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Southampton Town Faces Four Main Financial Hurdles

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As Southampton Town officials continue to wade through hidden I.O.U.s from the general fund to the capitol fund in the years 2004 through 2006, last week Southampton Town Supervisor Linda Kabot announced that the town would hold off on filing an annual update document with the State Comptroller, as recommended by the town comptroller Steve Brautigam. In a press informational session held by Kabot on Monday, May 18, she said the total authorized unissued debt for the town was around $19 million and added that the town faces four major hurdles in terms of correcting its finances.

Firstly, reported Kabot, since 2003 the town used interfund loans from the general fund to cover other town costs, such as police fund expenses, waste management expenses and highway fund expenses. These loans, she added, kept property tax increases at bay for these town expenses.

According to documentation provided by Kabot, “As of December 31, 2007, approximately $7.5 million in operating deficits were reported by the external auditors for the Police, Highway, and Waste Management Enterprise Funds, as well as various special assessment districts.” Kabot reported the “co-mingling” of funds was the crux of the problem. She added the town plans to enact a five-year deficit reduction plan, which was part of the 2009 adopted budget. The plan will steadily increase property taxes to cover these interfund transfers.

The second dilemma the town must reconcile is the often reported upon “errors, omissions and hidden I.O.U.s in the capital fund,” said Kabot.

“An unreported liability totaling over $8.5 million due from the General Fund to the Capitol Fund was confirmed March 19, 2009, for the years 2004, 2005 and 2006 … this administrative oversight for the years 2004 through 2006 was not conveyed to the town board during 2007 or 2008,” stated Kabot.

She added that it has been reported that the former comptroller Charlene Kagel admitted to knowing of the problem in July 2007.

“Since about six weeks ago, we have had no discussion with Charlene,” said deputy supervisor Bill Jones.

“It appears everyone is lawyering up,” Kabot stated, who added earlier that “the town is looking at all legal options.” Though, it remains unclear if the former comptroller will be subject to any repercussions.

Kabot added that the town “is still digging to get to every penny” of money that was approved to be transferred from the general fund to the capital fund but was never moved.

Town management services administrator Richard Blowes said the town should have certified financial reports by August, which will help ameliorate the third problem facing the town. The town needs to have accurate financial reports in order to authorize unissued bonds to begin paying off the town’s debts. Kabot added that she is insisting upon an external audit to “help review and restate fund balances.”

The town’s fiscal worries are further compounded by significant decreases in mortgage tax revenue. According to Kabot, the town is anticipating a $2 million shortfall for 2009. The town had originally budgeted for $7.5 million in mortgage tax revenue. This will lead to several cost cutting measures at town hall. Purchase orders at or above $1,000 will require Kabot’s signature and all equipment, vehicle and electronic gadget purchases will be suspended.