Faced with a rapidly depleting town entire fund balance that he would normally use to subsidize tax hikes for village residents in an upcoming election year, Town Supervisor Paul Feiner last week proposed a 2.58% hike in town taxes for unincorporated Greenburgh and a 1.75% hike for village residents — using an unprecedented $2 million drawdown from the Town’s Risk Retention Fund.
Never before in the Town’s history has a town supervisor proposed to use millions of dollars from the Town’s Risk Retention Fund to replenish a fund balance, let alone to replenish a fund balance so that it may be used to keep tax rates artificially low.
The Town’s Risk Retention Fund is a fund that covers general liabilities and usually pays for tax certiorari settlements, damage awards, and other liabilities the Town may face. According to the Town’s most recent financial statement, there was $5.3 million in the fund as of July 2014, which means the $2 million drawdown represents nearly 40% of the amount available.
Mr. Feiner made no mention in his budget message of his having drawn down the $2 million in Risk Retention funds or what the consequences to the Town might be if judgments and claims for 2015 exceed the remaining funds available.
On October 8, 2014, the Town Board voted unanimously – but without any prior public discussion or explanation — to transfer the $2 million from the Risk Retention Fund to the Town Entire Fund Balance, which was in danger of being depleted, based on the Town Board having determined that the Risk Retention Fund was somehow “excessive.”
There was no disclosure of how litigation-prone Greenburgh determined that the amount it reserves to pay judgments and claims was all of a sudden deemed “excessive” or what criteria it used to make that determination. The Town’s tax certiorari claims alone cost several million dollars annually.
Mr. Feiner has in the past subsidized the annual tax levy by, among other things, depleting the Town’s capital account for a new police headquarters and courthouse, but he has never before tapped into the Town account that pays judgments and claims.
Mr. Feiner’s proposed budget for 2015 calls for a drawdown of $3,135,851 in fund balance for the town outside villages, and $1,088,895 in fund balance for the town entire. Had Mr. Feiner proposed a balanced budget, town taxes for unincorporated Greenburgh would rise by about 10% and town taxes for village residents would rise by about 12 percent.
The decision in early October to draw down the $2 million from the Risk Retention Fund was probably motivated by the belief that the planned auction for Frank’s Nursery on November 18 would not in fact take place – a step which was only acknowledged publicly by the Town Board this past Friday.
Proceeds from the sale of Frank’s were expected to replenish the fund balance for the town entire which had fallen to dangerously low levels in June 2014 when the Town Board approved a $2.7 million drawdown in fund balance – in breach of the Town’s fund balance policy – to cover millions of dollar in delinquent tax payment that the Town had to pay this year to the Town’s school districts. .
Town comptroller Bart Talamini said at the time that the sudden drawdown of fund balance also resulted from the Town’s failure to sell the former Frank’s Nursery property, as well as the failure to generate any new income from the former WestHELP facility, which Mr. Feiner has let lie dormant and deteriorating since September 2011.
The Town’s fund balance policy, as amended in January 2014, calls for the Town to maintain at all times a fund balance for the Town Entire of a sum between 1.0% and 1.5% of total tax warrants, which are amounts that the town is required to pay not only to the Town itself, but also to the Town’s individual school districts, fire districts, the county and sewer districts.
The latest total tax warrant figure is $480,399,971, which means the minimum fund balance that the Town is required to maintain is $4.8 million. Total fund balance reported as of December 31, 2013 (after adjustments so that the $2.7 million was credited to fiscal year 2013 is $1,822,235. The result of the $2 million drawdown from the Risk Retention Fund was a net increase to the town entire fund balance of $1,574,532, so that the number now sits at $3,396,807, which is more than enough to cover the $1,088,895 that Mr. Feiner plans to use to subsidize the village portion of Town taxes – but still far below the minimum required by the Town’s fund balance policy.
The drawdown in town entire fund balance has been dramatic. Two years ago, the Town’s fund balance figure for the Town Entire stood at a relatively healthy $7.4 million.
Having used so much fund balance in preparing a minimal election year tax hike for 2007, Mr. Feiner found, after he had won the Democratic primary in September 2007, that he no longer had fund balance to use and, as a result, he was forced in October 2007 to propose a tax hike of 23% for unincorporated Greenburgh.
That crisis led the town board to adopt a fund balance policy which said that fund balance was not to be used to fund operating expenses, which is precisely what it’s used for when it augments tax revenues to keep annual tax hikes to a minimum. In addition, if fund balance was to be used for that purpose, town policy was that there should be a plan to replenish it.
In other municipalities which, unlike Greenburgh, balance their budgets, fund balances are normally used for capital accounts to fund needed long-term improvements, like a new police headquarters or a courthouse because such funds can reduce the amount that otherwise would need to be borrowed.
By law, the Town Clerk will formally present the Town Supervisor’s budget to the Town Board on November 10, the Town Board will hold one or more public hearings on the proposed budget by December 10, and by December 20, the budget must be adopted