Riverhead Town may not wait until November to refinance its more than $55 million debt related to the Community Preservation Fund.
Riverhead Town Supervisor Sean Walter is pushing the town to begin refinancing its CPF debt now with a goal of selling the refinanced bonds in July. Residents in the next election will be asked to vote on a referendum that would extend the life of the CPF by 20 years.
Mr. Walter has said the CPF debt is the “single biggest reason” for the town’s credit rating drop last year. The threat of rising interest rates is what led for the push, according to Mr. Walter, the town finance administrator Bill Rothaar and financial adviser Richard Tortora.
“I think everybody feels comfortable about it, so we’re going to try and move forward with it now, because if they raise interest rates, we are going to pay for it,” Mr. Walter said Tuesday.
The CPF comes from a voter-approved two-percent land transfer tax in the five East End towns that can be used mainly to buy open space or farmland development rights.
Back in the early 2000s, Riverhead Town officials feared that if they didn’t purchase open space and farmland developments rights upfront, the land could be sold and developed by the time they had enough CFP money.
So the Town Board at the time opted to buy the land up front by borrowing against future CPF revenues. The board authorized $30 million in bonds in 2002 and another $20 million in bonds in 2006 for CPF purchases.
However, when the real estate market dropped off, so did the amount of revenue the town received from the CPF, and the town ended up using CPF fund balance money to pay off the debt from CPF purchases.
The town now has a CPF debt of more than $46 million in bonds and about $12.6 million in interest, according to officials.
The CPF fund balance — money raised by the transfer tax but not used — stood at $18.2 million in 2010, according to town figures. It’s presently at $12.3 million, and is expected to be drawn down to a low of $6.5 million in 2022, Mr. Walter said.
After that, using a projected CPF income of $3 million per year — with no new land purchases and the money only being used to pay off prior purchases — the fund balance is projected to rise again starting in 2023, and to reach $11.68 million by 2030.
Mr. Walter said previous town projections had the CPF fund balance drying up by as early as 2017 or 2018, but the town has gotten additional revenues.
The $3 million revenue projection is based on the average amount the town has received over the past 10 years, he said.
The state passed two measures in recent months that Riverhead officials had looked at as key to eliminating its CPF debt.
In December, the state allowed East End towns to schedule public referendums to extend the life of the CPF tax from 2030 to 2050. Mr. Walter said the town originally planned to wait until November to refinance the CPF debt, assuming the extension was approved by voters.
And in April, the state passed a law allowing Riverhead Town to make 50-year repayments of CPF purchases made between 2000 and 2008, rather than the previous limit of 30 years.
That law will need to be amended to change the repayment limit to 40 years because the state constitution prohibits repayment periods of 50 years for anything other than docks or wharves, Mr. Walter said.
He said Riverhead never planned to bond anything over 35 years anyway, so the amended law won’t affect the town’s plans.
The Town Board unanimously passed a resolution in support of the amended bill at a special meeting Tuesday afternoon.
“We were never going to go to 50 years anyway,” Councilman Jim Wooten said.
The town only plans to refinance its CPF debt through 2030, Mr. Walter said.
“It’s a great idea,” Mr. Wooten said.
Photo Caption: The Weeping Willow Park on West Main Street was purchased with CPF money. (Credit: Barbaraellen Koch, file)