Clarkstown's Financial Cloud

It's not a stretch to say the whole financial industry revolves around the compass point of the absolutely safe AAA rating. But the financial crisis happened because AAA ratings stopped being something that had to be earned and turned into something that could be paid for - Matt Taibbi 

On August 01, 2013 the Rockland County Times reported that Coldwell Banker Real Estate (CBRE) ranked the Town of Clarkstown number one on their list of Best Places to Live for ‘Booming Suburbs’ in New York State. 

“We are so proud of this wonderful honor,” said Supervisor Alex Gromack.  Gromack said that in recent years the town has reduced 'spending growth', consolidated government and maintained its tax stabilization fund.  He declared that the town maintains a Triple A bond rating, the highest a municipality can receive, from Standard and Poor’s. 

The Rockland County Times went on to state that CBRE did not mention Clarkstown's school and town property taxes are among the highest not only in NY State but in the whole of the United States and Clarkstown police are regularly rated among the most highly paid municipal workers also not only in NY State but in the United States.  

Additionally,  the town government has a plethora of employees earning well over $100,000 annually (including the leader of the Conservative Party, Ed Lettre, who earns over $170,000 and Independence Party power broker, Frank Sparaco, who earns $75,000 for 25 hours of part-time work.)

Here are some facts about property taxes, police salaries and Clarkstown's AAA Bond rating ......

1) Property Taxes
Rockland County is now the third highest taxed county in the whole of the United States which is driving people to abandon their homes because of the property taxes and seek refuge elsewhere.  

Clarkstown is in the top ten Towns with a population of over 50,000 that has more people moving out than are moving in. That is a situation that spells disaster for homeowners and their property values.

2) Police Salaries
There are 51 police officers whose incomes in 2012 were over $200,000 many because of overtime. These 51 officers constitute nearly one third of the Clarkstown police force. Incredibly, 42 Police officers, that is 25% of the Clarkstown police department took home more in 2012 than Raymond Kelly, the Police Commissioner of New York City who earns $205,180. 

In a 2008 article in the NY Times entitled 'Crime May Not Pay, but in this Town (Clarkstown), Fighting It Sure Does' we read that Chief Noonan was making $332,530 annually. The 50 highest-earning Clarkstown employees were all members of the Police Department, with those 50 earning roughly $10 million, or about $200,000 each on average.  Supervisor Gromack called the police salaries "obscene" but said that:

"Clarkstown’s Police Department was covering the entire Town “on its own” and so is doing the job of “two or more” departments".  

Apparently ex-Chief Noonan is unhappy today with his nearly $200,000 per year pension and Clarkstown may have to pay him more. The Journal News reports in its article Retired Clarkstown Police Chief Gets Pension Bump to $206,398:

"Thought the $190,000-plus pension Clarkstown police Chief Peter Noonan got when he retired two years ago (at age 61) was good?  It's now even better.  For several years, Clarkstown’s police force has been the highest paid in New York and Noonan’s salary was the highest among chiefs in the state at the time of his retirement. Noonan now has the eighth highest pension among municipal retirees in the state with an annual benefit of $206,398. In the Lower Hudson Valley, he is still the third highest-paid pensioner, trailing only retired Westchester Medical Center executives Edward Stolzenberg and Cheryl Schatmeyer".

3) Clarkstown's AAA Bond Rating
On August 09, 2013 Standard & Poor's Ratings Services revised its outlook on Clarkstown's N.Y.'s general obligation (GO) bonds to NEGATIVE from stable while affirming that presently it was continuing to rate Clarkstown's GO bonds as AAA.   Standard & Poor's based its outlook revision to negative based on the town's ongoing structural imbalance, for tax relief purposes, since fiscal 2008."

In addition, Standard & Poor's assigned its 'AAA' long-term rating, and negative outlook, to Clarkstown's series 2013 GO public improvement bonds.  The 'AAA' rating reflected Standard & Poor's view that Clarkstown had "an affluent property tax base, as demonstrated by above-average income levels and what is considered to be high market value per capita despite significant tax appeal activity".  Clarkstown was stated to have a demonstrated willingness to raise revenue and cut expenditures.

The negative outlook reflected the possibility that Standard & Poor's could lower the rating in the next two years by one-to-two notches if Clarkstown fails to execute on its plans to "reduce its reliance on reserves for recurring expenditures". In its view, recurring structural imbalance would not be commensurate with a 'AAA' rating. 

When the Palisades Mall Tax Settlement was announced Clarkstown borrowed the money to make its payment. Why? Because the town of Clarkstown is insolvent.  Net assets this year will be less than zero.  Latest projections show that as of the end of this financial year (2013) net assets will be negative by $10 - $12 Million dollars.  What took Scott Vanderhoef 20 years to achieve at the County level has only taken Mr. Gromack 8 years at the Town level.

How did he manage to achieve this?

1) Pension Contributions - Since taking office Mr. Gromack has never made a full pension contribution.  Instead he has opted to defer payments over a period of years (normally 10 years) plus interest.  Last year that amounted to about $5 Million.  He calls it 'amortizing'.  Others call it spending on the Town's credit card and not telling anyone.  By the close of 2013 Gromack will have 'amortized' up to $15 - $20 Millions of debt just for unfunded pension contributions alone.

2) Reserve Account - For 2012 the town used $3.2 million from reserves to pay for salary increases rather than negotiating with employees.  For this year that amount rises to $4.6 million.

3) OPEB - Charges for retirement benefits other that pension contributions mainly lifetime health care costs. - Mr. Gromack chose not to include the full costs of this benefit in his budget thus hiding the true cost from taxpayers.   All of this shows up in the Financial Reports which shows the decline in the town's net assets from 2008 through 2012 the last year that Clarkstown was solvent.  Note the situation in 2013 where net assets are projected to be negative i.e. Clarkstown has become insolvent.

 Year      Net Assets      Increase/Decrease

2008      $41,956,016

2009      $36,518,223         ($5,437,793)

2010      $31,154,546         ($5,363,677)

2011      $20,541,415         ($10,613,131)

2012      $8,449,935           ($12,091,480)

2013     ($11,551,000)        ($20,000,935)  

Charles Clewsow commenting in Vanderhoef's Utopia Rockland's Dystopia agrees that the OPED is the hidden number. He writes it was largely that number that pushed Detroit, once one of our great cities, into bankruptcy. "Though much of the national concerns have focused on pension liabilities, heath care costs for retired municipal employees pose an equally if not larger problem. Amid the $18.5 billion in long-term debt that led Detroit to file for bankruptcy is roughly $3.5 billion in under-funded pension liabilities. However, roughly $5.7 billion of that debt is health care costs and so-called OPEB “other post-employment benefits.” 

Kevin Roy commenting in Living in the State of Denial wrote: "I was curious to see how Supervisor Gromack has performed from a purely financial perspective. The numbers below are based on Bloomberg's Standardize Financial Reporting metrics. I used a base date of YE 2005 since he was elected in 2004. 

Latest data is as of YE 2012 
Total Revenue +28.8% ($69.6mm to $89.6mm) 
Total Operating Expenses +35.2% ($71.6mm to $96.9mm) 

The only year Revenue exceeded Expenses was in 2008 when I believe the town sold the landfill for $20mm. That year the "surplus" was $11.3mm which really indicates the deficit was $8.7mm. 

What's more concerning is the 58.6% increase in Human Resources Expenses - aka Employee Benefits - ($13.1mm to $20.7mm) and 24.0% increase in Public Safety Expenses ($29.2mm to $36.2mm). These two line items account for 58.8% of Total Operating Expenses. 

Meanwhile, Principal Debt Service - aka interest expense - has increased 57.1% from $8.6mm to 13.6mm. This means that 15.2% of Revenue collected goes directly to covering interest expenses. The average has been 14.4% for the past 8 years. 

I'll end with the most depressing statistic. According to the S&P/Case-Shiller Index, home prices in the NY Metro area have declined 23.9% since 2005."

Brace yourself because once this election is over the only option to maintain Clarkstown's AAA bond rating is going to be through large tax increases on the "affluent property tax base". That is, you and me. You see the Town does not intend to reduce its 'spending' under the present administration, only its 'spending growth', and by the time we have to pay the bill Supervisor Gromack may be long gone to a comfortable retirement on full pension.

Presumably, unlike Chief Noonan, Mr. Gromack will be satisfied with his pension. 

Michael N. Hull is a retired senior citizen who writes opinion pieces on local political issues. He is a Director of Clarkstown Residents Opposing Patronage with Tom Nimick and Ralph Sabatini. Hull contributes periodically to the Facebook page Clarkstown: What They Don't Want You To Know and this article was written with several contributors to that Facebook page.