ISLIP'S BOND RATING WAS "NOT AN UPGRADE"...SAYS FITCH SENIOR DIRECTOR
On January 31, 2011, the Fitch Ratings Agency, a global financial ratings agency, put out a press release about the Town of Islip. Not long after, Newsday, Long Island Business News and several other respected news venues put out stories that the Town of Islip bond rating had been upgraded from AA to AAA; the highest rating available. According to the Fitch press release "Prudent management has enabled Islip to maintain sound reserve levels".
In August 2010, The Office of the State Comptroller for New York, Thomas DiNapoli, issued an audit report for the Town of Islip, for the time period January 1, 2007-August 31, 2008. The audit tells a different story of how Islip Town has handled its' money.
Mr. Jim Mann, the Senior Director and member of the Fitch Ratings team that handled the Islip rating, said this week that the Islip Town bond rating was NOT upgraded, but simply "AFFIRMED", as to what it already had been. Mr. Mann said that he had not seen the State audit, before releasing the rating. Cindy Stoller, Media Liaison for Fitch, wrote the press release and the release does say, the rating was "affirmed".
Perhaps the confusion for the reporters who mistakenly called it an upgrade came about, according to Mr. Mann because:
On April 30, 2010, there was a re-calibration of the entire (bond) ratings system and a systematic ratings upgrade to all outstanding ratings. This was done in order to use the same ratings for municipalities versus corporations. Islip already had a rating which would be equivalent to a AAA and therefore their rating was merely affirmed, not upgraded.
Following Fitch's January 31, 2011 press release, all news reports of the "upgrade from 'AA to AAA' were inaccurate", according to Mr. Mann.
The rating has been and continued to be AAA. No reason was given by anyone at Fitch, as to why something that occurred in April of 2010, suddenly became the topic of a new Fitch press release on January 31, 2011. Messages to Ms. Stoller asking her to explain why the release was made in January 2011, when the changes occurred in April 2010, were not returned.
A company called Fitch Inc. (vendor number 8649) was paid $27,500 by the Town of Islip, between 2005 and 2008. Fitch Inc. received no payments from the Town in 2009 and 2010. Calls to Ms. Stoller to ask if this Fitch Inc. is the same as Fitch Ratings Inc. and if it is the company that received $27,500 between 2005 and 2008 from Islip Town as a vendor, were not returned. Googling Fitch Inc. brings you to the Fitch Ratings System webpage and Ms. Stoller is listed as director of U.S. Public Financial Infrastructures and Project Finances/Latin America.
After the Fitch Press release was sent out in January 2011, over six newspapers printed the story as an "upgrade" from AA to AAA for Islip, something that according to the Fitch Agency representatives was not accurate.
Freelance Investigations questioned Mr. Mann in a recent telephone interview asking why the Town of Islip, has a AAA rating in general, considering the myriad of problem issues found in the State Comptroller's Office Audit; released in August 2010 by Thomas DiNapoli. Mr. Mann had not yet seen the audit.
Mr. Mann and Peter Wei, the Senior Analyst on the Islip Rating decision, both admitted for the record, that they had not seen the State audit until a link to it was sent to them earlier this week, by Freelance Investigations.
On a conference call later that day with Mr. Mann, Mr. Wei and Freelance Investigations, Mr. Mann said "Because of this new information we will review and reconsider their rating. We do rely on information from audited financials. It was an unqualified opinion of a qualified financial statement given to us by Town government officials that we based our decision on." Mr. Mann could not recall who actually gave him the numbers, except to say that they were Town of Islip government officials.
Earlier that day, Mr. Wei had spoken with Freelance Investigations and he had no trouble recollecting where he got the numbers from that Fitch relied on. "We did not see the audit released by the State Comptroller in August 2010. We relied on numbers for 2010 that came from Bob Kerr, from the Town of Islip, he is their financial advisor and Mr. Ludwig, they gave us all the financial information for 2010.", Mr. Wei said.
Robert Kerr works for the New York Municipal Advisors Corporation, (NYMAC), a financial management company that has been paid over $100,000 by Islip Town in the last five years for- as their website states "Our successful approach to 'rating agency presentations' (that) has benefited our clients by improved ratings."
According to records obtained by Freelance Investigations, NYMAC, located at 2 Roosevelt Avenue in Syosset, donated $2,150 to Friends of Phil Nolan's campaign between 2008 and 2010.
Mr. Joseph Ludwig, was the other person, according to Mr. Wei to give Fitch the Town's financial statement and 2010 numbers, along with Bob Kerr from NYMAC.
Mr. Ludwig has a home in Westbury, according to the address he used donating $200 to Friends of Phil Nolan in 2008. The Town Comptroller is required to live in the Town of Islip.
Mr. Ludwig was also the Islip Town Comptroller, when the State Audit Report found serious breaches of financial protocol.
Problems outlined in the audit included:
$14.3 million dollars per year for three years was "misplaced", which made it appear as if the Town was in a worse financial state than it really was.
Sources said this miscalculation resulted in over sixty Town workers being let go unnecessarily and yet immediately after the firings or retirements, a smaller group of much higher salaried employees were hired, explaining why the salaries remained flat despite the firings.
According to the audit there was a co-mingling of millions of dollars in capital projects' funds in one bank account. There was no accountability of where the money was being spent, or on what project and no safeguards were put in place to determine when or even if -money was misappropriated. There was no way to know when projects were over budget. In many cases , according to the audit, money for one project was used for another- in violation of law. When the money ran out, the Town Board would just make a resolution to put more in, also in violation of proper municipal protocol.
Bank deposits were made without identifying information, the Town failed to keep the signature plate used to sign checks from the Town coffers in a secure location and many other financial anomalies were indicated in the audit, including over $12,500 in missing money, a matter which was referred to the Suffolk County District Attorney's Office.
Credit cards purchases were not accounted for and each December millions of dollars in vendor payments without proper supporting paperwork, were paid by the Town. In some cases supporting invoices were created and submitted long after the work was already performed and paid for.
Mr. Phil Nolan, Islip's current Town Supervisor and Supervisor for the time period dealt with in the State's audit, has stated publicly that problems and issues in the audit were all dealt with. What Mr. Nolan refers to as the Fitch Bond rating "upgrade" is appropriate and warranted, according to his statements in published news accounts.
Attempts to contact Mr. Nolan for any comments he might have on issues raised in this story, went through the Town's Acting Public Information Officer, Kevin Bonner. Since the Town's regular Public Information Officer, Amy Basta, has been on maternity leave, all attempts by Freelance Investigations to communicate with Mr. Bonner, have yielded no response.
The Town has had a strong bond rating since 2002, when Peter McGowan was the Supervisor. The bond rating has remained high recently, despite many serious financial concerns that occurred from 2007-2009, when the State audit revealed problems under Mr. Nolan's administration.
Mr. Mann commented after first reading the State Audit report, although admittedly he read it only cursorily the day it was sent to him this week, by Freelance Investigations. "I will read it more thoroughly and see what it says, but it appears that many of the lack of internal controls were because of software problems and it looks like most of those issues were or are being resolved."
NUMBERS DON'T SEEM TO ADD UP.......
The January 2011 Fitch Rating press release stated, "In light of declining revenues, management instituted a series of staff reductions which generated 1.2 million in total savings...". The numbers from the Islip payroll from 2007 through 2009 do not reflect this savings. Instead, they show a reduction/savings of a little over $29,700 dollars between 2007 and May 2010. Records for the rest of 2010 show although the payroll figure dropped approximately $5 million to $48,541,279- at the same time the vendor payout totals for the time period between 2007-2010 increased $122.8 million.
$788,611,329 in 2007
$827,305,148 in 2008
$877,152,451 in 2009
$911,457,676 in 2010.
Fitch stated in their January 31, 2011 press release when the Islip rating was "affirmed" that the unemployment totals for Islip were unavailable. Statistics are available online at the Department of Labor, Bureau of Labor Statistics and show the unemployment rate for Islip was 8.5% in March, 2010 but dropped to 7.8% in 2011. Suffolk County is currently 8.2% and higher than the State average of 8.0%. On January 22, 2011 state jobless rates were said to be on the rise across the board, according to the Department of Labor whose records show the steady rise of the jobless rate in Suffolk since 2008. In 2009 it was 8.0%. and in 2010 Suffolk County's unemployment rate was 8.8%. It dropped in 2011 to 8.2% still slightly higher than the State average of 8%.
In published reports Mr. Nolan has always insisted he saved millions in payroll expenses, in fact in a recent published article Mr. Nolan claims to have saved $18 million per year in payroll. However, a review of the numbers reveals the payroll stayed relatively flat from 2007 when he first took over through May 2010, despite the fact that approximately 113 employees were fired or retired during that time period.
SALARY OVERTIME
Management 2007 7,906,454
2008 8,867,641
2009 7,267,080
As of 5/11/10 2010 7,019,715
WHITE COLLAR 2007 16,844,259 309,322
2008 16,785,615 291,806
2009 16,912,785 279,051
As of 5/11/10 99,376
BLUE COLLAR 2007 22,549,126 2,075,590
2008 21,821,786 1,571,732
2009 22,226,650 2,085,567
As of 5/11/10 948,418
PART TIME 2007 4,096,360
2008 4,054,158
2009 4,980,406
# of employees # of employees # of employees
1966 2007 1932 2008 1853 2009
Salary 47,299,839 47,475,042 46,406,515
O/T 2,384,912 1,863,538 2,364,618
P/T 4,096,360 4,054,158 4,980,406
___________________________________________________________
53,781,111 53,392,738 53,751,339
Saved in 3 Years $29,772.00
Numbers from the Town of Islip Payroll Sheets |
Although the number of employees went from 1,966 in 2007 to 1,932 in 2008 (34 fewer employees= payroll of $388,373 dollars less) and again the number dropped to 1,853 employees in 2009, (79 fewer employees= a payroll increase of $358,601 dollars) so from 2007 to 2009 the payroll stayed relatively the same. Sources say Mr. Nolan let go of low salaried employees and hired fewer employees making much higher salaries, most averaging $103,000 per year. The savings calculated in 3 years is $29,772, despite over 100 workers either retiring or being fired.
Then in 2010, the payroll numbers drop to $48,541,279, according to Republican Islip Town Councilman, Steve Flotteron. This number he received from Mr. Nolan has not been confirmed by any document to date. It includes part time and overtime according to Mr. Flotteron, who spoke recently with Freelance Investigations. He said the lower numbers are deceptive, because although it appears the payroll has decreased, the numbers fail to include increased outside contractor fees now being paid for things such as road paving, outside cleaning services, custodial and many more services that were always done by the Town employees and now are contracted out. According to the State audit, these contracts were often awarded without competitive bidding as required by law and there were no controls on purchasing.
"Now Nolan wants to float a $70 million dollar bond to repave the Town and play catch-up with all the things that haven't gotten done, or were not done with the same quality, since we let the Town workers who used to do those jobs go." according to Mr. Flotteron.
'There is already $141.3 million dollars in bonds that will come due within the next ten years, according to Town records. How will our children be able to pay for that and then another $70 million?" Mr. Flotteron asked.
Vendor Totals from the years 2005 through 2010:
2005 $700,004,540 * Mr. McGowan only
2006 $753,696,931 **Mr. McGowan/Nolan (Mr. Nolan in December)
2007 $788,611,329 Mr. Nolan
2008 $827,305,148 Mr. Nolan
2009 $877,152,451 Mr. Nolan
2010 $911,457,676 Mr. Nolan
Between 2007 and 2010 the vendor totals increased roughly over 122.8 million dollars from 788.6 million to 911.4 million, a difference of $122,846,347 dollars.
Mr. Flotteron pointed to things like custodial services. "Outside contractors can clean the floor, but when we had Town workers and the floor needed to be stripped, sanded and refinished, the Town workers would do that too. Now we have to hire additional outside contractors for things such as that."
NEWER EMPLOYEES = LOWER SALARIES ?
One of the positive reasons given by Town officials and also by Fitch representative Mr. Mann for using outside contractors instead of municipal workers, was that benefits and pensions don't have to be paid by the Town. Mr. Mann pointed this out to Freelance Investigations when asked how the increase in vendor payouts of $122.8 million and a decrease of $5 million in workers' salaries between 2007-2010 could be considered to be a substantial savings when taken in total. "How a municipality manages its' budget by outsourcing is not necessarily a bad thing, because they don't have to pay pension and health benefits."
Not having to pay pension and benefits might appear to make financial sense. What is actually happening in Islip Town, however, belies another scenario, according to Town workers.
Sources say many people who took early retirement incentives are being hired right back as part timers and/or consultants, sometimes with an hourly rate hovering around $40/per hour. J. Baumgarten, payroll supervisor, took early retirement last year and was hired back a week later and now works part time in the same title, for $40.92 an hour and she still receives benefits and a pension from the Town. Also hired was R. Duhigg as payroll supervisor for $51,142 dollars per year. G. Athenas, head clerk in the Town Attorney's office, took the retirement incentive last year and was hired back one week later as a part time worker for $35/per hour and she also still receives a pension and health benefits.
Maureen Meehan worked for the Town for over 10 years, her salary in 2006, was $69,700 as the Executive Assistant/Chief of Staff. When Mr. Nolan appointed Jeannine Dillon to the same job, with the same title, she was paid $88,000. Mr. Nolan claimed he was just bringing her salary in line with the former employee's salary, however, Ms. Meehan worked for many years and never had a salary commensurate with what Ms. Dillon started with. On February 2, 2009, Ms. Dillon got a raise to $103,100 dollars plus $10,000 from Mr. Nolan's campaign for consulting work. Ms. Dillon left her job as Deputy Supervisor in September, 2010, just after the audit was released, saying she was going to explore other opportunities. She had worked for the Town since Mr. Nolan took over in 2006.
Chris Nicolia, makes $11,830 as a part time clerk. Also a part time clerk is A. Pugliese who has the same title and was hired on the same day. He makes $7,280. Chris Nicolia started out as an unpaid intern while he attended law school. His father, owner of of Nicolia Ready Mix, in West Babylon has donated $8,500 to Friends of Phil Nolan from June 2007 to the present.
In December 2010, Gene Murphy, the Town of Islip Planning Commissioner, attended a party to celebrate his retirement after more than thirty five years with the Town. Now he is also being hired back, two days a week to work as a consultant, despite the fact that he stated publicly at the time, that his staff is more than capable of going on without his expertise, or he never would have retired. Re-hires can make up to $30,000 per year or more as part time consultants or part-time workers, while still getting their pension and benefits from the Town without the need for a waiver.
Why hire the same people back? Are there no other qualified personnel who could do these jobs, some residents ask? Approximately 30 more retirees are scheduled to be hired back by the Town, according to sources inside Town government.
Residents question where the alleged savings are. These retirement incentives were touted as an effort to rejuvenate the staff with new hires and thus alleviate some of the rampant unemployment.
Hiring back the same people you just retired, allows some people to get two paychecks and others none,
according to workers who wish to remain anonymous. This is double dipping, an issue Mr. Nolan raised in his election run, promising to end the practice. Town workers said some people worked for over twenty years to get to their salary and the new hires are starting where they worked so hard and it took them decades to get. Some of them, "twenty-somethings" with little or no experience are starting at the salaries they worked their whole lives to accomplish, insiders complained.
Mr. Flotteron said they fired the Town photographer, (a union job). Now they are hiring young kids and training them to take pictures for the Town, something Mr. Flotteron said should not be allowed because Town photographer was a union position and as such the position or title can't be eliminated and then have someone non-union just come in and be trained or allowed to do the same job.
Mr. Flotteron said they fired the Town photographer, (a union job). Now they are hiring young kids and training them to take pictures for the Town, something Mr. Flotteron said should not be allowed because Town photographer was a union position and as such the position or title can't be eliminated and then have someone non-union just come in and be trained or allowed to do the same job.
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