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Sep 22, 2008 12:50 PMPublication: The Southampton Press

Kabot proposing less tax relief for school districts

Sep 22, 2008 12:50 PM

In light of a volatile economy and slowing real estate market, Southampton Town Supervisor Linda Kabot is advocating a more cautious approach to providing tax relief to school and fire districts.

At Friday’s Town Board work session, Ms. Kabot revealed plans to allocate just $3 million to the town’s Payment in Lieu of Taxes, or PILOT, program, in next year’s budget—$1.8 million less than this year. Those tax relief payments, designed to make up for tax revenues lost when properties are purchased, preserved and taken off the tax rolls, are set aside from the town’s Community Preservation Fund revenues.

“We’re experiencing a decline in CPF revenues,” Ms. Kabot said; the town collected $1.7 million in preservation funds in August. “We’re expecting less for September than last month.”

“With everything that’s going on with Wall Street and the housing market, we need to watch what we spend,” the supervisor said. “If more CPF revenue comes than expected, we can always amend the budget to allocate more in PILOT payments.”

For 2008, the town set aside $4.8 million in PILOT payments, with the expectation the town would collect about $48 million in CPF revenue for the year. The bulk of the payments this year, $3.1 million, went to the Riverhead School District. Another $1.3 million went to Hampton Bays and some $187,000 to Eastport South Manor.

In the draft 2009 budget, Ms. Kabot is proposing to send $1.8 million to Hampton Bays, $953,428 to Riverhead and $48,061 to Eastport South Manor, with the remainder of the payments being spread out among the Flanders-Northampton Ambulance, Quogue Fire Protection Area and the Riverhead Fire District.

Though the town has discretion in sending out the payments, the allocations are set by a state index.

Also, $20,000 earmarked for the Flanders Fire District will be refunded to the CPF to make up for overages sent to that district from 2003 to 2004.

The CPF is financed through a 2-percent tax on real estate transactions paid by the purchaser at closing. Its revenue is set aside for the preservation of open space and the protection of farmland, but in 2003 state lawmakers amended the CPF to allow towns to use up to 10 percent of the funds to compensate school and fire districts that suffer significant tax loss when land within those districts is taken off the tax rolls for preservation purposes.

Ms. Kabot said she expects the town to collect $32 million in CPF revenue by year’s end. That figure is down from the $48 million collected in 2007. The town’s entire cash flow of preservation funds is currently earmarked through 2008 and into 2009, according to the supervisor.

Despite the downward trends, the town is still pursuing an aggressive acquisitions policy, having recently floated a $20 million bond for future purchases. On top of that, the town is also paying down an $80 million debt on funds borrowed against the CPF for land grabs, a yearly hit on the town of $10 million a year.

The state’s Department of Education determines the eligibility of school districts to receive PILOT subsidies according to what’s known as the Need Capacity Index. The amount of a subsidy is based upon a tax levy formula—the more a district spends, the more it can receive. But Ms. Kabot has been advocating a new formula that would calculate subsidies based on the amount of tax dollars lost to open space preservation as a result of the CPF. She and the Town Board petitioned State Assemblyman Fred W. Thiele Jr. and State Senator Kenneth P. LaValle to make the change in February and though the measure was approved by the Senate it has languished in the Assembly’s Ways and Means Committee.

Final allocation of CPF PILOT payments for 2009 will be made through town board resolution prior to November 30.

“The idea behind the PILOT program is to make up for tax loss,” Ms. Kabot said. “School districts have come to rely on this. But, we have to be mindful of hard times and be judicious in doling out these payments.”

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