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Finances

Town to send letter to New York State comptroller asking for review of town's finances

Huntington Supervisor Chad Lupinacci said the town will send a letter to the state comptroller's office asking for a review of the town's finances. Photo by Sara-Megan Walsh.

A request by Huntington’s new town board to have the state comptroller review the town’s finances was met with criticism.

Huntington Town Board voted 4-1 at its Jan. 3 meeting to go forward with a request to New York Comptroller Thomas DiNapoli (D) to conduct a review and audit of the town’s finances, policies and procedures. Councilman Mark Cuthbertson (D) was the sole vote against the measure.

“I just think this is a ridiculous waste of taxpayer money,” he said. “I think it’s a shot at the prior administration that had healthy financials and won a number of awards each year for the records we keep and our finances.”

In December, the Town of Huntington received its 17th consecutive certificate of achievement for excellence in financial reporting from the Government Finance Officers Association.  The nonprofit professional association serving nearly 18,000 government financial professionals across North America, had reviewed the town’s comprehensive financial report for the year ending Dec. 31, 2016.

I just think this is a ridiculous waste of taxpayer money.”
— Mark Cuthbertson

Councilman Eugene Cook (R), who sponsored the audit resolution, denied that it was a strike against former Supervisor Frank Petrone (D) and his practices, but rather a way to provide for a fresh start.

“Any business owner knows if they are buying a new business and going into a new business, they want to check all the records,” he said. “It’s as simple as that.”

Cuthbertson suggested given the lengthy time and funds it would require for the state to audit the town, the new administration and town officials would be better served by studying the town’s yearly internal audits performed by an outside contractor.

Cook sponsored a similar resolution in 2012 calling for state review, but it failed to gain the board’s approval. Petrone then offered a revised resolution that was approved, and ultimately resulted in a 2013 audit conducted by the state comptroller.

The 2013 audit report, which reviewed the town’s finances from Jan. 1, 2011, to May 31, 2012, found issues with the town’s ability to track overtime hours and paid leave for town employees adequately.

“We found that the town may have higher payroll costs than necessary because town officials did not monitor and control these costs,” states the 2013 audit’s summary findings.

Any business owner knows if they are buying a new business and going into a new business, they want to check all the records.”
— Gene Cook

The state comptroller’s office also found the town was awarding contracts to attorneys without going through the standard bidding process and then paid without providing detailed invoices in some cases. Recommendations were made and discussed between state and Huntington officials on corrective actions to be made.

“While serving as an affirmation of the policies that have helped Huntington maintain its AAA bond rating, we also appreciate the audit’s insight on how to make Huntington’s government operate even more efficiently,” Petrone had said in his response to the 2013 audit. “We will consider changes to implement the recommendations we have not already put into place.”

Councilwoman Joan Cergol (D), who worked for the town prior to 2013 and was sworn in to sit on the town board this month, voted in favor of requesting the state comptroller’s office perform an audit, though she said the measure was not necessary.

“I welcome an audit, but I don’t think it’s going to happen,” the councilwoman said. “If there is one, I think it will prove we run a tight ship.”

Supervisor Chad Lupinacci (R) said the resolution merely sends a letter to the state comptroller’s office to review the town’s financials “if they feel it is necessary,” to indicate the town would be both willing and cooperative in the process.

Huntington Town Hall. File photo by Rohma Abbas

Huntington town announced last week that they have maintained their AAA bond rating, and their outlook has been upgraded to “stable.”

Standard & Poor’s and Moody’s Investors Service have upheld the town’s rating, covering both existing debt and a planned $13.925 million bond issue.

Moody’s said the rating “reflects the town’s currently satisfactory reserve position and improving financial obligations, its sizable wealthy tax base and low debt burden.” They also said the stable outlook “reflects our expectation of continued sound financial operations and modest growth and overall stability in the local economy.”

In issuing its rating, Moody’s cited Huntington’s management and good financial policies and practices, as well as adequate budgetary performance, strong budgetary flexibility, very strong liquidity and strong debt and contingent liability position.

“We believe the town has demonstrated sound monitoring, ability to adopt and adhere to formal policies, and forward-planning,” the rating firm’s report said. “Town management tends to conservatively estimate both expenditures and revenues.”

The ratings extend to both the $13.925 million in borrowing and the $109 million in outstanding debt. Of the outstanding debt, $84 million represents Huntington borrowing and $25 million is debt incurred by the water districts in the town; that debt is repaid only by district residents. The planned borrowing includes $12.4 million for town projects and $1.5 million for Greenlawn Water District.

Huntington Supervisor Frank Petrone (D) said he was pleased with the town’s results.

“We are gratified that Moody’s and Standard & Poor’s have once again affirmed their support of Huntington’s fiscal policies by maintaining the AAA bond rating and either upholding or upgrading their outlook,” he said in a statement. “These ratings will ensure that Huntington continues to save on borrowing costs, benefitting all Town taxpayers.”

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Town head has eyes on illegal housing, environmental issues

Supervisor Ed Romaine discusses his last term and his goals for another two years if re-elected. Photo by Desirée Keegan

After his first full term at the helm, Supervisor Ed Romaine (R) said he thinks the Town of Brookhaven should look better than it does, and if re-elected plans to continue the town on its positive trajectory.

Romaine is running for another two years as supervisor against Democratic challenger Douglas Dittko, who declined to attend a debate at the TBR Newspapers office alongside his opponent. Dittko also did not answer a request for an interview.

According to the Suffolk County Democratic Committee’s website, Dittko, a Manorville resident, is a civic leader who has worked to preserve open space and has been involved in other community issues.

For Romaine, re-election means finishing up current environmental projects, managing the town’s budget and introducing technology to make it easier for residents to interact with the town. While he said there is still work to be done, he highlighted improvements since his special election in early 2013, which put him into office for several months before he was re-elected to a full term.

“My predecessor left in mid-term and he left with a fiscal crisis. He was firing over 100 people as he left,” Romaine said, referring to former Supervisor Mark Lesko (D). “We stopped some of those firings — I haven’t laid off [anyone] since I took office.”

While in office, Romaine has helped get the town’s debt under control, and this year the town finished paying off its pension debt. One of the ways in which Romaine brought in funding to do that was selling the former tax receiver’s office in downtown Port Jefferson as well as the old town hall in Patchogue.

“I’ve worked on finances because I’ve learned from a long life that all issues of government are issues of money,” Romaine said.

One of the incumbent’s focuses in another term would be housing. Following the recession, there were more than 200 foreclosed homes that the town is trying to maintain or tear down. And residents of neighborhoods near Stony Brook University complain of illegal boarding homes bursting with college students. To combat that issue, Romaine and town officials have already enacted some restrictions, like making it illegal to pave over front lawns to make more room for parking.

Another goal the supervisor has for a second full term is expanding his single-stream recycling program beyond Brookhaven’s single-family homes. The single-stream system, in which residents can put all of their recyclables on the curb together, has already drastically increased recycling townwide, and has made money for Brookhaven because the town sells material it brings in.

He would also like to continue his efforts to encourage renewable energy use and reduce nitrogen pollution in local bodies of water.

“It’s time for us to wake up,” Romaine said. “We’re going to lose what we cherish about living in this town if we don’t start to preserve our waterways.”

Mayor blasts state comptroller’s scoring of village

Huntington Bay Village’s mayor is contesting a fiscal rating by the state comptroller’s office. Photo by Victoria Espinoza

Huntington Bay Village’s mayor strongly disagrees with a recent release by the New York State Comptroller’s office ranking the municipality as susceptible to fiscal stress.

The comptroller’s office sent out a statement about the scores last week but Herb Morrow said  the score is misleading and Huntington Bay is in sound fiscal shape.

“The report is worthless because what they do is take a snapshot of one point in the year,” Morrow said in a phone interview. “They don’t take the financial planning into consideration.”

Morrow said the comptroller’s office ranked Huntington Bay as “susceptible” to fiscal stress in February because its reserve fund decreased.

“We did some major reconstruction of the police department to save taxpayers an enormous amount of money in the long term,” Morrow said. The reorganization included incentives and retirement costs that reduced reserve funds but, Morrow said, over time would reduce village payroll for police by $400,000.

“We are in great shape, and the residents are not listening to the comptroller’s story.”

Despite what Morrow said, the state comptroller’s office confirms Huntington Bay is susceptible to fiscal stress.

According to a statement from Comptroller Thomas P. DiNapoli’s office, “susceptible to fiscal stress” is the least severe of three categories that all municipalities found to be under fiscal stress were filed into. The other two category designations are “moderate fiscal stress” and “significant fiscal stress.”

In order to be designated as “susceptible to fiscal stress,” a municipality has to reach at least 45 percent of the total points of the fiscal stress score. The scores are made using annual financial reports that are submitted by local governments to the state comptroller’s office. Fiscal stress is usually defined as a local government’s inability to generate enough revenues within its current fiscal period to meet its costs. The comptroller’s system evaluates local governments based on both financial and environmental indicators.

The indicators of a local government’s financial state are its year-end balance, operating deficits, cash position, use of short-term debt and fixed costs. Environmental indicators include population, age, poverty, employment base and more. Fund balances, like Huntington Bay’s reserve fund balance, are used to identify the amount of money available to cushion revenue shortfalls or expenditure overruns.

According to DiNapoli’s office, a negative or low-level fund balance can affect the local government’s ability to provide services at current levels. It also claims that fund balance is a strong measure of the financial condition of a local government.

In a letter Morrow posted to the Huntington Bay website when the scores were originally released in February, he criticized the message that the comptroller’s office was sending to residents.

“It makes the jobs of local leaders harder. It is a waste of New York State taxpayer dollars,” Morrow said in the letter. “With no conversation or discussion with our village, we were given a negative designation that is very misleading to our residents. By releasing reports that create inane headlines, they confuse residents.”

Plan freezes salaries for pols, bumps highway budget

Town board members receive a copy of the 2016 preliminary budget. Photo by Victoria Espinoza

Huntington Town Supervisor Frank Petrone (D) unveiled a $188.7 million preliminary 2016 budget on Wednesday. Sept. 16, that reduces spending slightly from this year and stays within a state-mandated cap on property tax levy increases.

If approved, the budget would amount to a $29 increase for the average homeowner, if looking only at the town’s three major funds. The budget is balanced by a 1.3 percent increase in the town’s tax levy, because Huntington is using fewer funds from reserves to balance the budget, according to a town statement.

The town board voted at a meeting on Wednesday, Sept. 16, to schedule an Oct. 6 public hearing on the budget. The public hearing will take place at 6 p.m.

The spending plan is a “no-frills” budget, which is down from this year’s spending by .2 percent, officials said. The budget would maintain current services and reflects a reduction in staffing through attrition —fewer than five employees due to some retirements in the town’s General Services department, Petrone told reporters after the meeting.

There’s $1.9 million more budgeted for the town’s Highway Department, due to last year’s severe winter. That increase was offset by little to no increase in other major town funds and decreased spending in some of the special districts, a town statement said.

One of the issues the supervisor said he’s wrestling with is funding expenses taxpayers may want but that count against the municipality in its state tax cap levy increase calculations.

To that end, Petrone said officials have not included renewing a multi-million dollar Open Space Bond Act town taxpayers voted in favor of to have the town fund green initiatives, park improvements and land purchases, because revenue raised through the act counts into the town’s tax levy. Petrone also said that the town has been considering putting up a referendum to create a parking district, which could have the authority sell bonds to fund a long-desired parking garage in Huntington village, but that would count against the town’s tax levy calculation.

Petrone said he’s been calling on state lawmakers to look at possible revisions to the tax cap law in cases where voters directly choose to tax themselves.

“This 2016 budget preparation presented challenges and realities that will alter how the town does business going forward, without important changes to the tax cap act,” Petrone wrote in his budget message. “While the tax cap act seeks to stabilize the tax base, it also limits our ability to enhance or expand services to our residents.”

Other highlights of the budget include freezing all salaries for elected officials and appointment management, continued focus on building a $1.5 million new animal shelter and implementing design and initial construction of the James D. Conte Community Center at the former Huntington Armory.

The supervisor also proposed a $15 million capital budget that focuses on improvements to the town’s infrastructure, such as the rehabilitation of various plants and pump stations in the Dix Hills Water District to headworks improvements in the Huntington Sewer District. Funding is also included for road rehabilitation, drainage infrastructure and paving, according to the statement.

Victoria Espinoza contributed reporting

Commack Superintendent Donald James says the district will consider the state comptroller’s suggestions when it comes to handling surplus funding in its budgets. File photo by Greg Catalano

A state audit cracked down on the Commack Union Free School District, accusing officials of mishandling funds and costing taxpayers.

The audit, which was released Aug. 5, said Commack school administrators needed to do a better job overseeing the budgeting process after the district overestimated expenditures in its adopted budgets and did not use surplus cash to finance operations. The audit also found the district did not maintain a “complete and adequate” record of its fuel inventory to safeguard and account for its fuel.

“From 2011-12 through 2013-14, total actual revenues exceeded expenditures by as much as $3.7 million,” Comptroller Tom DiNapoli said in the audit, and while the district had a $24 million fund balance, it only used $1.8 million to offset taxes. “Had district officials used more realistic budget estimates, they could have avoided the accumulation of excess fund balance and possibly reduced the real property tax levy.”

The report also found that discrepancies in the fuel inventory records were not investigated. According to DiNapoli, Commack’s head groundskeeper performed a monthly reconciliation of district fuel purchase and use records with the actual fuel on hand but never acted on discrepancies, even though anything left unresolved within 48 hours must be reported to the state Department of Environmental Conservation.

In response, Commack Superintendent Donald James said the district had “varying fiscal philosophies” but cited a list of changes it would be implementing moving forward. As for the comptroller’s remarks on Commack’s financial condition, James kept it short and sweet.

“The district will review the expenditure budget areas and the variables affecting such areas discussed in the audit report in depth to assure reasonable estimates are presented,” he said in a statement.

District spokeswoman Brenda Lentsch said the district saves money through strong budgeting practices and all of its savings are returned to the taxpayers the following year.

“We go to great efforts not to spend the money the residents of this community entrust to us,” she said in a statement. “Further, the district returns every dollar not spent in the budget to the taxpayers to keep the tax levy as low as possible, and to continue to offer the multitude of programs and services that Commack is known for, and the community expects.”

On the subject of fuel inventory records, James had a lot more to say.

“The district has taken great care and effort to develop and implement new procedures to ensure that fuel supplies are adequately safeguarded, accounted for and protected against risk of loss or unidentified leakage,” he said in a response outlined within the audit.

Moving forward, James said the district would record, monitor and reconcile its fuel inventory via a senior account clerk and install video surveillance systems to monitor the area of the 2,500-gallon underground fuel tank and pump.

DiNapoli’s audit set out to evaluate the district’s overall financial condition and fuel inventory, specifically between July 1, 2013, and Nov. 30, 2014. The comptroller extended the scope of his audit back to July 1, 2011, however, to provide better perspective and background.

DiNapoli recommended the district develop procedures to ensure it adopts more reasonable budgets — to avoid raising more real property taxes than necessary — and use more of its surplus funds to support future budgets and reduce the burden on taxpayers. He also recommended the district adopt written policies to ensure fuel is periodically measured and to report discrepancies promptly.

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File photo

Calling upon previous instructions to be careful with Smithtown’s cash, two town board members voted against promoting two town employees at a public meeting Tuesday, though it was not enough to stop the raises.

Town Comptroller Donald Musgnug told the board in a special meeting last month that it must “tighten its belt” to protect its bond rating as the town goes out for bonding later this year to fund certain capital projects. Tuesday’s meeting agenda included two promotions that were ultimately approved by a vote of 3-2, but they were met with concern from Councilman Bob Creighton (R), who called upon Musgnug’s previous warning.

“We had Mr. Musgnug in here recently, and now I have a little bit of a problem,” said Creighton, who voted against the promotions along with Councilman Ed Wehrheim (R). “He tells us we shouldn’t be doing more promotions, and here it is, we have two more on here.”

The promotions ultimately went to Traffic Safety Department employees Dyanne Musmacker, to the position of senior clerk typist at $20.45 per hour, and Anthony R. Cannone, to the provisional position of traffic engineer at $54.07 per hour — both effective July 20. The two promotions were the only items Creighton and Wehrheim voted against in a list of 10 other personnel matters before the Smithtown Town Board on Tuesday.

Town Supervisor Pat Vecchio (R) defended the promotions, saying money was already allocated at the beginning of budget season for such raises.

“When the department asked for those promotions in September of 2014, I told them we would consider those promotions and that I would put the money in the budget effective July 1,” Vecchio said. “So there’s money already accounted for.”

Vecchio also said such a practice, allocating money in the budget for future raises, was not out of character for the town.

Creighton, however, was against the practice on the grounds of Musgnug’s presentation before the Town Board in which he expressed concern over the town’s financial future.

“My recommendation is that we fill only essential positions, promote from within where possible and leave non-essential positions vacant,” Musgnug said in his June 23 presentation on the status of the 2015 Smithtown budget. “The message is that we must continue to contain what we can control — expenditures.”

Musgnug said the town’s financial standing was ultimately on the line come the end of the year as it considers bonding for projects, and potentially faces a lowered rating.

“The rating agencies would like to see a structurally balanced budget,” he said at the June special meeting. “As we approach the 2016 budget cycle, the closer we are to breakeven in 2015 means less adjustments for 2016.”

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Town Councilman Tom McCarthy, Supervisor Pat Vecchio and Comptroller Donald Musgnug discuss Smithtown’s financial standing going into the 2016 budget year. Photo by Phil Corso

Smithtown is tightening its belt, town Comptroller Donald Musgnug said at a town board meeting on Tuesday.

As per Supervisor Pat Vecchio’s (R) request, Musgnug provided the town with his overview on the town’s current financial performance through May 31, and said Smithtown needed to be selective with expenditures in order to remain sustainable going into 2016.

“The town board has done well to keep certain positions vacant or to delay appointments,” Musgnug said in his report to the board on Tuesday. “My recommendation is that we fill only essential positions, promote from within where possible and leave non-essential positions vacant. The message is that we must continue to contain what we can control — expenditures.”

The comptroller said it was still too early in the year to predict “with any kind of accuracy” the final results of town operations, but said Smithtown still needs to budget  conservatively to ensure a stable financial ground next year.

Musgnug said the town was performing better than what was expected in this year’s budget, with one exception — the highway snow fund. A brutal winter was the only hindrance on the town’s otherwise on-track year in regards to the budget.

“Most departments are spending below what was anticipated, however certain revenues are out of our control, such as the mortgage recording tax, which is coming in less than anticipated,” Musgnug said. “Because of this and other factors, we will need to continue to tighten our belts so that we can bring the town’s operating results closer to breakeven in 2015.”

The comptroller also discussed the usage of Smithtown’s leftover fund balance to help balance budgets each year. He said the option was on the table, but not preferred, which Vecchio and Councilman Bob Creighton (R) agreed to.

Creighton said the town had been criticized in the past for doing such a practice, and Vecchio warned against it.

“Fund balances are a [double-edged] sword,” Vecchio said. “When you use it to balance the budget, you get accused by bonding companies.”

According to the comptroller, it was doubly important that Smithtown eyes its finances closely in the coming months because he anticipated the town would be going out for bonding later this year to fund certain projects.

The comptroller said he was not ruling out the possibility that rating agencies might lower the town’s bond rating in the coming year, but if it does happen, it would not be a significant drop.

“The rating agencies would like to see a structurally balanced budget,” he said. “As we approach the 2016 budget cycle, the closer we are to breakeven in 2015 means less adjustments for 2016.”

Town Councilwoman Lynne Nowick (R) asked Musgnug how significantly a lowered rating in September might affect interest for the town, to which the comptroller said it was difficult to call.

“It will impact interest, but it won’t be overwhelming,” he said. “If we do, it’ll be one score. But I don’t anticipate that happening.”

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By Jonathan S. Kuttin

The opportunity for same-sex couples to legally marry has expanded to 37 states and Washington D.C. with more likely on the horizon. The social and emotional benefits of living in a legally recognized union have been widely discussed. But what does legal marriage mean for your finances when you’re a same-sex couple?

There are a number of immediate and long-term benefits.

More protection for your shared assets. With the repeal of Section 3 of the Defense of Marriage Act (DOMA), certain federally mandated financial benefits previously reserved for heterosexual married couples now also apply to legally married same-sex couples. Some pertinent provisions include:

• Marital deduction for gift and estate taxes. Spouses married in a state recognizing same-sex marriages (who are also U.S. citizens) can pass property to one another without incurring gift tax while living and estate tax after death. This provision of tax law is significant because it means bypassing potential gift and estate taxes levied upon nonmarried couples who transfer property or other assets to each other.

• Social Security benefits. If you or your spouse dies, your marriage certificate and the duration of your marriage are used in determining if the surviving spouse will be the beneficiary of the deceased spouse’s Social Security benefits. In some cases, same-sex couples may need to reside in certain states that recognize the marriage. To further protect your Social Security benefits, the Social Security Administration encourages all same-sex couples to apply for benefits to preserve any claim.

• Beneficiary status. Your spouse will be recognized as your beneficiary on your insurance policies, retirement plans and items of property. This is true as long as he or she is your named beneficiary — make sure to update all of your beneficiary designation forms once you’re married. It’s also important to keep in mind that the spousal consent rules for retirement plans that require the spouse to provide written consent if the primary beneficiary named is someone other than the spouse, applies to same-sex married couples.

• Shared work benefits. Many companies provide spouse benefits that have significant value. For example, your marital status may afford you or your spouse reduced cost health and life insurance through an employer.

• Combined household efficiencies. Don’t underestimate the financial benefit of pooling your income and sharing the expense of running a household. While you can cohabit without marriage, your marital status may improve your ability to sign a lease or close on a loan (assuming you both have good credit and contribute income).

• Income tax perk or penalty? Depending on your combined income, and each spouse’s income, your legally recognized same-sex marriage may or may not improve your income tax situation. If one spouse does not work or has a low annual income, your combined income as joint filers may be taxed less than the separate incomes of two single filers. However, if you and your spouse are both high earners, together you may land in a higher tax bracket (or be subject to additional taxes or phase-outs) than you would if you each filed as single individuals, potentially resulting in a larger tax liability from filing jointly.

• Get professional advice. Merging your finances as a legally married same-sex couple can be tricky because of variations in state laws and other legal considerations. A same-sex couple’s marriage may be respected for purposes of some laws but not recognized for purposes of other laws. Your situation may be complicated if you previously utilized trust documents to “work around” inequities before marriage was a viable option.

While you may not be able to avoid a steeper income tax rate as married joint filers, you can employ other strategies to minimize your tax burden and untangle complicated trust work-arounds. Seek out professionals such as a tax advisor, lawyer and financial advisor to work through the complexities that can arise when same-sex couples merge their financial lives. Together you can explore solutions to help build a secure financial future.

Jonathan S. Kuttin, CRPC®, AAMS®, RFC®, CRPS®, CAS®, AWMA®, CMFC® is a Private Wealth Advisor with Kuttin-Metis Wealth Management, a private advisory practice of Ameriprise Financial Services Inc. in Melville, N.Y. He specializes in fee-based financial planning and asset management strategies and has been in practice for 20 years.

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