Customers in the Town of Hempstead's Sanitary District #2, which collects garbage in Baldwin, Roosevelt, and South Hempstead, are "grossly overpaying" for garbage collection compared to residents of other areas of Nassau County, Comptroller Howard Weitzman said today.
The Comptroller, issuing an audit of the independent sanitary district, said that the district wastes millions of dollars every year on administrative expenses, including unnecessary and overpriced insurance sold to the district by a no-bid broker, cars and trucks for top staff, and gifts for employees, while allowing sanitation workers, in effect, to work part-time jobs for full-time pay.
"The commissioners of this garbage district, operating for the most part outside of the public view, spend extravagantly on contracts that were entered into without competition and on perks for themselves and their top managers. Meanwhile, at a time when high taxes are residents' number one concern, homeowners in Baldwin, Roosevelt and South Hempstead are overpaying for their garbage collection by millions of dollars every year. That's the bottom line," Comptroller Weitzman said.
District residents spend about $12 million a year (including disposal fees paid to the Town of Hempstead), or $734 per property owner, to obtain curbside garbage pickup and disposal, the audit found. In other areas of the Town of Hempstead where the Town itself provides garbage pick-up, the cost per parcel is only $603. And in the Port Washington garbage district, the subject of a recent Comptroller's audit, the cost per parcel is only $252 (see chart).
"If the same rates were applied to District 2's customers, the district could save millions each year on its garbage collection costs," Comptroller Weitzman said.
If Hempstead were to service District 2's customers, based on the town's current cost per parcel, the cost would be approximately $9.9 million, a savings of $2.1 million a year. If District 2's costs were as low as Port Washington's, the Comptroller said, the cost would be only $4.1 million, a savings of nearly $8 million a year.
The report is the latest in a series of audits by the Comptroller of so-called "special districts" in Nassau. There are more than 140 town-created independent taxing authorities in the county, providing services such as garbage collection, water or street lighting, but which have had little or no oversight by the towns or any other governmental authority prior to the Comptroller's audits.
Comptroller Weitzman said, "Our previous audit of Sanitary District 1 in the Five Towns area was hampered at every turn by uncooperative district managers, yet it was able to uncover massive mismanagement and waste of taxpayer funds. District 2's managers were, by contrast, open and straightforward with us during the audit process, and they indicated they have begun to make certain changes recommended by the auditors.
"Nevertheless, these districts' wasteful practices speak to the larger issue: There are too many special governmental districts in Nassau County, adding to residents' property tax burden. Because these districts operate with virtually no oversight, we should not be surprised to find that some of them spend taxpayer funds freely, without appropriate financial checks and balances. And we should not be surprised if district residents end up overpaying for services." The audit found that District 2 has poor financial controls and does not competitively procure many of its contracts, whether for technology purchases, insurance, financial services, or legal services.
"One of the more outrageous policies we uncovered," Comptroller Weitzman said, "is that the district routinely allows sanitation workers to leave after a half-day of work, despite a collective bargaining agreement that defines their workweek as 40 hours:10 hours per day, four days a week." An analysis of time clock records revealed that the average workday in District 2 is four to five hours per day, four days a week, for a total of 16 to 20 hours a week. Despite actual hours worked, the workers are paid a full-time salary.
"As a result of its total reliance on one insurance broker, the district also carries more insurance than necessary, and pays more than necessary for the insurance it does need," Comptroller Weitzman said. In 2004, District 2 spent $2.2 million for insurance recommended by its insurance broker, the Louis Koch Agency of Baldwin. The district apparently has not conducted any competitive process for insurance services and has dealt exclusively with Koch since 1978. Insurance costs represented 25 percent of the district's total expenses in 2004. The broker recommends how much insurance the district needs, then provides it, while receiving commissions that are pegged to the premium amounts from the insurance carriers - "a conflict of interest," Comptroller Weitzman said.
Over the two-year audit period the district's insurance purchases, recommended by the broker, included $1.9 million for employee health insurance. If the district had insured its employees using the New York State Health Insurance Plan (NYSHIP), as it is entitled to do and as Nassau County does, its health insurance cost would have been approximately $1.3 million, a savings of nearly $600,000 over just two years.
"Most municipal employees consider NYSHIP coverage the Cadillac of health insurance," Comptroller Weitzman observed. "This district bought a Rolls, and stuck the taxpayers with the bill." In addition to the commissions the Koch agency received, the district paid the agency additional fees totaling $117,500 during the audit period, mostly to monitor the district's workers' compensation program and reduce its costs. "Instead of lowering the premium costs, however," Comptroller Weitzman said, "the costs for the workers comp program increased 53 percent from 2003 to 2004."
The audit also found that:
The report is the fourth audit of independent sanitary districts to be released this month by the Comptroller. On September 8, Comptroller Weitzman released audits of Town of Hempstead Sanitary District #1 (Five Towns area), and garbage collection districts in Syosset and Port Washington. While Port Washington's service was found to be efficiently operated, significant overspending and lapses of management control were found in the other two. A fifth audit, of the Town of Hempstead's 6th Sanitation District, will be released in the next few weeks.
Sanitary District 2 has approximately 121 employees and provides service to 15,255 residential and 1,150 commercial properties. The audit covers the fiscal years 2003 and 2004.
The full audit report of Sanitary District 2 can be read or downloaded by clicking on the link below.
Sanitary District No. 2 Audit Report