Along with the New York State Budget, Governor Andrew Cuomo signed legislation April 4 allowing Riverhead Town to restructure the town’s Community Preservation Fund debt, which currently costs more each year than the town is taking in in new CPF revenue.
As a result of the 2008 economic downturn, the town’s CPF revenues, collected through a 2 percent real estate transfer tax, suffered a decline from more than $6 million collected in 2006 to less than $1.9 million collected in 2011.
According to Riverhead Town Financial Administrator William Rothaar, the town has faced an average $2.7 million dollar deficit in the CPF fund over the past six years.
Riverhead’s CPF fund has more than $46 million in outstanding bonds, and the debt service on those bonds is about $5.62 million dollars per year.
Most East End towns have bonded money in anticipation of future CPF revenue, acting under the assumption that land should be preserved before the prices increase dramatically.
Under that assumption, the new transfer taxes paid on property in the future should increase as the real estate market recovers — a strategy that has worked particularly well on the South Fork, where CPF revenues have recovered from their lows of a half-decade ago.
That assumption has backfired in Riverhead, which has been the slowest of the five East End towns to recover from the economic downturn.
The special state legislation allows Riverhead to refinance existing CPF bonds, issued between 2002 and 2008, at current historically low interest rates.
Riverhead Town Supervisor Sean Walter has been advocating for this change in state law.
“I am pleased to say we have a solution—a very real solution to the CPF deficiency,” said Mr. Walter in a press release Wednesday. “This legislation removes statutory hurdles set forth in provisions of the Local Finance Law…which essentially prevented the town from its ability to refund and refinance the existing CPF indebtedness.”
The Peconic Bay Region Community Preservation Fund was first adopted after public referenda in the five East End towns in 1998. It was originally slated to expire in 2010, but in 2002 was extended by voters to 2020 and in 2006 was extended by voters to 2030.
This November, there will be a measure on East End ballots to extend the transfer tax through 2050, and to allow each of the five East End towns to use 20 percent of the revenue for water quality projects.
Mr. Walter said voter approval of the extension of the CPF transfer tax to 2050, in conjunction with the town’s new state-sanctioned ability to refinance its debt, is vital to the town’s fiscal health.
“The state legislation… promises the Town of Riverhead an opportunity to reduce CPF bond indebtedness, eliminate negative impact to the general fund due to CPF bond indebtedness, and generate monies to continue efforts to preserve our land and resources and undertake water quality projects,” said Mr. Walter.
“On behalf of the Town Board, I want to acknowledge the hard work of our state legislative representatives, Senator LaValle, Assemblyman Thiele and Assemblyman Palumbo,” he added. “Their arduous dedication to working with us on behalf of Riverhead residents has helped us avoid a looming and real budget crisis.”