East Hampton audit shows $27M deficit

East Hampton spent itself into a $27-million hole before a newly elected supervisor cut dozens of jobs and changed the way town business was done, a final state audit concludes.

The state comptroller's office notified East Hampton Wednesday that its audits of the general fund for 2007, 2008 and 2009 found the town built up a deficit of nearly $27.3 million. The deficit was nearly half the town's annual budget.

"It's the first time the state has validated a number that reflects the deficit for the town," said East Hampton Supervisor Bill Wilkinson. "It's unfortunate that it's closer to what we had predicted all along . . . we had hoped to do a little less borrowing."

Defining the precise debt is important because the town had been authorized to borrow up to $30 million to pay off the debt, but could not borrow more than it actually owed. Because East Hampton already borrowed almost $9.5 million last June toward paying off the debt, the final audit figure allows the town to issue bonds - or bond anticipation notes, depending on market conditions - for about another $17.8 million.

The amount of the debt has been debated for years, and last June a Suffolk County grand jury investigating the town's fiscal crisis determined East Hampton owed between $30 million and $40 million, leading to what the special grand jury report called a "complete collapse of fiscal management."

Before a series of audits, optimists in the town hoped the debt was as little as $15 million.

The debt led the town's Democratic supervisor, William McGintee, to resign, and Wilkinson, a Republican, was elected in November 2009. His first budget, adopted late last year, cut spending from $71.7 million to $64 million, with much of the reduction coming from the elimination of jobs: Thirty-two employees took early retirement and 18 unfilled jobs were cut from the budget.

The lower budget also cut the town tax rate by more than 17 percent.

Assemb. Fred Thiele Jr. (I-Sag Harbor) said the audit marks the beginning of the end of the town's financial problems, although it will remain subject to audits from the comptroller for the 10-year life of the bonds it sells to cover the debt.

"This marks the end of the worst of it," he said. "The town is now headed in the right direction . . . they're still subject to oversight, and that's a good thing."

Wilkinson said the town has avoided layoffs but is still looking at ways to trim spending.

"It's a great sense of relief that, to date, we have done it through voluntary measures," he said, adding the planned Wednesday closings of the recycling center is expected to create the opportunity "to shrink the workforce."