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Oct 7, 2009 12:12 PMPublication: The Southampton Press

Southampton Town to fix shortcomings in PILOT program

Oct 7, 2009 12:12 PM

After mishandling the distribution of tax exemptions to residents in the Riverhead School District and Flanders Fire District, Southampton Town is taking steps to fix its Payment in Lieu of Taxes, or PILOT, program.

The Town Board is considering a resolution to improve procedures for calculating tax exemptions for communities that qualify for exemptions under the PILOT program, which is funded by the town’s Community Preservation Fund. The resolution also seeks the repayment of money owed to the town by communities that benefited from lower taxes in prior years due to the town’s miscalculations.

Town Attorney Daniel Adams said the proposed code amendment is a response to an audit of the PILOT program released in June by New York State Comptroller Thomas DiNapoli’s office. The audit identified numerous mistakes by town officials in how tax exemptions were awarded, or not awarded, to homeowners in the Riverhead School District, which includes those living in the hamlets of Riverside, Flanders and Northampton.

“When we got the comptroller’s report, we knew that we would have to do something about his recommendations,” Mr. Adams said. “I took a problem, and I drafted a solution.”

The amendment calls for the town assessor to annually review the assessed values of preserved lands within the seven school and fire districts that qualify for tax exemptions under PILOT program. In addition to the Eastport South Manor, Hampton Bays and Riverhead school districts, the Riverhead, Flanders and Northeast Quogue fire departments also receive funding. The Northampton Ambulance District also receives PILOTs.

Reviewing preserved lands in those districts, Mr. Adams said, will prevent what happened to property owners in the Flanders Fire District in 2004 and 2005, when they collectively received $107,650 more in property tax exemptions than they were entitled to receive.

The resolution under consideration by the board calls for that money to be paid back to the town in the form of higher property taxes over two years, beginning in 2010. “It ends up being a couple bucks, if that,” Mr. Adams said of the repayments.

The resolution also calls for residents living on the Southampton Town side of the Riverhead School District to repay a collective $2 million because the town mistakenly gave residents $3.1 million in tax exemptions when Riverhead was eligible for only $1.1 million in exemptions in 2007. The repayment would happen over a period of 10 years and start in 2012, according to the proposed resolution.

“We over-allocated to the Riverhead School District to the tune of $2 million,” Mr. Adams said. “They shouldn’t have gotten that benefit. They should have only gotten a $1.1 million benefit.”

The repayment will mean higher property taxes for some taxpayers of the school district, and that may come as a shock to them, Mr. Adams said. The average increase in school property taxes as a result of the town’s miscalculation was not immediately available.

“It’s going to be difficult for Riverhead taxpayers,” Mr. Adams said, referring to those living within the school district boundaries. “They’re going to feel it.”

A public hearing on the proposed resolution is scheduled for Tuesday, October 13.

Fund Balance

Town officials at a meeting on Tuesday released tentative numbers for the fund balances of its police, highway, emergency communications system and other major budget lines.

But the numbers were only estimates, as officials on Tuesday were awaiting the results of a forensic audit due this Friday that will likely change the fund deficits.

Town Councilman Christopher Nuzzi said the audit would likely expose the deficits to be deeper than estimates provided on Tuesday by Town Comptroller Tamara Wright. The deficits were caused by shoddy capital fund accounting practices dating back to 2002.

Currently, the town’s police fund is $2.62 million in the hole, according to documents from the comptroller’s office. The highway fund is operating at a $386,096 deficit, and waste management has a $2.99 million deficit.

“These numbers aren’t real,” Mr. Nuzzi said. “They will probably change for the worse.”

Other fund balances including land management, the emergency communications system fund, and the general fund were operating at a surplus, according to town officials.

Southampton Town Supervisor Linda Kabot is proposing that $1.4 million in property tax revenue be used to reduce the police fund deficit to $478,991 next year. Officials also hope to pay off the highway deficit next year with $1.5 million in tax revenue.

But the extent of the deficits might change by Friday, Ms. Kabot warned. “If we didn’t have the capital fund problems, these would be our numbers,” she said.

Stormwater Projects

The town will be moving cautiously ahead with several proposed stormwater management projects next year.

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