The town of East Hampton, playground of the rich and pampered, is broke.
How broke? Well, the town is likely to end the year with a $12 million deficit – and in recent weeks, it had only $900 in its bank account and barely made its payroll.
The dire straits have raised the specter of a property-tax hike.
But fear not, gentle millionaires and billionaires. The increase will be small.
Last month, the state Legislature granted the town a loan of up to $15 million to pay off the deficit over 10 years.
This eliminated the need for a big tax hike to begin paying down the gap.
Still, the crisis is not over, and there are cries for the head of Town Supervisor William McGintee, a Democrat. He blames the deficit on his predecessor, Jay Schneiderman, a Republican, saying the GOPer squandered a budget surplus. Schneiderman denies the claim.
Sources say McGintee, who took office in 2004 and is in his third two-year term, has decided not to run again.
The town of East Hampton consists of six municipalities – including East Hampton village, Amagansett and Montauk – and Sag Harbor, which it shares with the town of Southampton.
It’s the summer and weekend playground of P. Diddy, Jerry Seinfeld, Ron Perelman, Steven Spielberg, Julian Schnabel and Candice Bergen, where homes rarely sell for under $1 million.
With a tax base like that, it’s a surprise the town is in trouble.
For example, Seinfeld paid nearly $190,000 in property taxes in 2006, according to records.
The main problem, officials say, is that even though East Hampton has long been home to celebrities, it has small-town fiscal practices.
For example, there is no comptroller – only a bookkeeper.
Thus, until the State Comptroller’s Office began auditing the town’s books last fall, there was no one to monitor fund transfers from one department to another.
Other factors include the growth of the town’s payroll and the fact that Suffolk County is slow to pass along the mortgage-tax revenue it collects.
“I think the town did not have professional oversight for the budget,” said state Assemblyman Fred Thiele (R-Sag Harbor), who was instrumental in arranging the state loan.
“Compared with other towns throughout the state, East Hampton has one of the strongest tax bases, but that doesn’t guarantee sound financial management. Sometimes, the bigger they are, the harder they fall.”
The town’s deficit, which was less than $1 million in 2005, has been widely estimated at $9 million. But Thiele said state auditors have found it is actually $12 million.
He said there will be a property-tax increase, but it will be small.
McGintee did not return calls for comment.