Riverhead debt could mean big tax hikes

Riverhead officials gave a grim assessment yesterday of town finances and warned taxes could well rise to meet the shortfall.

William J. Rothaar, the town's financial administrator, told officials there is a $5.2-million gap in the town's operating budget.

He also provided details of the debt the town has accumulated from capital projects - mainly costs of capping an old town landfill - in the past eight years.

Rothaar blamed the operating budget shortfall on the landfill and an estimated decline of $1.3 million in fees from mortgage taxes, interest income and other sources.

Rothaar cautioned his report was preliminary and based only on the first two months of this year, saying the town's overall financial picture should be clearer in May or June, and "we'll know more by September."

He added that the town has run a debt for years and has spent most of what was once a $17-million reserve fund designed to hold down taxes.

The town committed to spending $51.5 million to cap the landfill, and still needs to raise $9 million of that money through bonds, the interest and principal of which will show up in future budgets.

It now has few alternatives.

The town can cut spending, increase income, find new sources of revenue or extend borrowing, which would only add to the ultimate cost of paying off its debt.

Supervisor Sean Walter said the town's $43-million annual budget is about as low as possible. "The town board and the public must understand there is absolutely nothing else in this budget to cut," he said.

The town's final alternative is to raise taxes. Rothaar said paying off the entire debt through taxes would raise town taxes 26.5 percent in 2011, another 3.2 percent in 2012 and 2.3 percent in 2013.

Using half the remaining reserve fund for debt payment would result in a tax increase of 15.5 percent in 2011, 11.39 percent in 2010 and 4.67 percent in 2013.

A household in Riverhead typically paid $1,718 in town taxes in 2010 and would see an increase of $456 next year if the town chooses not to tap reserve funds.