Riverhead Town residents living in special taxing districts -- formed for such purposes as extending public water service or putting in streetlights -- were improperly charged last year for town services they never used, according to an audit by state Comptroller Thomas DiNapoli.
People in 11 special districts in the town were collectively overcharged more than $779,000 in taxes, which lowered by the same amount the tax bill for everyone in Riverhead -- including themselves.
That happened because, while residents were overcharged in the district in which they live, their town taxes might have gone down because of overcharging in the special districts where they do not reside. The people who made out best were those who didn't live in any special district at all.
How much individual taxpayers overpaid depended on their total tax bill and whether they live in more than one special taxing district, such as a sewer district and a water district extension.
The town tax structure is at the root of the problem. Everyone in Riverhead pays most or all of their town taxes -- called whole-town taxes -- into the town's general fund.
But some town residents also pay special taxes for particular services they use, such as lighting from a street lighting district.
DiNapoli's audit showed Riverhead officials improperly charged everyone living in its special districts a flat rate assessment for general town services -- 14.2 percent of their special district budgets -- rather than calculating the specific cost of whatever town service they might have used.
In many cases, the districts were charged a small amount while getting no specific service at all, such as fees for the town's payroll services, justice court and municipal garage. In total, $779,829 improperly came from 11 special districts to pay for town services, according to the audit. DiNapoli's office called the practice "unfair" because it assumed each special tax district received equal services from every town department. "This is not an adequate method of allocation," the audit stated.
Riverhead Supervisor Sean Walter acknowledged that some of the chargebacks clearly were improper, and in a formal response to the audit said those questionable charges have already been excluded from this year's budget, including charges for the justice court, municipal garage, town payroll department charges, and the salaries of the town supervisor and town clerk.
The town is preparing a corrective action plan for 2014 to insure that all future charges to special districts are based on their actual use of town services.