State audit warns of potential for tax inequities in Oyster Bay

Oyster Bay’s Town Board needs to improve oversight after four years of improperly managing fund balances, according to a state comptroller's audit of the town’s financial health.

"The fund balance was not properly managed," the audit said, specifically pointing to the town’s practice of running deficits in some funds while having surpluses in others and risking an uneven tax burden among taxpayers.

"Since the majority of the town’s special district funds only serve portions of the town located outside of villages, tax inequities could result from using fund balance of some funds to finance deficits in other funds, since taxpayers may see either increases or decreases depending on their special districts of residence," according the audit.

The town’s lack of a multiyear financial plan makes it "difficult for the board to properly manage the town’s fund balance and assess alternative approaches to financial issues," the audit said.

The state comptroller’s office audits municipalities every few years. Ira McCracken, chief examiner for the comptroller’s office, said the audit focused on fund balances because their risk assessment showed "that was the area that was most at risk."

The audit, which was released in September and covered 2016 through 2019, was the first state comptroller’s audit since 2013 and the first for Supervisor Joseph Saladino, who was appointed in January 2017 following the resignation of John Venditto. Venditto, who was found innocent of federal corruption charges but pleaded guilty to state corruption charges, died in March.

Oyster Bay finance director Robert Darienzo, who has served in that position under Venditto and Saladino, said the focus should be on the overall financial picture, not individual funds.

"Globally we're turning around the town's finances," Darienzo said, pointing to overall surpluses and recent bond rating upgrades. "We’re not going to have every fund exactly on the dollar amount that we need to be, but we are getting there."

In 2019, Saladino said he was "very proud to report that the deficit in our operating budget is gone."

"There is no more deficit in the operating budget of the town of Oyster Bay," he said at the April 16, 2019, town board meeting, according to a transcript.

But the town’s audited financial reports show that it ended 2018 with three funds in deficit and that by the end of 2019 the deficits in two of those funds had increased even as one was eliminated.

The town levies dozens of taxes on properties, but not all levies apply to all properties. Only the general fund levy hits property owners throughout the town. Other levies — including highway, "part-town" that funds the planning department, garbage collection, solid waste disposal, lighting, public parking and drainage — are imposed on the majority of private properties in unincorporated parts of town. Levies for park districts and fire protection districts are for specific geographic areas.

When the town announces its tax levy in the annual budget, that number combines 28 levies that the town board has complete control over, and excludes others such as water districts with semi-autonomous governance structures. How a tax levy hike, cut or freeze affects individual property owners depends on where they live.

Saladino’s first budget cut the town’s tax levy in 2018 by 0.5%, but some property owners saw their taxes go up. For example, county records show that town taxes on Venditto’s Massapequa home increased in 2018 to $2,258 from $2,157 the previous year, a 4.6% tax increase. In contrast, town taxes on Saladino’s home, which is in another part of Massapequa, decreased in 2018 to $1,831 from $1,918 in 2017, a 4.5% drop, county records show. Neither property’s assessed value changed during those years.

The reason for the difference was a sharp increase on a town garbage collection tax levy in 2018 that hit Venditto’s property but not Saladino’s.

Tax levies have at times appeared to be out of sync with how the corresponding funds have performed. Saladino’s 2018 and 2019 budgets cut the solid waste disposal district levy even as the deficit in that fund was growing, hitting $6.9 million at the end of 2019, according to town financial records. The town’s highway fund finished 2018 and 2019 with surpluses that grew to $6.1 million, but the 2020 budget hiked the town’s highway taxes.

While the parks fund has consistently run surpluses, the town has cut and raised taxes on specific park districts. The Oyster Bay hamlet park district tax levy, for example, has gone from $460,196 in 2017 to $1.2 million in the 2020 adopted budget, a 160% increase.

Darienzo said he was not prepared to speak about the Oyster Bay park district.

"I never would have imagined we would be talking about a fund less than a million dollars of our $300 million budget," Darienzo said. "I don’t know why that would be a concern of anybody’s, but on the whole we are prioritized to getting our funds where they need to be."

He said the town doesn’t know how the funds will perform when it creates budgets that must be adopted by November of each year.

"I don’t have a crystal ball," Darienzo said. "I’m not going to know where all the funds are going to land from one year to the next."

The audit noted that the town’s public parking fund has also run a deficit over the previous four years despite increased parking fee revenue.

"The town has been unable to maintain a trend of operating surpluses in this fund," the audit said. "Rather, inaccurate estimates of parking fees (lots, garages, meters) and salary expenses continue to exacerbate the deficit position of this fund."

The audit recommended that the town board adopt a formal fund policy and create reserves and multiyear financial plans.

Darienzo said a formal fund policy is "in the conversational stage … nothing’s been written down."

The town is not rushing to create a multiyear financial plan: "We don’t see the need at this time," Darienzo said. "We’re going to do what’s best for us. We’re not going to do what’s best for the state controller’s office."

Fund surpluses aren’t likely to be set aside as reserves anytime soon, he added.

"We want to fix every fund to get them all in the black," Darienzo said. "Only at that such time when we are on solid ground in every fund, would it be prudent to discuss the idea of setting aside reserves."