Second straight year of record-breaking land preservation tax revenues for East End

Riverhead Town set a record in its Community Preservation Fund receipts in 2021, according to data released yesterday by Assembly Member Fred Thiele.

The $6.9 million in Community Preservation Fund revenues collected by Riverhead last year topped its previous high of $6.1 million in 2006, the peak of the housing bubble.

Riverhead’s 2021 CPF revenue jumped nearly 40% over the $4.9 million the town saw in 2020 — and 2020 revenue was a 44% increase over 2019.

The CPF derives revenues from a 2% transfer tax on real estate sales in the five East End towns and so provides a useful barometer of how active the real estate market is and whether property values are increasing.

The regional real estate market saw a boom in 2020, fueled by an exodus from New York City to the East End as the coronavirus pandemic swept through New York. The local real estate market continued that trend in 2021, as the transfer tax revenue increase shows.

According to Thiele, 2021 saw the highest regional total for CPF revenue in since the fund’s inception in 1999. It produced $210.6 million in revenue for the Peconic Bay Region in 2021, Thiele said, breaking a record set in 2020, when $139.4 million was collected.

Among the five East End towns, the Town of Southampton took in the lion’s share of CPF revenue last year with $118.4 million in revenue, a hefty 56% of the regional total. East Hampton’s 2021 CPF revenues topped $66.7 million, comprising nearly 32% of the region’s total revenues. Southold Town’s CPF revenues reached $13.6 million last year, and Shelter Island took in just under $5 million.

Every East End town saw CPF revenues increase significantly over 2020. The region’s overall CPF revenues shot up 51% over 2020.

Since it inception in 1999, the CPF has produced $1.6 billion in revenue for the Peconic Bay region, said Thiele, who with former State Sen. Ken LaValle coauthored the legislation that created the CPF.

The 2% tax on real estate transfers in the five East End towns was created to fund land preservation purchases in each town. It has protected more than 10,000 acres of land. In 2015, the CPF was extended to 2050 and amended to allow up to 20% of CPF revenues to be expended on eligible water quality improvement projects, such as wastewater treatment improvement and pollution prevention projects and aquatic habitat restoration projects. Voters approved the changes in 2016.

Riverhead’s CPF escapes looming insolvency

Riverhead’s CPF fund was on the brink of insolvency several years ago, when debt service on borrowing against future CPF revenues came close to depleting the town’s CPF reserve and exceeding its annual revenues.

Between 2000 and 2008, during a boom time in the local real estate market and development pressures increased, Riverhead Town borrowed approximately $70 million to fund land preservation purchases.

But then the real estate bubble burst and the local real estate market crashed. Riverhead’s CPF revenues followed suit, plummeting from a high of $6.1 million in 2006 to a near-record low of $1.6 million in 2009. The town’s CPF revenues in the ensuing years were not enough to cover its CPF debt service and its CPF reserve — savings socked away during the boom years — was quickly running dry. The CPF debt burden was a major factor in Moody’s downgrading Riverhead’s bond rating in 2015.

Facing the prospect of having to pay the CPF debt service out of the town’s general fund — which would have required what then-Supervisor Sean Walter warned would be a “catastrophic” property tax increase — Riverhead Town sought and in 2016 obtained new state legislation to allow the town to refinance its CPF debt. The refinance would have allowed the town to extend the CPF debt for 30 years, reducing its annual debt service obligation to a more manageable amount.

But the town’s CPF revenues edged up enough in 2016 and the years that followed to allow the town to avoid depleting its CPF reserve and having to refinance the CPF debt in order to meet its debt service obligation — which is declining as the bond principal declines and in the current fiscal year was budgeted at $4.6 million.

The town’s CPF revenues, as reported by Thiele, have actually exceeded far exceeded the amounts budgeted in 2020 and 2021 — by more than 70% for fiscal year 2021.

Riverhead’s estimated CPF revenues of $4.05 million in its adopted budgets for 2020 and 2021, but took in $6.9 million last year and $4.9 million in 2020, according to Thiele.

Riverhead Financial Administrator William Rothaar said yesterday the accounting department is preparing an updated report on CPF revenues in 2021.

According to the town’s 2022 adopted budget there was an estimated CPF fund balance of about $7.2 million as of Dec. 31, 2021.

Peconic Bay Region Community Preservation Fund revenues 1999-2021 by RiverheadLOCAL on Scribd