Riverhead faces at least $1 million revenue shortfall due to COVID crisis

(Updated: May 1, 4:50 a.m.) Riverhead Town is facing at least a $1 million revenue shortfall in lost building and planning department revenues due to the coronavirus public health crisis, the town’s financial administrator told town board members during today’s work session.

Financial administrator William Rothaar told the board he projects those lost revenues to be the biggest fiscal hit the town will take as a result of the crisis, but warned that state aid revenues may also be reduced.

The town’s adopted 2020 operating budget projects state aid revenues of $107,000 in revenue sharing from the state, $70,000 in state funding for public safety expenditures and $18,000 in state funding for services to the elderly — a total of $195,000 in direct aid.

The town budget also projects mortgage tax revenues of $1.2 million in the current fiscal year. That money comes to the town through the state, but it is a tax paid by property owners on new mortgage indebtedness.

Rothaar told the board the town can offset most of the anticipated $1 million shortfall in building and planning department revenues by leaving certain vacancies unfilled and deferring the purchase of certain equipment. The town could avoid about $800,000 in spending that way, he said. Rothaar did not provide the board with specifics during the work session but said he would prepare a report with details.

In response to a question from Councilwoman Jodi Giglio, Rothaar said none of the positions he is suggesting be left vacant are police officer or public safety dispatcher positions.

Supervisor Yvette Aguiar said the town would not make cuts to essential services and infrastructure.

“Every Suffolk town is reviewing their budget to assess their financial standing,” Aguiar said in a prepared statement at the start of the meeting, which was livestreamed on the town website and televised on cable channel 22. Riverhead Town Hall remains closed to the public due to the pandemic.

“We need to understand our projections of fines, building permits and miscellaneous income to anticipate loss of revenue due to COVID-19,” she said. “Therefore we need to possibly adjust the new budget as soon as possible.”

The board will take up a resolution at Tuesday’s meeting to limit spending by all town departments for the remainder of the current year.

The resolution would indefinitely postpone all discretionary spending and require pre-approval of all overtime by the officer of the supervisor. It would postpone all non-funded and non-pledged capital projects as well as all purchases of equipment and vehicles. Improvements and repairs would be limited to those “deemed necessary and integral” to the operation of the department or the function of equipment or vehicle.”

Departments would also be required to use best efforts to “insource tasks and services rather than outsource.”

“Everything has to be scrutinized before we spend anything,” Rothaar said in an interview after the meeting. He said he’ll be providing the board with an update every week.

Like businesses in the private sector, government entities are trying to respond to an economic situation unlike anything in modern history.

The state budget office is projecting a $13.3 billion reduction in general fund revenues compared to the revenues projected in the governor’s executive budget plan, which was prepared before the COVID pandemic struck. The economic crisis engendered by the pandemic has rendered the earlier projections obsolete, the budget office said in a document released on Saturday.

The State Legislature on April 2, in the midst of the outbreak, adopted a budget the governor said would have to be reviewed at predetermined intervals throughout the fiscal year — which for New York State runs from April 1 through March 31 — and adjusted according to developments as they occur.

The enacted budget grants the state budget director the authority to reduce aid-to-localities appropriations and disbursements by any amount needed to achieve a balanced budget, as estimated by the budget department.

The April 25 financial plan say steep reductions to estimated general fund tax receipts ($12.2 billion), as well as lottery and gaming revenues that support school aid ($858 million) are required.

Worse still, the dramatic decline in general fund tax receipts is forecast to carry through each subsequent year of the financial plan, for a total loss of $60.5 billion through FY 2024, compared to the executive budget.

The total budget gap for the four-year period (FY 2021 through FY 2024) is a projected $69 billion, according to the financial plan.

A separate analysis released by the state on Saturday looks at the impacts of the crisis on the state’s overall economy. The report, prepared by Boston Consulting Group at the request of the state, suggests the total impact on New York’s economy will be $243 billion over the course of the full recovery relative to pre-COVID economic levels — equivalent to about 14% of New York’s 2019 gross domestic product.

There is an additional $202 billion loss relative to pre-COVID GDP growth trends, bringing the total loss to $445 billion, the report says.

This impact is greater than 9/11 or the 2008 Great Recession which caused an economic impact equivalent to -2% and -10% of Real GDP respectively.

The analysis projects the economy will recover to the pre-COVID level in the first quarter of 2023.

Editor’s note: This story was updated after publication to reflect an interview Thursday evening with Riverhead Town financial administrator William Rothaar.