Riverhead Town may get a reprieve from future tax increases due to recently approved state legislation that could reduce the town’s debt payments by about $3 million per year, according to Supervisor Sean Walter.
However, the fate of the one of the bills, which calls for extending the Community Preservation Fund deadline from 2030 to 2050, must be approved though a public vote of residents in all five East End towns.
“If the residents don’t pass the referendum, we’ll be at a point where we have to take the money out of the general fund to pay the CPF purchases off,” Mr. Walter said. The town could still refinance its CPF bonds without the extension to 2050, but it wouldn’t get the savings it needs, he added.
The town will run out of money to pay off the CPF purchases by about 2020 or 2021 at the current pace and the town’s bond rating will drop, Mr. Walter said.
East End residents have voted to extend the life of the CPF twice before.
The town authorized $30 million in bonds for open space and farmland preservation in 2002 and another $20 million in bonds for open space and farmland in 2006 with the goal of using CPF money. The revenue comes from a voter-approved 2 percent real estate transfer tax.
When the real estate market tanked about six years ago, the town was no longer receiving enough in CPF revenue to pay off the bonds and has been using CPF surplus funds, which are also dwindling, to help do so since then. It currently has a CPF debt of $46 million in bonds that carry about $12.6 million in interest payments, officials said.
The bill extending the CPF deadline to 2050 was sponsored by state Senator Ken LaValle (R-Port Jefferson) and state Assemblymen Fred Thiele (I-Sag Harbor) and Anthony Palumbo (R-New Suffolk). The legislation was signed into law by Government Andrew Cuomo on Dec. 15, 2015.
The second piece of legislation Riverhead Town sought was approved as part of the state budget on April 1. It allows longer bond repayment periods under the state law requiring the length of time municipal borrowings must be paid back by to be determined by a “period of probably usefulness.”
Mr. Walter said the town will probably not seeking bond repayment periods of more than 40 years, even though the amendment allows 50 years. He estimates the longer payback period will add between $1.5 million and $2 million in interest over the course of the borrowing.
This amendment only applies to Riverhead Town and only to CPF purchases made between 2000 and 2008. It also is subject to a permissive referendum, which could happen if someone opposed the measure and forced a public vote through a petition drive.
The CPF was approved by voters in all five East End towns and the money raised can only be used for open space and farmland preservation in the town where the money came from. The bill approved in December also allows CPF revenues to be used on water quality projects.
The town has been paying an average of $5.7 million per year in CPF debt and has received about $3 million per year in the 17-year life of the CPF, according to Mr. Walter.
Deputy town attorney Ann Marie Prudenti told the Town Board Wednesday that the town has been trying to get these two pieces of state legislation approved for more than a year.
“It’s been revised about a dozen times,” she said.
“This is the best news in a long time,” Councilman Tim Hubbard said.
“Riverhead really stepped outside the box more than any other town when it came to doing this type of acquisition,” Councilman Jim Wooten said.
Town officials at the time wanted to preserve as much land as possible then because they thought the land would be developed if the waited.
“It was a vision they had back then and it was a good one because it helped create what we have here today,” Mr. Wooten said.
“And we almost ran out of money,” Councilwoman Jodi Giglio added.