CPF revenues up, though fund still ‘bankrupt,’ supe says

02/07/2014 8:00 AM |
BARBARAELLEN KOCH PHOTO | The Weeping Willow Park on W. Main Street was purchased by the town under its Community Preservation Fund program.

BARBARAELLEN KOCH PHOTO | The Weeping Willow Park on W. Main Street was purchased by the town under its Community Preservation Fund program.

Last year was a pretty good year for the Peconic Bay Community Preservation Fund.

The fund, which uses money raised through a voter-approved 2 percent real estate transfer tax to buy open space and farmland development rights in the five East End towns, brought in a total for 2013 that was up by 43 percent over the previous year.

In fact, the 2013 total — $95.43 million — was the second-highest the fund has ever raised, according to South Fork Assemblyman Fred Thiele (I-Sag Harbor). Voters in the five East End towns first approved the CPF in 1999.

In the Town of Southampton, the CPF raised $57.79 million, the highest amount that town has ever received in CPF revenue.

East Hampton Town got just over $28 million in CPF revenue for 2013, its second highest total over the 15-year-span.

And Riverhead?

Riverhead Town brought in a fraction compared to its neighbors to the south: to be exact, Riverhead’s $2.58 million was less than one-tenth of what East Hampton raised and less than one-twentieth of Southampton’s total.

Revenue brought in through the town's CPF program since it started, in 1999, through 2013.

Revenue brought in through the town’s CPF program since it started, in 1999, through 2013.

While Riverhead’s CPF revenue total did reflect a 17 percent increase over last year, it’s still less than half of what the town is currently paying in debt service incurred because the town borrowed against anticipated CPF revenues. The idea, officials said at the time, was to buy land while it was still available, because if the town had waited until it had the money, the land might have been sold and developed before it could be acquired.

For the past five years, Riverhead Town has been paying about $6 million annually in CPF debt. Those yearly payments are expected to remain in the $5 million to $6 million range through 2020, according to town finance administrator Bill Rothaar. After that, the town anticipates that debt service will drop to about $3.4 million in 2024, then to under $2 million for the final three years of the program, according to Mr. Rothaar.

Over the life of the bond, the town expects to pay almost $99 million in principal and interest on CPF purchases, he said.

EDITORIAL: Despite past problems, no town should be left behind in CPF program

Riverhead will be paying off the CPF debt though 2030 and is not planning to buy any more land or development rights with the money. Overall, the town has made $68.9 million worth of CPF purchases, on which it expects to pay $29.9 million in interest through 2030, bringing the total debt to $98.9 million, according to Mr. Rothaar.

He said the annual budget debt service amounts in past budgets have at times come in lower than expected because the town refinanced the debt and got a lower interest rate.

“What’s going to happen is that, at some point, it’s going to flip,” he said, meaning that by continually paying down the debt and not buying anything else, the fund will eventually find its way from the red to the black.

However, exactly when that “flip” will happen remains unclear, as it depends on future CPF revenues.

In 2002, when the town first began borrowing against expected CPF revenue to buy land, it initially was bringing in far more money that it was spending, according to Mr. Rothaar, who said this enabled the town to build up a CPF fund balance that is now about $18 million. That fund is used to close the annual CPF shortfall.

Supervisor Sean Walter said last fall he expects that $18 million balance to run out within five years, at which point the town will have to use money from its general fund to close the gap.

In the meantime, Mr. Walter said in an interview, “We’re not buying any more land. The town spent money like drunken sailors, on all fronts. Hopefully, we can grow our way out of this.”

In 2002, during the administration of former supervisor Bob Kozakiewicz, the Town Board voted to authorize a $30 million bond for open space and farmland development rights purchases. The fund was to be split, with $20 million allocated to farmland and $10 million to open space.

Two years later, during the administration of former supervisor Phil Cardinale, the Town Board authorized another $25 million preservation bond, also using future CPF receipts to pay off the debt service. This bond was approved because the previous bond was all either spent or allocated to specific purchases. The horizon to pay back CPF debt had also been extended by East End residents from 2010 to 2020, and was later extended further to 2030.

Then in 2006, again under Mr. Cardinale’s administration, the Town Board authorized another $20 million bond for open space and farmland development right purchases, also utilizing future CPF receipts to pay off the debt service.

“We borrowed $75 million and never did an income analysis,” said Mr. Walter, who worked in the town attorney’s office at the time. He says he called for the income analysis but the proposal was ignored.

“Only two years did we ever come close to receiving $6 million,” he said. “When I took office, I stopped all the spending and put the unspent money into debt service.”

Mr. Cardinale said in an interview that he has no recollection of Mr. Walter’s recommendation.

He said the CPF reserves were “enormous” when he was in office and feels the town shouldn’t have a problem paying off CPF debt if it has an $18 million balance. Mr. Cardinale questioned why the principal owed on the bonded amount continues to rise if the town is using its fund balance to pay down the debt. .

The plan is to refrain from spending anymore CPF money and give the revenue a chance to catch up to the debt service, according to Mr. Walter. In fact, the supervisor said, there should be no other plan — by him or anyone else who holds the supervisor’s seat in the foreseeable future.

“If anyone tried to buy property with this, it would be a corrupt decision,” he said. “The CPF fund is bankrupt. You can’t make that decision to spend more.”

Despite the red light on CPF purchases, Pine Barrens Society executive director Richard Amper — who has often been critical of the town’s handling of environmental issues over the years — was complimentary to the town on this issue.

“Riverhead did a better job with their limited funds than the other four East End towns, because they bought the property when it was less expensive and when it was still available,” Mr. Amper said. “They will generate ample funds in the remaining years to pay for the cost of carrying the money. They were very conservative in buying only what they thought they could afford.”

Mr. Walter said he hopes to meet with Mr. Thiele and state Senator Ken LaValle (R-Port Jefferson) to see what, if any, help they can offer the town on the CPF debt issue. However, he said he doesn’t even know what type of help might be available at this point.

Under the CPF program, money raised through transfer tax stays in the town it came from and cannot be spent outside that town. The result is that the two South Fork towns receive drastically more money that Riverhead or Southold towns.

Several years ago, former Riverhead Councilwoman Barbara Blass suggested that the CPF program be changed so that money raised on the East End benefits the entire East End. She said that environmental issues occurring in Riverhead Town, which gets very little in CPF revenue, will have an effect on neighboring towns that get much CPF money.

The idea didn’t have any support among other towns.

“I don’t see that happening,” Mr. Walter said when asked about that possibility this week.

“That is philosophically correct; it is pragmatically impossible,” Mr. Amper said. “The towns would never have endorsed the program if they thought the money would be used to purchase land in other towns.

“Long Island is sufficiently balkanized so that we don’t think regionally very well,” he said.

Annual CPF totals of the five East End towns, year-by-year.

Annual CPF totals of the five East End towns, year-by-year.