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Lay-Offs May Be Only Way Out Of East Hamptonís 2009 Deficit

Originally Posted: May 06, 2009

Aaron Boyd

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East Hampton Town Comptroller Janet Verneuille warned the Town Board of an impending $4 million deficit by the end of 2009 during her monthly financial update on Tuesday, May 5. Photos by Aaron Boyd

East Hampton - East Hampton Town Comptroller Janet Verneuille's assessment of the town's checkbook, and the likely state of the economy for the remainder of 2009, predicts a tally of up to a $4 million deficit by the end of this fiscal year, leaving the town board with few options to finishing the year in the black other than possible lay-offs of town employees.

The 2007 fiscal year ended with a $10,554,951 deficit, as certified by the 2007 audit. The 2008 audit will not be available before September, though Verneuille's preliminary numbers suggest a $1.8 million shortfall in mortgage tax revenues, $2.45 million under-budgeted for health insurance and $2 million less than projected in revenue for the Community Preservation Fund (CPF). That calculates to mean that East Hampton began the 2009 fiscal year with a deficit of approximately $16,804,901.

The State of New York approved a municipal bond to cover the town's deficit up to $15 million, converting the deficit into 10 years of structured debt service and effectively mending most of the gap moving forward. Once the deficit financing begins, keeping the town solvent will require balanced budgets without shortfalls or gaps, though if Verneuille's calculations are correct, the town will still have to shoulder $1,804,901 of debt going into 2009.

Town Supervisor William McGintee has stated several times over the last year that 2009 must "finish in the black," however the debt carried over from 2008 and a projected shortfall of $2.3 million in anticipated mortgage tax revenues this year places the deficit at approximately $4.1 million by the end of 2009.

Verneuille stressed the need for immediate action from the town board. "We have to make tough decisions now, but I think we're going to have to make more tough decisions in the 2010 budget," she asserted, explaining that the board "needs to make these decisions quickly because if we run out of cash we don't have much time."

Town Councilman Brad Loewen suggested that the town base any layoffs on which services can be cut.

Verneuille suggested that the board consider various "one shot" options for revenue to close the $4 million gap for 2009, including real estate and asset sales and a one-time tax. "The board needs to seriously consider all of these things," Verneuille maintained, adding that another New York municipality in a similar condition was able to shore-up their finances with a one-time tax. "People were much more willing to pay a one-time tax rather than a recurring tax," she explained, as the residents favored a single hit rather than spreading the financial burden over several years. The one-time tax would be used as a last resort if all other means of paring the town budget fail, the supervisor assured.

Preparing For The Worst
If land and asset sales are not enough to cover the shortfalls in the 2009 budget, the town will have to decrease their workforce, whether through attrition, offering early retirement or, in the worst case scenario, lay-offs. All of the vacant positions that could go without being filled were removed from the 2009 budget and those employee salaries were moved into contingency along with $400,000 from the whole- and part-town funds by the Town Board last week. Early retirement is an option, however that requires an initial buy-out that may save the town money over time but could increase the deficit in the short run. "I really do see this coming down to layoffs," Councilwoman Julia Prince contended, "All the great ideas out there about early retirement, they all start with opening up a dialog with the unions."

"I met with [CSEA President] J.J. [Kremm] yesterday very briefly," McGintee stated, "Just to advise him that this is on the table." The supervisor contended that discussions with labor representatives would be "fruitless" if conducted before the board had the opportunity to solidify their course of action. "Each one of the board members should make a list on their own" of potential cost reductions or new revenues, McGintee recommended. "We need to do the work independently and take a look at where we are," he suggested. "We need to go back to basics, otherwise we run the risk of getting the same-old, same-old rather than really fixing things."

Prince offered to draft a letter from the board to the various town department heads to let them know "they're going to start losing people, we're serious." During the 2009 budget deliberations last year and the recent fund transfers, the department heads' "philosophy has been to give money back from their budgets," Prince surmised. "One thing we haven't said to them is look at the services we provide."

Councilman Brad Loewen agreed with Prince's stance and offered a procedure for determining which positions to dissolve. In establishing the town's daily operations, "We found a service then we hired the people," Loewen reasoned. "First thing we have to do is determine what we don't need in services anymore, or what we can't afford in services anymore or what services are not supporting themselves," as a number of programs generate enough revenue to be self-sustaining. "We have to get going on this," he charged.

"The plan has to be in place by the end of this month and implemented by June," McGintee emphasized, "That puts us half-way through the year."

The Town Board will have to seriously consider layoffs over the next few weeks, with the supervisor's deadline for solutions coming up at the end of May.

Councilwoman Pat Mansir urged the board to come to a decision quickly for the sake of their employees. "There are employees out there with knots in their stomach," she explained. "For months and months they've been thinking, 'When am I going to get laid off?'" Mansir concurred with Loewen tact, "We need to find out what services are out there that are break-even, we need to know precisely and we need to know what things are out there that we're donating, where the taxpayers aren't getting paid back."

"I don't care how I come up with $4 million, I just need $4 million," McGintee reiterated. "What I need are short-term solutions."

One option that neither the board nor Verneuille recommended was going back to the state to request a larger allowance for deficit financing. "I don't advocate going back to the state, but it is another alternative," Verneuille counseled. "All the options are on the table," McGintee maintained. "We need to roll up our sleeves, shrink the workforce, preferably by attrition, and shrink our services."

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Guest (e h resident) from east hampton says::
I still do NOT understand why we, the taxpayer, is footing the bill for BILL's pet money manager who lost control of this a long time ago.. Whyyyyyyyy is he still employed by the town, by us the taxpayer...100k per year..does he have something on the Supervisor we should know....Hmmmmm.
May 13, 2009 6:48 pm

Guest (EH Resident #2) from East Hampton says::
I agree... What a bunch of morons to run this beautiful town... I mean look at this picture. Do these people even appear like they know what they're doing, or getting ready to take an afternoon nap. McGintee, karma will get you, now that you're being investigated... the money you stole will be found. And the entire town is waiting for the day it'll happen... it isn't if, but when...
May 11, 2009 10:59 am

Guest (EH) from TOWN RES says::
May 8, 2009 6:47 pm

Guest (EH Resident) from East Hampton says::
Lay offs should start with the supervisor and the rest of the lame board! There are enough committees created to run the town until the new board arrives in November!
May 8, 2009 4:27 pm


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