- Prompted by a proposal raised by Southampton Town Supervisor Linda Kabot
, the Southampton Town Board is considering the creation of a reserve fund for the sole purpose of paying back debt accrued from the town's Community Preservation Fund (CPF) program.
"As revenues come down, you need to make sure you can pay your bills," Kabot asserted to the board in a work session meeting on Friday, May 29. "We need to make sure we always have the ability to cover our debt."
Town Comptroller Tamara Wright, right, estimated that the town will be $3 million short of saving for the reserve fund. Mary Wilson, left, manages the program for the town.
According to the supervisor, the total principal and interest payments for the town's CPF program in 2009 will be more than $9 million. In 2010, that total should rise to more than $10 million. Once flourishing, revenues from this program are now floundering, and while the town collected $32 million in 2008 from the two percent transfer tax, revenues for this year will most likely be less than budgeted, proof being that in April the town collected under $900,000 in CPF revenues.
"You never want to go to the general fund taxpayers," Kabot offered. "We promised that this program would be self-supporting. We have a duty to make sure we don't overextend ourselves. Right now, the general fund is exposed."
Under the proposed resolution, an inter-fund transfer of $1.2 million will be used to start the reserve fund, a transfer that is considered to be a repayment to the CPF fund from the town's debt clearing fund. Beginning in the second half of 2009, $250,000 in revenues per month will be put into the reserve fund, totaling $1.5 million. In 2010 and 2011, $350,000 a month will be set aside for reserve each month, totaling $4.2 million per year. By the end of 2011, the reserve fund should total approximately $11 million, which is the maximum amount of debt service expected per year.
However, some board members were hesitant to accept the proposal as is, citing low real estate prices as a reason to purchase land now.
According to Councilwoman Anna Throne-Holst, there is still work to be done in order for the reserve fund to come to fruition.
"It's important that we don't lock ourselves into something should the market change," asserted Councilwoman Anna Throne-Holst
. "There is still more work to be done." The councilwoman added that for every dollar spent developing land, $1.30 is needed to work it. "That's a bigger picture way to look at it," she offered. "It's not just a preservation of land thing. It's preservation of funds."
Examining the town's revenue intakes for the first four months of 2009, new Town Comptroller Tamara Wright, on hand at the meeting as financial consultant, said it was her estimation that the town will be approximately $3 million short of being able to reserve adequately. She added that paying for any property with cash will be very difficult for the next 18 to 24 months.
However, Kabot argued that creating a reserve fund would be beneficial when the town goes in front of Moody's and Standard and Poor's credit raters. She added that, as of now, the town is spending the majority of its CPF revenues on debt service and PILOT payments. Borrowing to buy more land would increase the town's debt service.
If the reserve fund is created, Kabot said, the town board would not be permitted to dip into it when money is needed for other purposes.