Due to an unstable local and national economy, the Town of Colonie’s $5.6 million deficit-reduction tax in 2008 barely put a dent in the deficit, according to an auditor’s report to the Town Board on Thursday, Oct. 7.
It was in a year of very unfortunate circumstances, said William Freitag of Bollam, Sheedy and Torani, the accounting firm that performed the audit on the town.
Freitag said the town was not able to predict the downturn of the economy, and officials expected the deficit reduction plan to have a much larger impact.
He said the revenue from the one-time tax was intended to go directly to the bottom line, but a tumbling economy meant a decline in other revenue sources. He said the town’s sales tax revenue is down $1.7 million and departmental income went down $3 million.
The town built up a deficit over the past six or seven years that amounted to $27,370,000 by Dec. 31, 2008. Officials were able to take a $2,770,000 chunk out of that number in 2008, but they were only able to reduce it by $750,000 in 2009.
`Unfortunately, you had the situation where you were trying to put a nice little dent in the deficit and you were impacted by sources out of your control,` said Freitag. `It’s one of those perfect storm type of things.`
While the $5.6 million did lessen the impact of the recession, Town Supervisor Paula Mahan said the town did what it could to `stay afloat.`
`With the weak economy, and under the circumstances, we kept the town from going under and that’s basically where the town was at that point,` she said. `You can’t control the economy but on the same token, the town is still moving forward, and that’s the positive side of it.`
Also found through the audit, George Person, a municipal specialist with Bollam, Sheedy and Torani, said Colonie is in a unique situation because it includes villages within the town.
He said it was discovered through the audit that the town was raising taxes in the highway fund and financing the highway fund through a sales tax in 2008. Person said that was against New York state regulations.
`Under New York state regulation, if a town has village, or in this case, villages within that town, and that village adopts to collect its sales tax, well then, by law, all sales tax collected by the town must be used only for the benefit of the residents outside the village,` said Person. `However, the law, which was changed seven, eight or nine years ago, says that if there’s no taxes raised in those town-outside village funds, then that sales tax can be used for townwide purposes.`
According to Person, the town had to make an adjustment to their financial books to return the money to the highway fund. He added that the town must merge both the general fund and the highway fund when looking at their finances because they are both governmental funds and are paid for by taxpayer money.
`Keeping these things separate when you’re analyzing it,` he said. `That causes a lot more confusion when you say, ‘This is a deficit.’`
The town has been repaying around $7 million back to the highway fund each year since 2008, which has resulted in a surplus this year in the highway fund. Person said this means the highway fund will not be raising taxes, and the town can use the sales tax revenue to cut into the general fund’s deficit. He said that once the surplus is gone in a couple of years, the town may run into a different problem.
`If you don’t generate another source of income because that surplus is gone, then you can’t transfer the sales tax and will have to raise property taxes,` he explained. `Down the road, in probably two years, this is something you’ll have to be confronting.`
The report states that the Highway fund should be fully repaid by 2012.
Catching the board by surprise, Freitag attributed the town’s landfill’s fund balance deficit of $7.6 million at the end of 2009 to missed post-closure costs.
The reported deficit in 2008 was $6.4 million, but Freitag said those studies had omitted some cells in the landfill that amounted to a $1.2 million increase in liability in 2009.
`They were not included in their estimates of future costs,` Freitag said of the outside engineering firm’s study. `It wasn’t an error because estimates are not considered accounting errors; it’s just a change in an estimate.`
Town Attorney Michael Magguilli asked if there was any reason as to why those cells were missed, to which Freitag responded, `No.`
`It’s one of those things, Mike, that you have rely upon, as auditors, you have to rely upon experts in this area and hope that they’re in there,` he said.“