Thiele: Riverhead sets another land preservation tax revenue record, while the rest of the East End sees decline in 2022

Riverhead Town generated $7.89 million in Community Preservation Fund revenue in the first 11 months of 2022, breaking the yearly record it set in 2021, according to a report by Assembly Member Fred Thiele.

Real estate transfers rose over 26% in the first 11 months of 2022 compared to 2021, according to Thiele, breaking the 12-month $6.9 million record setting revenue generated last year by the town. Revenues for December 2021 have not yet been reported by Suffolk County.

The rest of the Peconic Bay region fell short, however, in reaching the record highs of the prior two years; the revenues for all the whole East End for the first eleven months fell from just more than $195 million in 2021 to $160.8 million in 2022 — a 17.6% drop.

Revenue for the fund spiked in 2020 and 2021, caused primarily by a regional real estate market boom fueled by an exodus from New York City to the East End as the coronavirus pandemic swept through New York. East End towns produced a record setting $210.6 million in revenue in 2021. The CPF derives revenues from a 2% transfer tax on real estate sales in the five East End towns.

The break in the growth of the revenue shows “a significant cooling of real estate activities on the East End in the last few months,” Thiele said. “Whether it be attributed to the inevitable bursting of the COVID-19 market bubble, increased interest rates, stock market declines over 2022, predictions of a coming recession, or some combination of these factors, the conclusion must be that there has been a clear reduction in CPF revenues over the last three months.”

Riverhead generates the second lowest revenues of the five towns participating in the regional program, only behind Shelter Island. The money generated by the program can be used by a municipality for land preservation and water quality improvement projects.

The upward trend in CPF revenue for Riverhead continues a pattern of overperformance for the town. In 2021, the year the town broke its previous 2006 record of $6.1 million, the town estimated in its budget that it would only generate a little more than $4 million for the program and needed to allocate part of its reserves to the budget line. In actuality, the transfer tax generated $6.9 million. 

In 2022, town officials continued their conservative estimate for the fund, predicting again in the municipal budget that it would only generate a little more than $4 million and that the town would need to allocate reserves.

This year, town officials have estimated that the town will receive even less than the previous two years: $3.2 million. 

Most of the money appropriated to the CPF budget line goes towards paying the town’s debt service on the $70 million it borrowed to fund land preservation purchases between 2000 and the 2008 real estate market crash, when CPF revenues plummeted. The town’s CPF revenues after the financial crash were not enough to cover its CPF debt service until 2016, when the fund’s revenue climbed to a point where the town was able to pay its debt service without depleting its reserves. The CPF debt burden was a major factor in Moody’s downgrading Riverhead’s bond rating in 2015.

The town had a roughly $9.8 million fund balance of CPF revenues as of the end of 2021, according to the town’s 2023 municipal budget document, which was the most recent figure given by the town’s financial administrator. The town most recently used the CPF to jointly purchase and preserve 37.37-acres of property on the south side of Old Country Road and east of Northville Turnpike with Suffolk County. The town paid 10% of the purchase price of the land — not more than $500,000 — with the county paying the rest.

Gov. Kathy Hochul signed another piece of legislation in 2021, authored by Thiele, that would create an additional half-percent real estate transfer tax on East End towns, along with the CPF, to fund a Community Housing Fund to aid in providing financial assistance to first-time homebuyers, rehabilitate or create community housing, or provide housing counseling in the Peconic Bay Region. 

The decision to adopt the law is up to each individual town’s town board and subject to a mandatory referendum. Every East End town board but the Riverhead Town Board passed legislation putting the referendum on the ballot this past November, and voters passed the fund in all four towns. 

The Riverhead Town Board can pass a local law putting a referendum on the ballot this year, but has had no discussions since it decided not to put the referendum on the ballot last year.