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Kabot Charges Nuzzi’s Proposed PILOT Allocations Would Collapse CPF Fund

Originally Posted: November 23, 2008

Andrea Aurichio

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Everyone came to the table Friday as town officials meet with representatives from the CPF, and the Hampton Bays and Riverhead School Districts as the town's top financial advisers warned Supervisor Kabot that the CPF fund was in distress. Photos by Andrea Aurichio

Southampton - "This is not about the school budget, this is about tax relief to residents who cannot pay a $6,000 property tax bill this year, when they paid $5,000 last year," Dr. Diane Scricca, superintendent of the Riverhead School District, asserted, addressing members of the Southampton Town Board at their Friday afternoon special work session to discuss PILOT payments to school districts.

Councilman Nuzzi's plan seeks to maintain payments at last
year's level of $4.8 million when CPF revenues topped out at
$50.3 million rather than limit payments

The session, presided over by Supervisor Linda Kabot, was attended by School District Administrators as well as by the town's top financial officers and representatives of the Community Preservation Fund (CPF) who gathered to discuss a possible reduction in payments to the Riverhead and Hampton Bays School Districts this year.

The Southampton Town Board is weighing two plans that attempt to increase payments to last year's levels, both in excess of the $3 million now allocated for PILOT (Payment In Lieu of Taxes) payments in the 2009 town budget.

One plan, advanced by Councilman Christopher Nuzzi, calls for an increase in allocations totaling $4.8 million in PILOT payments while the other plan, proposed by Supervisor Kabot, calls for a total of $3.5 million in PILOT payments. PILOT payments are awarded to school districts based on a need index established by the New York State Department of Education.

The town's Comptroller cautioned town officials regarding any increase in CPF payments in excess of the $3 million currently budgeted, noting the fund is in financial distress as the town heads towards 2009.

The $3 million PILOT allocation in the town budget is based on current town law governing the appropriation of CPF funds which stipulates that no more than 10 percent of the fund's annual total may be paid out as PILOTS. Town officials expect to close out the 2008 fund with a total now estimated at $31 million if the town is able to collect $1.5 million in transfer tax in November and December.

Nuzzi's proposal raises serious legal issues by calling for a change in the town law governing the CPF, established by the state legislature, governing proceeds from the Peconic Land Tax in each of the five East End townships.

According to Kabot, and town financial officials, the Nuzzi proposal at $4.8 million exceeds the total tax loss of $4.1 million created by tax-exempt properties in the eligible districts. Nuzzi's proposal is aimed at restoring payments to the Riverhead District to last year's levels to extend the maximum possible tax relief to taxpayers in the District.

Riverhead School Board member Christine Press and School Superintendent Dr. Diane Scricca were on hand to speak to the district's needs.

"You cannot make PILOT payments in excess of the tax loss," Richard Blowes, the town's top administrator and former Comptroller said.

Nuzzi's allocation is based on 2007 CPF totals when the fund collected a robust $50.3 million rather than on the fund's dwindling 2008 revenues as stipulated by town law. This year the fund level has dipped considerably due to the downturn in real estate transfers.

Southampton Town Supervisor Linda Kabot's plan calls for a
total of $3.5 million in PILOT payments by allocating an
additional $500,000 from a town reserve fund that will be added
to the $3 million allocated in the 2009 town budget.

Anticipated revenues for the fund are now projected at $21 million based on the assumption that the town is able to collect $1.75 million per month in 2009. The town is already committed to pay an estimated $10 million in debt service next year. That along with a the $3 million already budgeted for CPF PILOT payments totals $13 million and accounts for more than 50 percent of the fund's projected total revenues for 2009. "The CPF fund is in financial distress," Town Comptroller Steven Brautigam said. "That is very clear."

In addition, Supervisor Kabot cautioned the town must pay $800,000 in stewardship and administrative costs to maintain the fund. The town cannot go to bond to cover debt service or PILOT payments. The town can go to bond to cover land buys and is now in contract to purchase $9 million in acquisitions scheduled to close in 2009.

Kabot's plan proposes to raise the budget PILOT allocations from $3 million to $3.5 million by supplementing the CPF fund with money from the town's reserve fund. In attempting to derive more funding for the school districts, Kabot came up with the reserve fund solution since it does not require any changes in town law.

Nuzzi's plan, if adopted, will result in a $1,297 tax reduction on a house in Riverhead valued at $500,000. Hampton Bays School District residents will save $185 on a house valued at $500,000. In comparison, Kabot's plan will offer Riverhead School District taxpayers a $570 tax break on a house valued at $500,000 while Hampton Bays School Districts residents would save $175 on a house valued at $500,000.

The Riverhead School District is hardest hit by in this year's budget with less than $1 million earmarked for the district for 2009 as a result of an audit by the New York State Comptroller's office conducted in the summer of 2008. The audit indicated the town had previously overpaid the Riverhead District by an estimated $2 million based on a miscalculation in the tax levy formula used by the town's financial officers.

Town Board members meet with representatives of the CPF as town financial advisers note the CPF fund is in distress citing declining revenues and the town's obligation to pay off $10 million in debt service in 2009 while PILOT payments strain the fund's limited resources.

PILOT payments are made annually at the discretion of the Town Board and may not exceed 10 percent of the total CPF revenue for the previous year. The town is under no obligation to make PILOT payments at any time, and could have opted to forgo payments this year in view of the funds shrinking revenues.

Councilman Nuzzi chose to introduce a resolution to increase payments as a means of extending tax relief to the ailing Riverhead School District rather than adhere to the legal limit permitted by town law.

Councilman Chris Nuzzi, who was unable to attend the meeting, questioned the necessity of meeting with the school district representatives. Kabot contended the meeting had been called at the request of the School District Superintendents who were under pressure to provide more detailed information to their school boards.

"There has been so much information and comment going on in the Halls at Town Hall," Kabot said, "along with all the other facts and figures reported by the news media that they want an accurate account of what is really going on."

Councilwoman Nancy Graboski expressed grave concern for the
future of the CPF noting town residents would not support a
referendum concerning the CPF if Nuzzi's plan is implemented.

"Everyone has a different opinion on what to base this payment on. No one can point to a specific section of state or town law and say this is what the formula is. This whole thing is open to too much interpretation," Nuzzi commented in a phone interview on Monday. He still contends taxpayers in the Riverhead School District should not be deprived of tax relief this year, while the town board debates the language of the CPF legislation. "Tax relief should be at the top of our agenda this year," he asserted.

Finding fault with the proposal, Richard Blowes, the town's Management Services Administrator countered, "You have not defined PILOT here. You are not proposing to make PILOT payments, you are not talking about tax relief as intended under the law, you are talking about subsidies, and that is not what the law allows."

Pending Vote
A vote of two to two with one member of the five member board absent or abstaining from voting will result in the payment of the budgeted line item amount of $3 million in PILOTS according to Town Law. Both Kabot and Nuzzi need a majority vote of three to two or four to one to pass their proposals. A tie will defeat either or both of these proposals and the original payment as budgeted will be made in 2009.

The town board plans to vote on both resolutions at the Tuesday evening meeting scheduled to be held in Town Hall at 6 p.m.

The CPF fund was established by town-wide referendum in 1997. The initial legislation creating PILOT payments was ratified by voters in a town-wide referendum in 2001. Subsequent modifications to the law, made in 2007 were enacted as a result of the passage of a state law in August of that year, but were never subject to town-wide referendum.

The New York State Legislature's Ways and Means Committee contends the legislation now pending regarding the PILOT to qualified school, fire and ambulance districts should be subject to a town-wide referendum in November 2009.

"That referendum will never pass," Councilwoman Nancy Graboski commented, noting the passage of the Nuzzi proposal could mean the beginning of the end of the CPF.

"We will not be buying any land in 2009," Kabot said. "We do not have the money."

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Guest (justice for all) from southampton says::
It's amazing that you did not attend the meeting with the school districts. Your trying to illegally change the CPF when a majority of the town voters don't want it changed. Where is the town going to come up with money to pay for these changes? The country is in an economic crisis. Real Estate sales are way down. You better wise up, much is at stake here. Do the right thing.
Nov 24, 2008 12:00 am


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