to use CPF money [money collected for land preservation] for normal everyday expenses and to reduce tax levy by $2.5 million," said Bernard.

According to Assemblyman Fred Thiele, who was the author of CPF legislation, CPF is a dedicated fund that may only be used for the preservation of land, debt service and costs associated with the management and stewardship of properties acquired with the Two Percent Tax monies. It has to be used for those purposes. It can't be used for anything else, Thiele emphasized.

McGintee's budget also proposes an Interfund transfer for health insurance, listing revenue being transferred at $4.835 million. That should equal the amount budgeted for health insurance. It doesn't. It's a quarter of a million dollars more. That's "virtual money, it doesn't exist," Bernard contends. "They might as well have created a new revenue item and called it 'Monopoly Money,' because that's what it is," he continued.

More "bloated" revenue figures can be found throughout the draft document, Schneiderman and Bernard maintain. Money collected for justice fines, planning board fees, solid waste fees, and cesspool fees increase significantly, adding more revenue than has historically been collected.

The town is anticipating $5.95 million in mortgage tax income, up from $4.15 million in 2007. But as Bernard points out, much of that line item comes from refinances, and with the recent collapse of the sub-prime mortgage market, lenders have grown leery of writing mortgages. "It ignores market conditions," Bernard said. "It's irresponsible."

The town forecasts a $275,000 surplus in its secondary general fund, used to administer "Part Town" revenues. Yet it is common knowledge around Town Hall that there are no surpluses; the board is functionally out of money, and has borrowed from next year just to make ends meet. There are no summaries of the assorted funds balances.

The town also earmarks $520,000 for beach, parking and launch permits, though the figure was only $310,000 in 2006 and $370,000 budgeted for 2007. As of July 2007 the town had raked in about $230,000, but Bernard said most of the permits have already been sold by the time the summer comes.

The 2008 budget also forecasts an increase in the sale of jet fuel and landing fees at the East Hampton Airport, and calls for $750,000 of revenue from the justice court, even though the actual figure in 2006 was only $634,124.

Neither McGintee nor budget officer Ted Hults returned requests for comment on the assertions – sources have said McGintee has issued a gag order warning employees not to talk to The Independent. Councilwoman Deb Foster alone returned calls.

On Monday, she said she had just begun her own examination of the budget. While she reserved comment on the CPF situation, she noted that the town has made a point of increasing all fees across the board to bring them more in line with what other towns charge. As to justice court fines, she said the town voted to almost double fines. To discourage recidivists who see low fines as the cost of doing business, she said, "We want them to hurt."

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