In light of Southampton Town’s troubled finances and decreased revenues, supervisor Linda Kabot asked the town board to consider “lock boxing” money for the Community Preservation Fund (CPF). Kabot says the plan would allow the town to continue paying off the CPF’s annual debt without relying on the general fund to cover any shortfalls from decreases in transfer taxes, which is the CPF’s main revenue source.
“You would do this in your own home. If you had a mortgage and you lost your job, you would want a savings account to pay for your obligation,” explained Kabot. “We have a mortgage on the CPF program that is over $100 million.”
Over the past 10 years the town spent around $400 million on land purchases, continued Kabot, but only received $300 million in transfer tax revenue. The remainder of this expense was procured through bonding. This year the town will pay around $9 million towards the principal and interest on these bonds, though next year these payments will increase to roughly $10 million. Kabot said the town should be “judicious” when deciding whether to purchase a piece of property in the future as the town will most likely have to bond for future purchases.
“If we are getting $1 million a month in revenue that is $12 million for the year, minus $10 million which is spoken for for debt services, leaving us with $2 million if we are giving certain school districts and other eligible districts PILOTs [Payment In Lieu of Taxes],” explained Kabot. “If you’re going to be paying for land and you aren’t doing it on a pay as you go basis, you may be borrowing and that will increase your debt services.”
Based on recommendations made by former town comptroller Steve Brautigam, Kabot’s plan, which is in the form of a resolution, calls for the creation of a $1.2 million preliminary cushion fund. This money is already in CPF coffers and was transferred there at the end of 2008, when it was ascertained that the CPF fund paid too much into the town’s debt clearing fund.
CPF manager Mary Wilson said the second part of the resolution would “designate a portion of future monthly revenues” which would go into this rainy day or debt reserve fund. For the next six months of 2009, Brautigam proposed that $250,000 in CPF revenue be segregated for this fund. In 2010, the town would increase the allotted savings to $350,000 per month.
“The goal is to get up to a point where there is at least $11 million in this reserve fund or at least one year’s debt services,” said Wilson.
Current town comptroller Tamara Wright said the town’s projections of receiving around $1 million a month in revenue wasn’t conservative. She added that last month, the town received only slightly over $1 million, but in the prior months, received under $1 million.
“If we were planning conservatively, by my estimation, you would be almost $3 million short of being able to reserve adequately,” said Wright. “If the revenue streams stay where they are, paying for properties out of cash is going to be very difficult for the next 18 to 24 months.”
“The dilemma is that this is an unprecedented opportunity to stockpile open spaces at prices that aren’t going to stay at this level in our lifetime,” observed councilwoman Anna Throne-Holst. “We need to look at the bigger picture. It is estimated that for every $1 of land that is developed rather than preserved $1.30 is needed to provide services for the infrastructure that goes with that.”
Kabot said she hoped the board would come to a consensus vote at the next town board meeting on Tuesday, June 9.