The Riverhead Town Board’s anticipated vote on authorizing a $6 million, two-year bridge loan to stave off a double-digit tax increase next year was put on hold Tuesday, because four board members are split on the issue and the fifth was absent from the meeting.
Supervisor Sean Walter said that without the loan, the town will face a 12.5 percent tax increase next year and that cutting $4 million — the amount of the town’s general fund deficit — would involve eliminating about 60 town positions.
The board tabled that measure along with a resolution to set a public hearing on a proposal to allow the town to pierce the state’s 2 percent tax cap, which would likely be necessary without the loan.
The supervisor must deliver a tentative 2015 town budget by Oct. 1. So what might happen if both measures fail?
“The alternate plan is that I don’t fund all the services of the town,” Mr. Walter said at last Thursday’s work session.
“If the Town Board does not authorize the tax cap override, or the loan, my alternative plan is, I cut the budget by $4 million,” he said.
The town has been using surplus funds to offset tax increases in its budget for more than a decade, with the surplus money coming mostly from land sales or contract extensions on potential land sales at the Enterprise Park at Calverton.
The 2014 general fund budget, approved in the fall of 2013, includes $3.57 million in such reserve funds, leaving remaining surplus funds of between $1 million and $2 million — not enough to plug the $4 million hole, officials say.
The idea behind the bridge loan, which the town has already arranged with Suffolk County National Bank, is that the town will be able to sell some land at EPCAL within the next two years and use that money to pay off the loan.
“This will be on somebody’s palm card running against me, but here goes: If we take the loan and we are successful in selling land at EPCAL, we’ll be heroes,” Mr. Walter said Tuesday night. “If we fail, it’s going to be a whole lot worse.”
The supervisor acknowledged that he would like to extend the loan repayment period from two years to three, which the bank would have to agree to.
Councilman John Dunleavy opposes a loan.
“I’m not a gambler, and I’m not going to gamble that we’ll sell land there in two years,” he said. He feels the land sales won’t happen as quickly as the town hopes.
The town isn’t expected to get approval for a 50-lot subdivision at EPCAL, required by state law before sales of smaller lots can begin, until sometime in 2015.
Councilwoman Jodi Giglio also opposes the bridge loan, and feels the town needs to make cuts and explore ways of dealing with the deficit other than borrowing.
Mr. Walter says the deficit is entirely the result of debt from the town landfill reclamation and capping project, which went well over budget under the previous administration. He says the annual landfill debt is $4 million, the same amount as the current budget deficit.
He has said the town has cut positions and expenses in the four years he’s been in office and has drastically reduced the garbage fee, which is paid as a fixed amount and not part of the tax rate.
Still, he said, he’s leaning toward approving the loan because he feels confident the town will be able to make some large land sales at EPCAL soon after the subdivision is approved.
Councilman George Gabrielsen said he supports having the loan available, but he doesn’t think the town should use all $6 million of that money to lower taxes.
“I’m in favor of having it available,” Mr. Gabrielsen said. “We have to make some cuts, and I’m talking about upper echelon cuts, not lower-paid employees. We’re not passing a 12.5 percent increase. I think we’re going to land somewhere in between.”
He said a 12.5 percent increase is akin to saying, “As a board, we’ve failed, and we’re saying, ‘Let’s pass it on to the taxpayers.’<\!q>”
Councilman Jim Wooten, who is now the swing vote, was said to be ill Tuesday night and could not be reached for comment on his position on the bridge loan.
But at last Thursday’s work session, Mr. Wooten said, “I’m not comfortable with 12.5 percent” and indicated that he has been looking at other ways to reduce costs, such as a four-day work week at Town Hall.
The town is also waiting to find out how many employees will accept a retirement incentive program designed to lower costs, which won’t become clear until Sept. 3.
At Tuesday’s board meeting, Riverhead resident Steve Romano said the proposed $6 million bridge loan reminded him of the town’s use of the Community Preservation Fund to make open space purchases several years back.
The town ended up not receiving as much money as it originally expected, since the fund is supported by a 2 percent land transfer tax, and land sales had slowed due to the down economy.
The town now has a deficit in the CPF and is using general fund money to pay the debt on those land purchases.
The procedure for piercing the state tax cap is much simpler for towns than for school districts. While schools seeking to pierce the cap must have budgets approved by at least 60 percent of voters, towns only need approval from 60 percent of their board members. With a five-member board like Riverhead’s that requires only a simple majority, just as for every other vote.
However, piercing the cap does require the Town Board to hold a public hearing on the measure first. There are also a number of expenses that are exempt from the cap, so the overall tax levy increase can, in some cases, be more than 2 percent and still be in compliance.
The Town Board is next scheduled to meet Wednesday, Sept. 3.