Town budget shows state tax cap isn’t what it seems

When is a 2 percent tax hike closer to 3 percent?

When the state says so.

In his budget message released Wednesday, Supervisor Scott Russell proposed total town spending of $39,824,144 for 2012 with a tax rate hike of 2.79 percent. The supervisor’s spending plan shows that the state’s new 2 percent cap on tax increases is not as solid as it may seem.

The town’s mandatory contribution for its employees to the state retirement system does not count toward the limit, said Mr. Russell. Last year the town paid $2.8 million into the retirement system and that figure is expected to jump by $700,000 to $$3.4 million next year. By comparison, that expense stood at $1.2 million five years ago.

The state retirement system includes billions of dollars, much of which is invested. When Wall Street is doing well, municipal payments tend to be lower. Conversely, when markets are down, municipal payments rise to make up the difference.

Mr. Russell said the vast majority of the projected tax hike, 2.4 percent, is attributable to the higher retirement payment. Town spending would rise just 1.32 percent, said the supervisor. The 2010 budget raised taxes 1.78 percent.

The town’s comptroller has drawn the ire of Greenport Village officials in saying the town cannot live up to its commitment to pay for fire protection for some Greenport residents.

The 2 percent cap, said the supervisor, “is simplistic and does not address the need for real reform.” Speaking on municipal collective bargaining, Mr. Russell said, “The days of employees not contributing to their own retirment accounts needs to come to an end now.”

The supervisor said he doesn’t envision the need for layoffs, but as some employees retire their positions will not be filled. He is expected to call for the creation of a new town engineer post. That, he said, should be more cost effective than hiring outside consultants, particularly for the federally required MS4 stormwater remediation program.

The position would pay between $70,000 and $80,000 a year with another $30,000 in benefits.

Next year’s budget must also include 4 percent raises for Southold’s CSEA employees, who received that same amount this year. Salaries were frozen in 2010, the first year of a three-year contract that expires at the end of 2012.

The town can only guess at what it might be required to pay its police officers, who have worked without a contract since Dec. 31, 2009. With the town and PBA unable to come to terms, the salary question will be resolved through binding arbitration. The town will make its case to the state arbitration board on Oct. 6.

The supervisor believes salaries set by a state entity should also be excluded from the cap.

“All of that should be on the table for discussion,” he said. “Over the long term we’ll see how viable the 2 percent cap is. The state made the easy decision in passing it.”

The supervisor’s budget now goes to the Town Board for its review.

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