Town capital budget discrepancy is downgraded

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What was originally reported to be a $19 million discrepancy in the Southampton Town capital budget last week might actually be closer to a $250,000 discrepancy, according to the latest calculations put forth by Town Supervisor Linda Kabot and Comptroller Steve Brautigam.

But even that number is subject to change, the comptroller warned this week.

The new estimate comes more than a week after Ms. Kabot revealed that the town’s capital fund budget and actual balance do not match up.

The supervisor first mentioned that the town’s computers showed $35 million in capital funds, though only $16 million was actually in the bank, during a Town Board work session on January 23. Since then, Mr. Brautigam said Ms. Kabot directed him to do some investigating.

“She asked me to go back and make a quick calculation after it was discussed improperly in public,” Mr. Brautigam said, adding that the number “changes every day” as some of the 170 capital accounts go back 10 years. “I have to go back and tie the Town Board resolutions to the funding.”

Town Management Services Administrator Richard Blowes, who stepped down Monday from his post as deputy supervisor in order to focus on town finances, said he would rather hold off on commenting about the updated $250,000 figure.

“I would feel more comfortable waiting for the entire analysis to be complete until we make a determination on a definitive number,” he said. Previously, Mr. Blowes said a detailed accounting of the capital fund will be complete and made available by April, the end of the first fiscal quarter.

But Ms. Kabot expressed confidence in Mr. Brautigam’s accounting and said she stands behind the latest number.

“That figure came from the comptroller,” she said. “He’s the one responsible for doing the math and drilling it down and piecing it all together. I feel comfortable in putting out that number.”

But Town Councilwoman Anna Throne-Holst, who has been critical of the fact that the Town Board has not received a thorough accounting of the capital program, said she does not understand the drastic reduction in the ledger.

“How is it she has that figure and we don’t?” Ms. Throne-Holst said.

Capital—or long-range—projects, such as the construction of buildings and roads, are funded mostly through the issuance of bonds and financed over a period of time. That differs from the operational budget, which pays for day-to-day government functions, and is funded through the more predictable revenue stream of property taxes and fees.

The controversy over the capital budget, according to Mr. Brautigam, stems from a lack of understanding of how capital projects are funded—some are funded through bonds and others through grants and applications. Previously authorized, but unissued bonds, Mr. Brautigam said, are responsible for the capital funds dilemma.

Ms. Kabot said the practice of authorizing money for capital projects ahead of time, then back-filling the project with the funding at a later date, is a common one.

“There’s no criminal activity afoot here,” she said. “But we don’t want to do it this way anymore. Going forward for 2009, we’re going to be segregating each capital project into its own individual account.”

The comptroller’s latest calculations haven’t alleviated Ms. Throne-Holst’s concerns. “I’ve been asked to go along to get along,” she said. “But now, time is up.”

The councilwoman is now seeking documentation substantiating all the town’s capital projects, either authorized by Town Board resolution or adopted in the town’s capital budget. Ms. Throne-Holst said she has been asking for this documentation for almost a year.

Town Councilman Chris Nuzzi has also expressed frustration with the delay in the capital numbers, and former Town Councilman Dan Russo recently said that he began asking for the same figures when he was appointed to the board last February.

In explaining the delay, Ms. Kabot said reconciling the capital budget is a “monumental task,” though she promises a full accounting is forthcoming. The supervisor also said she plans to ask the New York State Comptroller to review the town’s final report on the capital budget.

Ms. Kabot said Town Board members are upset because the town’s capital records are not “neat and tidy.” But Ms. Throne-Holst said it shouldn’t take a year to put together the information she and other board members want. “I’ve been around enough budgets to know that it doesn’t take a year to get things ‘neat and tidy,’” she said.

In the meantime, Ms. Kabot said department heads have been advised that all “old” capital projects are frozen until the ledger is balanced. The supervisor said critical public safety works and road improvements will be given top priority. Town Councilwoman Sally Pope recommended the freeze at the board’s most recent work session, on January 30, arguing that the town should hold off on any further projects until the capital budget is reconciled.

In a op-ed piece submitted by Ms. Kabot to The Southampton Press on Monday, the supervisor criticized the prior administration’s bookkeeping and said she ran for the town’s top chair “to restore public trust in local government and stop the ‘Enron Accounting’ that was going on.”

Ms. Throne-Holst responded to those charges by saying it was time to stop laying the blame for all the town’s ills at the feet of former supervisor Patrick Heaney. “She blames him, but she was a part of that administration just as I am part of this one,” Ms. Throne-Holst said. “Why wasn’t she asking these questions back then?”

Although she cites “bad-record keeping” on the part of the prior administration, Ms. Kabot said she is not blaming anyone particular, including former town Comptroller Charlene Kagel. “Bottom line is, I said bad record keeping. I did not pin the blame on any one individual.”

Ms. Kagel, however, responded to Ms. Kabot’s allegations and said she was not going to engage in a back-and-forth with the supervisor.

“Ms. Kabot has put people to work in her administration who are unable to give the Town Board the financial information they need to make policy decisions,” Ms. Kagel said in an e-mail. “That is her problem. That is a major problem. And the only solution she can formulate is to blame other people and make ridiculous statements to the press. I stand on my record.”

Ms. Kagel reiterated that her offer to come in and assist on the capital budget stands. “I’m happy to reach out to Charlene,” Ms. Kabot said. “If she wants to come in, I’m open to that.”

According to Ms. Kabot, the inconsistency in the capital budget is a “reconciliation matter, nothing more” and is due to past projects being authorized but never bonded, as Mr. Brautigam suggests. In other words, the supervisor is claiming that the Town Board approved capital projects, but the money for those projects was never actually borrowed and deposited into capital accounts.

“In the meantime, expenses are being charged by the respective department heads to move the capital project forward because the town comptroller’s office has set up a new project account code,” Ms. Kabot explained in her op-ed. “Sometimes the bond issuance may not happen for years, or borrowing occurs in lesser amounts than the original authorization, based upon phasing associated with the capital project.”

The supervisor goes on to accuse the former comptroller of “interfund-borrowing” to compensate for depleted cash in capital funds. “Although this process is legal per se, clearly it is unsettling to hear about co-mingling of funds, advancing loans across taxing districts, and borrowing after the fact to pay back expenses already laid out for capital projects.”

That still doesn’t satisfy Ms. Throne-Holst, who said she still wants to see every Town Board resolution that authorizes those projects linked to a funding source. “I want to know what has been bonded, what has been spent, what’s left, and most importantly, what is our debt service,” she said.

At the January 30 work session, Ms. Kabot said headlines in The Press regarding the $19 million she originally cited were “sensational” and geared toward “selling newspapers.” Ms. Kabot said other news outlets that reported the matter as a mere “reconciliation error” were closer to the mark.

“Those sensational headlines are nice to talk about at cocktail parties and help to sell newspapers,” Ms. Kabot said. “But we’re committed to transparency.”

At the same time, Ms. Throne-Holst and Mr. Nuzzi continued to express frustration with a situation that has changed little since it became public more than two weeks ago, and with Mr. Blowes.

“Statements are made, information is requested, we are told it is coming, but it is not,” Ms. Throne-Holst said to Mr. Blowes during the January 30 work session after he said a complete report detailing the situation was still to come. “We were told Tuesday that we would have a complete accounting today, but we don’t. We have to stop being told things are forthcoming when they are not. It is misleading to us as elected officials as well as to the public.”

Coming to Mr. Blowes’s defense, Town Councilwoman Nancy Graboski said providing that information requires a lot of time and work.

“You have to understand, in order to address these discrepancies between what we show in the capital budget, what has been bonded and what has been spent, we need to go back to each capital project and link each project with a Town Board resolution and carefully analyze and evaluate all of the numbers,” Ms. Graboski said.

“I know that,” Ms. Throne-Holst responded. “And that’s what I’ve been asking for.”

A visibly frustrated Mr. Nuzzi said, “I thought we were going to have that today.”

Mr. Blowes said he didn’t have the time to deliver that level of detail. “I don’t have the sufficient time to provide that information,” he said.

Ms. Kabot charged Ms. Throne-Holst with leveling unfair criticism at Mr. Blowes, who she said is getting to the bottom of the discrepancy.

“You just got elected a year ago,” the supervisor said. “We are marshalling all of our resources to figure this out. It takes time. We need to stop with all the criticism and not let our egos get in the way.”

“It’s not a matter of ego,” Ms. Throne-Holst said. “It’s a matter of public trust. I wasn’t the only one sitting in this room Tuesday who thought we would have had more detail than we’re getting today.”

“We have some numbers,” Ms. Graboski said. “But nobody is willing to stand behind those numbers without some further research.”

Mr. Brautigam, who wasn’t present at the meeting when the inconsistencies in the capital budget were first revealed, said Friday that he was confident that the budget would be reconciled.

“I feel comfortable that we will be able to balance it to a reasonable dollar figure,” Mr. Brautigam said, adding that “no money is missing.”

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