East Hampton deficit nearly doubled in 2007

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Preliminary reviews of East Hampton Town’s spending during 2007 indicate that the 2006 budget deficit more than doubled during the past year, to some $8.3 million, according to a report from the town’s auditors.

In the town’s Annual Update Document (AUD), issued to the Town Board last week, the auditors estimate that the deficit in the town’s general fund increased by more than $5 million in 2007 after broad overspending in both the A and B funds.

According to board members who reviewed the AUD with representatives from the auditing firm, the B Fund—the portion of the general fund that does not include services provided to East Hampton Village residents—fell an additional $3.4 million into deficit in 2007. After 2005 and 2006, it was already some $3.36 million in the red. It’s total deficit now stands at $6.7 million.

In addition, the portion of the general fund that covers services for the entire town, known as the A Fund, dropped from a surplus of $1.2 million at the end of 2006 to a deficit of more than $1.6 million—a nearly $2.9 million swing from black to red.

The numbers in the AUD were provided by board members Pat Mansir and Pete Hammerle.

A large portion of the deficit appears to be due to a more than $4.3 million cost overrun for employee retirement and health benefits and lower than expected mortgage tax revenues, Mr. Hammerle said.

“We are in much worse financial shape than we thought we were,” Ms. Mansir said this week. “It’s not impossible to reverse, I don’t even think it is hard to reverse, but we’ve got to get it laid out for the public as soon as possible so we can start working on it.”

Supervisor Bill McGintee said Tuesday that he did not know the exact numbers the AUD showed, but that he expected to see about $3 million in deficit increases in the two funds.

In recent months, Mr. McGintee has said he expected to see the deficit rise by between $1 million and $2 million in 2007 and then begin to retreat after 2008. Earlier this week, he was saying it looked as if the overall jump in the deficit would be about $3 million—$1 million in the A Fund and $2 million in the B Fund, far less than the AUD shows.

“We knew it was going up because we still had reserve in there,” Mr. McGintee said. “We thought it was going to be a couple more million so maybe this is a bit more than we anticipated.”

Mr. McGintee has said the deficit can be eliminated within two years, but may require steep tax hikes and possibly layoffs of employees.

The AUD is a preview of the full town audit for the year, which is not expected to be released by the auditors until September.

Board members said this week that the deepening deficit increases the urgency for them to start making the fixes needed to get spending under control. “The board needs to work together to fix this,” Councilwoman Julia Prince said. “There are a lot of things we need to do to plug the holes and fix things on the administrative side.”

Ms. Prince said the board would be discussing the budget crisis in detail for the first time at its May 6 work session.

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