East Hampton has been digging itself out of debt for more than half a decade, since the financial mismanagement under former Town Supervisor Bill McGintee left the town faced with no choice but to take nearly $30 million in deficit financing and institute severe budget cuts.
Now, current Town Supervisor Larry Cantwell is warning that state budget tax cap calculations for next year could squeeze the town’s 2016 budget even tighter, at a time when residents are pleading for more police and code enforcement officers to help quell the out-of-control summer partying scene, particularly in Montauk.
The New York State Comptroller’s Office announced July 20 that the base tax levy cap applied for local governments for 2016 will be tightened to “significantly less than 2 percent.” The tightening will set the cap for local governments at 0.73 percent for 2016, compared to 1.56 percent in 2015.
The tax cap is set at either 2 percent or the rate of inflation, which has recently been less than two percent. There are several other factors unique to each town that could raise or lower that town’s tax levy cap, including changes in taxable property, large settlements paid by towns and pension contribution increases.
While this is bound to create a problem for towns throughout the state, East Hampton Town Supervisor Larry Cantwell has been very vocal in the past week about the challenge it poses for East Hampton.
“This creates tremendous stress on the town as it gears up to begin the 2016 budget process,” said Mr. Cantwell at last week’s work session. “The so-called 2 percent tax cap is not a 2 percent tax cap at all.”
The state’s current calculation for East Hampton estimates that the final cap levy increase allowed for 2016 will be $1,095,000, compared to $1,694,400 in 2015 – a 35 percent decrease.
East End supervisors’ 2016 budgets are due to be turned in by the last day of September, after which the town boards will make revisions, public hearings will be held, and final budgets will be adopted by mid-November.
Mr. Cantwell said East Hampton may be forced to pierce the tax cap in order to provide needed services.
“At a time when our residents are looking for significant increases in our enforcement of local laws and more police and code enforcement staff to address quality of life issues in hamlets like Montauk and Springs, we are being told by the state that in order to do so, you may have to pierce the levy cap that is half what it was originally intended to be when the law was passed,” he said.
East Hampton is also looking at an increase in health insurance premiums of between 6.4 percent and 8.6 percent, based on the most recent projections from the New York State Health Insurance Program, and the town’s labor agreements require the town to pay salary increases in the 2 percent to 2.5 percent range.
The town’s base levy increase cap is one-third of the amount that would be needed to pay just the negotiated salary increases.
“When you negotiate a contract with a yearly salary increase near the assumed 2 percent levy cap, you believe you have obtained a number fair to the employees and to local taxpayers, until you learn the levy cap is being cut drastically at a time when health insurance is increasing and retirement costs are at best holding steady,” said East Hampton Town Budget Officer Len Bernard. “This obviously puts tremendous pressure and stress on the remainder of your budget – especially when the public is looking to the town for increased services in other areas.”
“It is more than ironic that the State Health Insurance Program, for which we are a participant, is telling us rates could go up by as much as 8.6 percent on one hand. Then, on the other, the state is telling us the base increase allowable for our tax levy is 0.73 percent,” added Mr. Cantwell. “Something seems inherently wrong with a system that produces these scenarios for local governments.”
The Comptroller’s office said school districts, whose budget years begin July 1, could face tax levy increase caps of between zero and 0.73 percent next year as well.
This year, Southold Town’s tax levy increased 1.45 percent. Southampton has been toeing the line at a zero percent tax levy increase for the past four years. Riverhead, whose budget relied heavily on several one-shot revenue sources from the sale of town property, budgeted for a 2.1 percent levy increase this year. Shelter Island pierced the tax levy cap, with an increase of 5.9 percent for 2015.
While school budgets that pierce the tax cap require passage by 60 percent of voters, town budgets are not voted on by the public, but must receive approval from 60 percent of the governing body that approves the budget.