Riverhead to Take Action Soon on 2015 Budget Crisis

Riverhead Town taxpayers are facing a potential 12.5 percent tax hike next year if the town doesn’t take one of two decisive alternative actions: laying off about 60 workers — 20 percent of their work force — or obtaining a bridge loan of up to $6 million in anticipation of the sale of lots at EPCAL.

It appears the town board is leaning toward going ahead with a tax hike, but will, for the first time, include the increase as a separate line on residents’ tax bills, denoting that this increase is to pay down debt incurred when the town capped its landfill on Youngs Avenue.

Riverhead finance administrator Bill Rothaar and deputy town attorney Ann Marie Prudenti gave a presentation of the alternatives at a work session Aug. 7.

Mr. Rothaar explained that the town has been using money from its cash reserves, known as a fund balance, in order to balance the budget over the past several years. At the end of 2012, he said, the town had $9.75 million in the fund balance, but in 2013, they used more than $4 million to pay expenses.

By the end of 2013, there was only $5.5 million left in the fund balance, and the town budgeted to use $3.5 million of that money this year, leaving them with just $2 million left next year, when the town needs to keep a healthy reserve in its fund balance for emergencies and for the sake of its credit rating.

He estimated that the town will be $4 million overbudget next year unless the town takes dramatic action.

“The budget is so close, it’s almost a non-functioning budget,” remarked Town Supervisor Sean Walter.

Mr. Rothaar said he calculated the number of layoffs needed to balance the budget based on the town’s total payroll costs, divided by its 300 employees, but in reality, due to union regulations, the first people to lose their jobs would be those with the least seniority, and the lowest salaries.

“If we cut 20 percent of the workforce, we would cut the lowest paid employees, anyway,” said Councilman Jim Wooten. “New employees are paying 25 percent of their medical, and you’d cut the most eager employees and the ones who are costing us the least.”

If the town goes forward with the tax increase instead of layoffs, they will need to hold a public hearing because they will pierce the state-imposed 2 percent cap on tax increases.

“If you look at cutting that number of employees, you can’t stop crime in this town, and if you cut the police staff, the police will run overtime,” added Mr. Walter.

Riverhead still owes $29 million in principal on its debt to close the landfill, which will be paid off in 2023, but the payment amount decreases over time to the point where the town is anticipating owing just $2 million per year by 2018.

By breaking out that debt on a separate line in residents’ tax bills, board members said taxpayers will be able to watch that line decrease over time as the debt is paid off.

“This can has been kicked down the road for 11 years,” said Mr. Wooten of the landfill debt. “We had hoped something would happen by now to head off the inevitable.”

“This board has been very open and honest about that,” he added.

“I just don’t want to kick it down the road anymore,” said Councilman John Dunleavy. “I don’t care what we do, but this town board right here is going to be blamed for raising taxes. Whatever you do, you have to be prepared.”

Mr. Rothaar estimated, if the town decides to go ahead with a 12.5 percent tax increase, the average taxpayer will pay $224 more next year to cover the landfill debt. He added that the final tax increase could be less than 12.5 percent once the budget is finalized.

Mr. Walter said that due to the town’s recent re-bid of its garbage contract, residents who had been paying more than $400 per year for garbage pickup are now paying $285 per year.

“Because of the garbage district bid, if you add it up you’re pretty much where you were in your garbage taxes before the garbage bid,” he said. “When I first took office, the tax increase was 16 percent. We’ve done a good job, but I feel some sense of failure that we weren’t able to fix this.”

The board does have a third option, but it’s a risky one. With the subdivision of EPCAL imminent, the town’s Community Development Agency could take a bridge loan of up to $6 million to cover the costs of preparing the land for sale. Town departments that have been working on the process have been documenting their time spent on CDA work that could be covered by that loan.

The town would have to repay that loan within two to three years from the sale of land at EPCAL.

But with many uncertainties still in the wind on a a piece of land that has potential to be a huge asset to the town but has been beset for years by setbacks and quarreling, it’s a risky option at best.

Mr. Walter said the town could take the bridge loan and not use the money right away, instead taking a loan from its worker’s compensation fund to pay off the debt and only use the bridge loan money if someone files a worker’s compensation claim against the town.

“If we do it and it’s successful, we’ll be heroes,” said Mr. Walter of the bridge loan. “If do it and we’re not successful, we’ll have put the town in a much worse position.”

Mr. Walter said he recently polled the town’s department heads, who were all in favor of the tax increase.

“I don’t want to push this down the road,” he said of the landfill debt.

“I don’t think we’re going to be selling property there as fast as you think [at EPCAL],” said Councilman Dunleavy. “I just want to be realistic…. As long as you explain to the voters why this has to happen, I think the regular voter is smart enough to know that this had to happen eventually.”

Mr. Walter said he is going to prepare two resolutions for the town’s next meeting on Aug. 19, one to go forward with a public hearing on piercing the tax cap and one to go forward with the bridge loan.

The town supervisor’s draft 2015 budget is due to be released to the public at the end of September.