Carmel Town Board Faces Stark Decision on Budget
Two weeks after receiving Carmel Town Supervisor Kenneth Schmitt’s tentative 2013 budget proposal, which entailed exceeding the two percent tax levy cap by an additional four percent, two Carmel councilmen last week said the financial forecast for the town demands further action.
Councilmen John Lupinacci and Jonathan Schneider, both of whom were seated this past January and have professional backgrounds in finance, said after working on a four-year financial outlook plan with Town Comptroller Mary Ann Maxwell that there was no choice but to either slash an additional $1 million in operating expenses next year or raise the tax rate even further, potentially up to 12 percent, compared to the 8.7 percent earlier proposed, in order to maintain the town’s financial health.
All of the members of the town board recognized an additional $1 million in spending cuts will undoubtedly mean significant layoffs of town employees.
Both Lupinacci and Schneider said that not pursuing one of these options, or a potential mixture of the two, would put the town’s fund balance, which had dropped precipitously in recent years after being used to offset tax increases, in further jeopardy.
A month a ago, a bond rating agency warned Schmitt and Maxwell that if the town’s fund balance dipped any further – standing at $3.1 million at the end of 2011 – the town was in danger of losing its Aa1 bond rating, meaning it would cost the town twice as much to borrow money in the future.
“The worse thing we could do is raise our taxes [8.7] percent and lose our bond rating,….the way we have our budget set up now, it’s not possible, it’s probable,” Lupinacci said of Schmitt’s proposal.
Lupinacci also proposed returning $300,000 to $400,000 to the town’s fund balance in order to create a greater buffer to protect the town’s top bond rating.
Lupinacci and Schneider both said their analysis showed that raising taxes 8.7 percent this year without the additional cuts, would force the town do the same in the years that follow; amounting to a 100 percent increase in the total amount of town taxes an individual property owner would pay within eight years that would not include any increase in services.
“We have to lose a million out of this budget, some way, some how…because we cannot keep going to the taxpayers,” Lupinacci said, adding that town residents alternatively might voice support of a further, incremental tax rate increase, instead. “We need residents to come out here, because if we start cutting a million dollars out of this budget, services are going to be affected.”
Schneider agreed the direction of the town’s finances needed to be corrected.
“Are we going to cut [spending] or are we going to raise [taxes]? This is the crossroads we are at and we need to make a decision one way or the other,” Schneider said.
Schmitt said he did not believe town residents would support a double digit tax hike.
During public comments, Carmel resident John Butler inquired about a $200,000 budget line item. Maxwell said it was money being held in contingency if union employee salary and benefit increases needed to be paid next year, which are part of the currently ongoing contract negotiations with the unions.
Butler asked if for every $100 paid in employee salary, there was additional expense of $70 in employee benefits and was told he was correct. Butler said in the private sector that percentage usually remained around 20 percent.
“You get above that, you are not viable anymore. You are insolvent,” Butler said. “That’s what knocked out General Motors.”
Butler said the town board needed to look to the outsourcing of work to private contractors whenever possible, in order to avoid paying the cost of employee pensions and health care benefits.
All of the town board members urged the community to weigh in on the drafting of the budget.
A public hearing on the budget is scheduled for Wednesday, Nov. 7 and, according to state law, the town board must adopt a final budget by Tuesday, Nov. 20.
Adam has worked in the local news industry for the past two decades in Westchester County and the broader Hudson Valley. Read more from Adam’s author bio here.
