Riverhead officials hope to refinance $46 million in debt owed by the town’s troubled land-preservation fund and pay it off by 2030, the town supervisor said Tuesday.
Supervisor Sean Walter has in the past considered refinancing the debt to about 2035 to reduce annual payments, which have outstripped the fund’s revenue by about $3 million a year since 2010.
But at a Tuesday town board work session, he said paying it off a few years earlier would help the fund weather a potential interest rate hike. “If they raise interest rates, we’re going to pay for it,” Walter said.
A formal vote was not taken at the work session, but at least one councilman supported the plan. “It’s a great idea,” said Councilman James Wooten.
Community Preservation Funds in Long Island’s five easternmost towns are tapped by town officials to buy and preserve undeveloped properties, farmland and historic sites.
State lawmakers attached language to the 2016-17 state budget that passed April 1, allowing Riverhead officials to restructure the fund’s $46 million in debt and $12 million in interest.
Walter’s refinancing plan would see the Community Preservation Fund balance decline from $9.7 million this year to a low of $6.6 million in 2022. Then it would rise back to about $11.7 million by 2030 as the annual debt payments shrink due to the refinancing, according to the town’s projections.
Walter said he had some reservations about allowing the fund to dwindle further, but called it a “calculated risk.”
Riverhead’s Community Preservation Fund, financed by a 2 percent tax on most real estate transfers, racked up significant debt as town officials snapped up farmland between 2000 and 2008, before revenue took a dive in the economic downturn.
Since 2010, the Community Preservation Fund has owed an average of $5.6 million a year but has taken in only an average of $2.7 million. Without refinancing, the fund would run out of money in 2020, according to the town’s calculations. Riverhead officials haven’t tapped the fund in six years.
Walter said the fund’s problems contributed to the town’s 2015 credit downgrade by Moody’s Investors Service to a rating of Aa3 from Aa2. He said he hopes to meet with Moody’s representatives by the end of June and secure a continuation or upgrade of the rating.