Kelly prejudged
 For a capital budget


To the Editor:


Responding to Richard Kelly’s question in his letter to last week’s paper, I say that (and I say this as someone who has sat on the Deer and Tick Committee and who has also guardedly supported the 4-Poster program created by the committee), I believe that yes, it does! 


Further, the assumptions from which you have been prejudged may well offer a picture window view into the accuser’s self-expectations for impartiality and fairness.


STEVEN PYTHON


Shelter Island


To the Editor:


Capital expenditures on buildings, equipment and systems are one of the larger and more vital long-term items in the town budget.


Historically, the town has lumped together high-cost capital items with current operating expenditure, which can significantly distort total expense and ultimately taxes in any given year. In 2008, for example, net investment in capital items totaled some $846,000, excluding the Community Preservation Fund’s 2-percent investment in land, about 10 percent of the town’s “total costs of services” of $8,482,000.


A good example is Highway Superintendent [Mark] Ketcham’s request at last Monday’s budget session for a paper baler in 2010 costing an estimated $85,000, which he proposed to “fund” by not having the Recycling Center pay $75,000 rent for equipment to the Highway Department, thereby resulting in a net cost of $10,000. On Tuesday, on questioning, it was agreed that the transaction would in effect utilize the Highway Department equipment reserves to pay for the new machine out of current cash balances.


In my view, capital items should be separated from the operating budget and shown in separate schedules projected over 3 to 5 years, as is now done in our school budget and in a number of other towns. Such investments, long-term in nature, should be planned over a 3- to 5-year period. Consideration should also be given to alternatives to the specific investment (e.g., different equipment) and to the funding alternatives for each of these long-term investments: borrowing, leasing, renting, subcontracting or paying cash from the town’s reserve accounts. 


These investment and funding decisions should take into account the town’s financial position, including its reserves, borrowing capacity and a discounted cash flow analysis of alternatives.


Another very important consideration must be whether to burden current-year taxpayers to fund all or most of the long-term investment that will provide benefits over many years to future generations, or to spread the cost over the estimated life of the equipment. Traditionally, many towns have used the generation of excess reserves via higher than budgeted mortgage tax revenue, grants or deferral of capital investment to subsequent years, to cover current capital costs, which is often not apparent to the public. In current economics, it is unrealistic to expect this windfall to continue.


While a comparative ratio analysis to other similar towns must yet be completed, it would seem Shelter Island Town is in a reasonably strong position relative to our neighboring towns, although we are a very small financial entity. Our fiscal policies under Supervisor Jim Dougherty have been prudent and conservative. 


Nonetheless, there is no reason why we cannot use available analytical tools, as outlined above, to better understand our alternatives and to expand his policy of sharing such considerations openly with the public. 


DONALD M. KORNRUMPF


Town Council candidate