State audit confirms Wheatfield financial woes

The Wheatfield Town Board received two pieces of bad news last week - the state audit and a new Moody's rating.

The news from State Comptroller Thomas P. DiNapoli was expected. Despite statements by Timothy Demler, former supervisor, to the contrary, the audit confirms what the town's new budget director and the town's independent auditor have already said -- Wheatfield finished 2009 in debt.

Because of that debt, Moody's Investors Service downgraded the town's credit rating from A2 to Aa3, which means the town will have to pay more interest to borrow money and those loans may be more difficult to get.

The state audit confirmed an accumulated combined deficit of $715,000 at Dec. 31, 2009, in the general, highway and fire protection district funds, but added an additional $2 million to the total for sewer funding it deemed not appropriately used, and also cited the town's previous policy of providing cell phone service to non-employees.

The town's own figures show a $630,000 deficit, not including the $15.6 million of long-term debt the town carries.

"The board did not levy any property taxes in the general or highway funds from the early 1970s until 2010," the audit report points out. "While it is commendable that the board was able to avoid a tax levy for so long, the town has accumulated a large deficit that will need to be repaid, most likely by taxes. Instead of taxes, the board financed operations with declining levels of fund balance, one-shot revenues and restricted moneys that should not have been used for operations. ..."

The audit covered the period Jan. 1, 2008, to Nov. 16, 2009.

New Supervisor Robert Cliffe said the Town Board began taking steps to cut the deficit even before he took office in January.

"Simply put, against the wishes of my predecessor, during budget negotiations the board took steps to slow the bleeding of the last few years," he said. "Upon my taking office and with the assistance of Budget Director Ed Mongold, the board and I have taken numerous additional steps to not only stem the bleeding, but to take some of the nasty medicine to start healing our wounds. During the upcoming budget process we will take responsible steps to start the process of bringing our financial position back to full health."

Cliffe, in a press conference on Sept. 3, said he was hopeful the additional $2 million mentioned in the audit as part of the deficit can be eliminated. The auditor's position is that since the grant funds were for particular purposes, they must be repaid and will therefore increase the town's deficit.

The town had received the money as an Environmental Protection Agency grant for sewers, which the town had already paid and constructed. Legally, the money should have been put in a reserve account, but Demler dumped it into common funds and "started spending money like a drunken sailor," Cliffe said.

The EPA will do an audit on the funds, Cliffe said, and he is hopeful they will be understanding that the same taxing group would be affected by any penalty. "It doesn't make any sense to hurt our taxpayers more," he said. "We are working with the EPA to allow them to make a reasoned decision regarding this use of grant funds; we hope that they will conclude that the town's use of funds was appropriate."

The cell phone issue mentioned in the audit has been resolved, Cliffe said. Only town employees have cell phones and the total number of phones issued has been drastically reduced.

Councilman Gil Doucet said Demler had taken a friends and family plan that allowed cell phones for non-employees.

"I don't think anyone was aware that his (Demler's) mother, father, daughter and her boyfriend all had town cell phones," he said.

"It's the Town Board's responsibility to manage finances in a way that's good for the town and good for its taxpayers," said DiNapoli in issuing the state audit report. "Unfortunately, the board has not done this and now has large deficits. At the end of the day, the town will have to make up for this loss." 

Board members said, unlike Cliffe, who has Mongold provide detailed monthly financial reports to them, Demler as the town's chief financial officer was not cooperative about providing information.

Councilman Larry Helwig said when the board first learned about the deficit last year, he asked the budget director to see specific figures. The budget director said he must first check with Demler before releasing the information, then quit his job. The board went ahead and trimmed $200,000 from the 2010 budget.

"To this day on his radio show, he (Demler) is insisting we have a fund balance that's not there," Helwig said.

Cliffe said he doesn't envision the town's new highway tax going away, but added that he doesn't plan to just put out taxes to solve the deficit problem. The board will have to make some difficult decisions for the upcoming budget on what the town will and will not provide. In some cases, like the cutting of the mosquito spraying this year, these actions will not be popular, he said.

Asked about any penalties against Demler's handling of town funds, Cliffe said some of his practices were not legal, but not necessarily criminal. Money can be borrowed from one budget fund and put in another on a short term basis, but must be put back at the end of the year, he said.

For a copy of the state audit report, visit: http://www.osc.state.ny.us/localgov/audits/towns/2010/wheatfield.pdf.