Riverhead looks to pay off remaining land-preservation debt five years early

Riverhead officials are looking to wipe out the town’s remaining Community Preservation Fund land-preservation debt five years ahead of schedule, a sharp turnaround from a decade ago, when the debt threatened to spill into the town’s general fund and force a major tax increase.

Financial Administrator Jeannette DiPaola told the Town Board at Thursday’s work session that the town has enough money in the Community Preservation Fund to pay off the town’s remaining CPF debt while still leaving about $20 million in the fund.

The debt dates back to borrowing Riverhead undertook between 2000 and 2008 to preserve farmland and open space. The town borrowed against expected future revenue from the Community Preservation Fund, which is funded primarily by a 2% real estate transfer tax on most real estate sales.

That strategy depended on continued strength in the real estate market. After the market collapsed in 2008, CPF transfer-tax revenue fell short of the amounts needed to make the debt payments. Riverhead relied on CPF reserves to cover the gap.

By 2016, town officials warned that CPF reserves were being depleted and the general fund could be forced to cover more than $2 million a year in land-preservation debt payments — an expense officials said at the time would have required a double-digit town tax-rate increase.

State legislation enacted in 2016 allowed Riverhead to refinance the debt, stretch out repayment, lower annual payments and avoid using the general fund to meet the town’s obligations.

Riverhead’s annual CPF revenues rose sharply in the years following the COVID-19 pandemic, as the real estate market boom drove property prices higher. The town collected about $7 million in CPF transfer-tax revenue in 2025, DiPaola told the board.

DiPaola is now recommending using available CPF fund balance to pay off the remaining debt before the final scheduled maturity in 2030.

“I’m not a fan of debt, so anytime we have an opportunity to pay our debt down, I will obviously bring that forward,” DiPaola told the board.

The Community Preservation Fund had a fund balance of about $30.1 million at the end of 2025, according to a worksheet presented to the board. The town has already budgeted about $2.75 million for this year’s debt service payment on the 2018 bond issue.

DiPaola proposed using an additional $7.2 million from CPF fund balance to pay down the remaining principal. She said the move would save about $660,000 in future interest costs.

The remaining CPF debt matures on Aug. 1 each year from this year through 2030, according to EMMA, the Municipal Securities Rulemaking Board’s public disclosure system for municipal bonds. The proposed paydown would retire the CPF-funded portion of those remaining maturities.

After the scheduled debt payment and proposed paydown, the CPF fund balance would still be about $20.1 million, according to DiPaola’s worksheet. The worksheet showed about $19.7 million available after applying a reserve calculation.

Council Member Ken Rothwell said he strongly supported the paydown, saying it made no sense to continue paying financing costs when the money is available.

“Even after taking this step right now to pay down the debt, we’ll still have about $19 million in Community Preservation Funds, which is really impressive,” Rothwell said.

Because a small part of the same bond series is tied to the general fund, the town would also need to use about $92,000 in general fund balance to complete the paydown. DiPaola said that portion would produce only a small interest savings, but it would remove the remaining payment from next year’s budget.

Council Member Joann Waski asked how the town reached the point of having money available, given prior discussions about piercing the tax cap.

DiPaola explained that the Community Preservation Fund is separate from the general fund. She said the town’s improved general fund position was due largely to conservative budgeting, interest earnings that exceeded budget estimates and department heads keeping operating expenses below budget.

Last town square note to be paid off

The board also discussed a separate proposal to pay off the remaining bond anticipation note issued for the town’s 2021 purchase of three East Main Street parcels for the future town square, using the proceeds of sale of one of the parcels to Joe Petrocelli for his proposed hotel. The closing on that sale is scheduled to happen by the end of this month. The payment on that BAN is due Aug. 14.

In addition to the sale proceeds, the town will use rental income from Petrocelli for possession of the property since December and amounts previously budgeted for other purposes, including an upcoming BAN payment on that borrowing and budgeted interest on borrowing that won’t take place this year. It will not require drawing on the town’s general fund balance, DiPaola said today.