Supe: Paying for landfill closing debt will cost you big time

Town officials are trying to figure out how to plug a $5.2 million gap in the town’s 2010 general fund operating budget, caused by the town’s escalating debt service and sagging revenues.

The town’s debt service — a $3.49 million hit in the current fiscal year — is mostly interest on the $43 million bonds floated so far to pay for the landfill reclamation, capping and closing project, Riverhead financial administrator Bill Rothaar told the Town Board at its work session yesterday.

The town must bond another $9 million in 2010 to finish paying the cost of the $52 million landfill closing project, a sum Supervisor Sean Walter said should have been bonded in 2008 and 2009 by the previous board, but was left for 2010 “for a variety of reasons,” including an incomplete town financial audit, he said. The additional bonding will add another $1.25 million in debt service, growing the town’s operating budget gap to $7.3 million in 2011, assuming revenues and other expenses remain flat.

Over the past eight years, the town has drawn on its fund balance to pay debt service and suppress tax rate increases, Rothaar said. During that time, the fund balance has dropped from 30 percent of the town’s general operating budget to 13 percent by the end of this fiscal year, Rothaar said. The town must maintain a minimum 5 percent fund balance, or $2.5 million, because less than that will affect the town’s bond rating, Rothaar said. The fund balance currently stands at $6 million.

Rothaar told the board it could fund the entire $7.3 million gap in the 2011 operating budget, which would by itself result in a 26.5 percent tax rate increase, or it could apply $3 million of its remaining fund balance in 2011 and have a 15.5 percent tax rate increase, and spread the rest of the cost over the next two years, resulting in tax rate increases of more than 11 percent in 2012 and 4.5 percent in 2013.

For the “average homeowner” whose house has an assessed valuation of $50,000, the town portion of his property tax bill — currently $1,718 per year — would increase by $456 if the gap is fully funded in 2011, Rothaar said. If the costs are spread over three years, his town property taxes would increase $269 in 2011, $226 in 2012 and $103 in 2013.

While the incremental increases in the second scenario — spreading the cost over three years — is less painful, the overall expense to the individual homeowner is actually higher than if the deficit is plugged in one shot in 2011. Under the first scenario, the tax rate would jump in one year from just under $35 per $1,000 of assessed valuation o a little more than $45 per $1,000 of assessed valuation. Under the second scenario, spreading the deficit reduction over three years, the tax rate would rise to nearly $50 per $1,000 of assessed valuation in 2013.

Walter told board members that the 2011 budget process “starts right now,” and Rothaar would regularly update the full board on the status of revenues and expenses, so that any necessary corrective action can be taken. He noted that Rothaar’s calculations depend on revenues and expenses remaining basically unchanged during the next few years, which will mean continuous belt-tightening going forward.