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2 issues may hurt Amherst finances; Highway fund, legal claim cited

The Town of Amherst is in sound financial health with the exception of two anxiety-provoking problems that could result in major tax increases or a cash-flow crisis if allowed to fester. One involves a potentially devastating legal claim. The other involves spending in the Highway Department.

A complicated personal injury claim involving the town and a state agency accused of deceit and conspiracy could decimate the town's general fund reserves within two years, according to Thomas P. Malecki, partner in the Drescher and Malecki accounting firm that released the preliminary findings of the town's 2011 audit on Monday.

"At some point in time in 2012 or 2013, you're going to run out of cash to advance to your self-insurance fund," Malecki said.

The decade-old Bissell case, which involves a $23 million judgment, has resulted in the town paying out a personal injury claim to the tune of $3.2 million a year beginning in 2011. The next payment is due next month.

The town, which is self-insured, is currently on the hook for $13 million of the total claim. Its excess insurance carrier covered the remaining $10 million. Two courts have stated that the State Insurance Fund must reimburse the town, but the state agency has refused to do so.

"You either collect the cash from the State Insurance Fund or there will be a tax levy at some point in time," Malecki said.

Supervisor Barry Weinstein responded, "There will be a $13 million hit to the taxpayers."

"That's correct," Malecki said.

The general fund -- the town's largest fund -- broke even in terms of revenues and expenses. But because of the Bissell case, more of the town's general fund reserves have been declared "nonspendable" because that money has been tied up to cover the Bissell case judgment, Malecki said.

The town currently has $4.4 million in unrestricted general fund savings at the end of last year. But after next month, general fund reserves will be down to about $1.2 million. More borrowing may be possible to offset this decline, but Weinstein said he was reluctant to "kick the can down the road."

In regard to the town's troubled highway fund, Malecki said, the town's Highway Department has used up much of its highway fund reserves over the last two years with expenses outpacing revenues. The fund dropped from a year-end, unreserved fund balance of $5 million in 2009 to a mere $500,000 at the end of last year.

"This is a fund that's going to need consistent monitoring," Malecki said.

Highway fund savings stands at 4 percent of the fund's total budget -- well short of the 10 percent minimum the town requires for most of its funds.

Weinstein pointed out that the town raised taxes for the highway fund in the 2012 budget by 10.75 percent, which is expected to generate an additional $860,000 in revenue. But Malecki said that will not be enough to improve the highway fund's health overall.

Comptroller Darlene A. Carroll said higher-than-anticipated gas and oil costs, as well as overtime and salt costs for a difficult winter at the start of 2011 contributed to highway expenses.