East Hampton Town Piggy Bank Is Empty
 Morgan McGivern
|
(7/28/2008) Severe fiscal problems in East Hampton Town, where a budget deficit is estimated at $10 million to $12 million, continued to cause concern this week, as a lack of cash forced the town board to borrow to pay immediate bills, such as payroll, and more questions were raised about the town’s accounting, this time of its health insurance costs.
With no money in reserve, East Hampton Town will issue a $4 million short-term bond to cover upcoming bills, until mortgage tax revenue due from Suffolk County arrives, according to a resolution passed by the town board last Thursday.
According to the Suffolk County treasure’s office, a check for $2.27 million, covering mortgage taxes taken from October, 2007, through March 31 of this year, will be mailed to the town today. Town Supervisor Bill McGintee said an additional $1.1 million in public safty funds is expected from the county as well.
Delays in the receipt of money due from the county are not unusual, but surplus town funds can normally cover temporary shortfalls until they come in.
Last year, with the town also facing a cash flow problem, $8 million was borrowed from the community preservation fund without the town board’s knowledge. That practice was determined to be inappropriate.
The town’s 2008 budget includes $5.9 million in expected mortgage tax revenue, and, despite sharp economic downturns affecting the real estate market, Mr. McGintee said yesterday that he remains “hopeful that we’ll meet our mark.” He said he expects at least another $1 million in mortgage tax revenue from the 2008 second quarter.
According to James Malone, a senior deputy county clerk, this year’s mortgage tax revenues for East Hampton Town are off 42 percent from last year. In the first six months of 2007, he said, just over $4 million came in, compared to $2.3 million in the first half of this year.
Also this week, questions were raised over just how much East Hampton Town has paid in recent years for employees’ health insurance benefits.
Saying the town could save several million dollars each year by adopting a new coverage plan, Supervisor McGintee has been pushing for a change. Though the Civil Service Employees Association union maintains its contract does not allow that to occur, Mr. McGintee believes that it does, and in a split vote earlier this year the town board approved looking into a change to the Empire health plan. That vote triggered a requirement that the union, if opposed to the switch, submit an alternative plan that would save the town a similar amount of money.
The deadline for that submission was Monday. However, a discrepancy was discovered between figures provided to the union by Island Group Administration, which oversees the town’s self-insurance plan, as to the total cost of the health plan last year, and the amount the town says it has paid, according to a preliminary 2007 audit.
According to Alan Kaplan of the Island Group, who provided an accounting of paid claims, administrative fees, and other costs, the total cost to the town for insurance in 2007 was $8.3 million. In a preliminary “audit update document,” the town’s auditors set the figure at $9.6 million.
And after reviewing the bills sent to the town from Island Group from Jan. 3, 2007, through Dec. 21, 2007, Mr. McGintee set the number at $8.9 million. He noted that the audit update was based on preliminary, unaudited data, and suggested that different practices in accounting for health costs between the town budget office and Island Group, such as the inclusion or exclusion of costs for vision care and dental benefits, could explain the discrepancy.
“We don’t pay unless he sends [a bill] to us,” Mr. McGintee said, referring to Mr. Kaplan. “If he’s claiming it was less, then maybe we overpaid him.”
The town is being audited by state comptrollers, he noted, and Island Group’s charges and payments for East Hampton’s health plan are being audited by consultants at the town’s request. “We’ll wait for the results,” he said.
But Town Councilman Pete Hammerle, who this week reviewed health insurance figures dating back to 2001, said he found differences in every year between what Island Group says it has been paid and what the town’s records say was paid. “Not a single number matches anything,” Mr. Hammerle said.
Over all, he said, the town’s budgets indicate payments of $2 million more during those years than what Island Group’s records indicate. Mr. Hammerle said he had informed the state comptrollers of his discovery, and they told him that their audit was based solely on the figures in the town’s records, and not on data from outside companies such as Island Group.
“My fear is, I’m desperately trying to get to the bottom of this, and with all the auditing going on, I’m not convinced that anybody’s going to get to the bottom of this,” Mr. Hammerle said on Monday.
In light of the new information, union employees were given a 30-day extension for submission of an alternative plan.
But Mr. McGintee said Tuesday that what the actual health care costs were in a particular year should not matter, because the union’s proposal should match the cost of the Empire plan he has proposed switching to, at $6.5 million to $6.8 million a year.
The plan would require higher payments from employees for doctor’s visits and prescriptions. Though the union’s position is that changes cannot be made to employees’ medical coverage until 2010, “we still have to go to the table with a proposal,” John J. Kremm, the East Hampton C.S.E.A. president, said Monday. However, he said, “the second he goes to make a change, we’re going to arbitration.”
Confusion over the accuracy of the town budget office’s records and concern over bills from East Hampton’s independent auditing company, Albrecht, Viggiano, and Zureck, led town board members in recent months to eliminate vouchers from the company from warrants to be paid, in order to first seek more information.
The company, which not only has been conducting the town’s required audits but has sold East Hampton new accounting software and has provided accountants and other consultants to help town staffers get the system on line, is owed some $350,000.
Last week, Tom Ruggiero, a principal with the company, told Mr. McGintee that the firm’s partners were concerned about the unpaid bill.
“We were informed that because they had not been paid, they would not be working for us right now,” Councilwoman Julia Prince said yesterday.
In recent months, Ted Hults, the town budget officer, has laid much of the blame for confusion over the exact state of the town’s budget on difficulties and delays in the switchover to the new system, and an inability to access data using the old software while the shift was taking place.
Mr. McGintee said yesterday that a dry run of the new software was taking place as scheduled with consultants from A.V.Z.