Southampton Town overpaid school districts from preservation fund, audit finds

In May of 2009, an audit by the New York State Comptroller’s office found that Southampton Town in 2007 had sent $2 million too much in Community Preservation Fund money to help lower taxes in the Riverhead School District, which encompasses parts of Southampton Town.

Now, a new audit from the comptroller’s office finds that the town also allocated a total of $1.8 million too much from its preservation fund to the Riverhead School District between the years 2008 and 2009.

The Community Preservation Fund uses a voter-approved two percent land transfer tax to raise money for open space and farmland preservation, but in 2002, the law was amended to allow certain districts with a high percent of land off the tax rolls due to Pine Barrens preservation to have their tax levy offset with CPF PILOT payments, or payments in lieu of taxes. Initially, Riverhead was the only district that qualified.

The PILOT payments to the Riverhead school district had helped offset some big tax increases in the Southampton Town portion of the district that were due to fluctuations with the equalization rate, which is used to divvy up tax payments in districts like Riverhead that are located in more than one town. But the 2009 audit found Southampton Town used the entire Riverhead district’s tax levy, including parts not in Southampton Town, when computing how much of a PILOT to use to offset school taxes in the Southampton Town part of the district.

The audit also found that the CPF payments were improperly used to benefit residents of the Flanders Fire District.

The new audit, released last week, deals strictly with the PILOT issue in Southampton Town and found that the town did not correctly interpret a 2007 amendment made to the CPF PILOT program by the state Legislature, and based its PILOT payments on the amount of all tax exempt land in each district, rather than the amount of tax exempt land due solely to CPF purchases.

As a result, the audit says, $1.7 million more in PILOT payments were applied to lower taxes in the Riverhead School District in 2008 than should have been, and $35,252 more than should have been were applied in 2009. The 2010 audit also found that the town applied $664,647 more in CPF money than it should have for PILOT payments in all districts combined because it misinterpreted another 2007 amendment to the program.

The audit was requested by state Senator Ken LaValle (R-Port Jefferson) and state Assemblyman Fred Thiele (I-Sag Harbor). They had at one time promised to pass state legislation that would have forgiven the over-allocations, but that law never was approved.

Southampton Supervisor Anna Throne-Holst said in a letter to the comptroller’s office that the town revised its procedures for assessing PILOT payments in 2008 and revised its assessments on properties to make sure they qualified for the payments. She said the town will develop a corrective action plan and send it to the comptroller’s office before Jan. 15, 2011 to address any mistakes in allocations to various districts.

The town in 2009 already began a program of “phasing out” of PILOTs to various districts over a 10-year payment plan to make up for lost aid when Riverhead district taxpayers received that extra $2 million in tax relief. School districts themselves do not have to repay anything, since they didn’t technically receive money; the CPF amount was simply used to lower the amount taxpayers in each district had to pay.

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