Southampton Town residents who live in communities hardest hit by the economic downturn will receive less tax relief for 2009 than they did this year.
That’s because a proposal to allocate $4.8 million in Payment in Lieu of Taxes, or PILOTs, from the Community Preservation Fund to the Hampton Bays, Riverhead, and Eastport-South Manor school districts was scrapped by the Town Board on Tuesday, November 25, and replaced with a compromise resolution proposed by Town Supervisor Linda Kabot.
In a unanimous vote, the board adopted the supervisor’s plan to pay out roughly $3.5 million in PILOTs, which is around $500,000 more than the $3 million she had originally earmarked in her 2009 budget, but well below the $4.8 million allocated this year.
“I believe this plan makes the most sense legally, financially and politically,” Ms. Kabot said Tuesday.
To set the amount of payments in 2009, Ms. Kabot calculated 10 percent of a projected $33.8 million in CPF revenue for 2009, which equates to $3.38 million. CPF rules allow 10 percent of revenue from the 2-percent transfer tax to be used to make PILOTs to reduce the impact on taxing districts from removing properties from the tax rolls through preservation. The $3.5 million total was reached by adding $105,243 from a CPF PILOT Reserve Fund established in the adopted resolution on Tuesday night.
In May 2003, under former Town Supervisor Patrick Heaney, a local law was passed allowing for PILOT funds not spent within a calendar year to be carried over. A total of $444,841 of unused CPF revenue from 2007 was placed in the reserve fund on Tuesday. The $105,243 allocation for this year leaves just under $340,000 in that reserve fund.
Now, with the board having adopted the supervisor’s updated plan, the Riverhead School District, which comprises residents of Flanders, Riverside, Northampton and the Red Creek area, will get about $1.7 million less in PILOTs.
In 2008, when the PILOT subsidy was $4.8 million, those residents received the bulk of that payment, at $3.1 million. As a result, residents with a home valued at $500,000 received $1,297 in tax relief. Now, with the board adopting Ms. Kabot’s $3.5 million PILOT allocation, $1.4 million will be paid to the district, resulting in a $570 tax relief benefit to those same homeowners.
In the supervisor’s view, $4.8 million was too much in 2008 and less should have been allocated, with a portion put in reserve. “Now, we are grappling with what people have grown accustomed to,” she said of the larger payment.
Hampton Bays School District fared better under Tuesday’s adopted plan, receiving $1.8 million in PILOTs for 2009. In 2008, less relief, $1.3 million was sent to that district. Eastport-South Manor, which collected $187,000 in PILOTs in 2008, will receive just over $40,000 in 2009.
Reluctantly, Town Board members Chris Nuzzi, Anna Throne-Holst, and Dan Russo voted with the supervisor and Town Councilwoman Nancy Graboski after withdrawing a resolution to pay the same amount, $4.8 million, for 2009. One reason: A reassessment of lands within those taxing districts decreased the estimated amount of tax revenue lost at $3,493,555.68, and providing more than that amount in PILOTs would violate New York State Law, according to town attorneys. Ms. Kabot also threatened to not sign the 2009 tax warrant, which would certify the budget, if the $4.8 million plan was adopted.
In 2002, the CPF was amended to allow for tax relief payments to those districts within the pine barrens that had suffered tax loss due to lands being taken off the tax rolls for preservation. But, to qualify, those parcels must either be owned by the state or municipal corporations. As part of the reassessment, ineligible properties, such as churches, cemeteries, sumps, municipal offices, schools, and not-for-profit entities not owned by the state, were removed from the tax loss equation, resulting in the decrease in value. Mr. Nuzzi and Ms. Throne-Holst said they pulled back from their plan to pay out $4.8 million after town attorneys told them that doing so would open up the town to potential lawsuits.
The plan to pay the same amount in PILOTs stemmed from a meeting with New York State Assemblyman Fred Thiele and State Senator Ken LaValle, drafters of the original CPF legislation, who promised to introduce amendments in Albany in 2009 to clarify PILOT policy.
In part, their amendment would base the payments for a given year on 10 percent of the prior year’s collected CPF revenue. Mr. Nuzzi and Ms. Throne-Holst argued that setting aside $4.8 million now would simply preempt what would become state law in 2009. They also argued that such a drastic decrease in PILOTs to Flanders, Riverside and Northampton would result in too great a hardship on the residents within those communities. Ms. Throne-Holst said she and Mr. Nuzzi met with the state lawmakers to craft a solution that would retain the integrity of the CPF, which is primarily for land preservation, but at the same time would help those residents in most need of tax relief.
“There’s no right answer here,” Ms. Throne-Holst said, adding that a lack of clarity to the 2002 amendment allowing for PILOTs was the crux of the problem, one the state lawmakers vowed to fix. “The last thing I want to do is tinker with the integrity of the preservation fund,” she said. “And I’m not doing that. I feel my environmental record speaks for itself. But what we’re doing here is leaving one community whole and another left hurting, and as thinking, caring adults, we should be able to find a solution to this, especially in this economy.”
Mr. Nuzzi agreed. “There’s little in the state law to go with when it comes to PILOT payments and too much left up to interpretation,” he said. “All we can do is vote tonight and do our best to solve this in the future. I find it a shame that we are not being consistent to these school districts, and we need clarification on a state level once and for all so we never do this to our residents again.”
In November 2009, voters likely will go to the polls to consider the legislation drafted by Mr. Thiele and Mr. LaValle aimed at clarifying the PILOT policy. According to both lawmakers, that legislation will include a validation of all prior PILOT payments, an allocation formula based upon the previous year’s actual annual revenue as opposed to using a projection of the coming year’s anticipated revenue, and a specification of eligible criteria and preservation lands in calculating the amount of tax loss within a given district.