A $2.6M revenue shortfall in Smithtown blamed on pandemic

Smithtown faces an estimated $2.6 million revenue shortfall after the coronavirus pandemic forced officials to curtail some fee-generating programs, officials said, though the losses will be mitigated by a mix of spending reductions or delays the town council imposed earlier this year, along with increased revenue from other sources.    

The single biggest projected revenue drop is in the town’s school aged child care program, originally budgeted to bring in $1.4 million in fees but now expected to bring in closer to $300,000, according to town Comptroller Donald Musgnug’s analysis. That program was suspended last spring after school districts that hosted the program closed their buildings, and the town refunded money that parents had already paid.

As consumers’ pandemic fears and restrictions imposed by New York State pushed some businesses to temporarily close or limit services, fees the town collects for nonresidential solid waste were expected to fall $461,543, wiping out roughly 7% of a major revenue line for the town, which had projected $6.9 million. 

Revenue dipped too as contractors filed fewer building permits, outings organized by the town senior center were canceled and adult and youth sports programs were delayed or operated at reduced levels. New York State cut the payments it makes to the town through a basic municipal aid program by $60,000.

Revenue shortfalls do not translate directly to losses because some program costs also dropped, and the total shortfall is small relative to the town’s $112.3 million in planned spending for the year. But state law requires town officials to submit balanced budgets and caps the amount by which they can increase property taxes, the biggest revenue source for most municipalities. Municipal officials are typically loath to draw on reserves or other one-time revenue fixes.

Town leadership responded instead with an array of cost-cutting measures that should bring the town close to break even by the end of the year, Musgnug said in a phone interview. “We are very fortunate the town board took some corrective action earlier this year,” he said. The measures included tightening overtime policies, leaving some job openings unfilled, delaying delivery of replacement town vehicles and cutting discretionary spending in areas, such as repairs and office supplies by 15%. Savings are being squirreled away in a contingency account that now holds $500,000, Musgnug said. So far it is untapped. 

One unexpected bright spot is the state’s mortgage recording tax, a one-time tax on the value of a mortgage set at 1.05% in Nassau and Suffolk counties. A portion of the proceeds flow back to the town, and Musgnug expected the amount to fall because real estate agents last spring were temporarily barred from live showings. He also suspected buyers might shy away from major purchases in a recession.

But home sales and house prices on Long Island actually spiked this summer, driving disbursements to the town up to $3.5 million through July, up from $2.4 million year-over-year and on track to beat the $4.3 million Musgnug had originally forecast for the year.