Riverhead to pay off land preservation debt five years early

Two decades ago, Riverhead Town borrowed $72 million to fund an ambitious land preservation campaign. Now, the town is poised to pay off the remaining debt five years early, a move town budget officials said will save $660,000 in interest and free up funds for future preservation.

The town board voted Tuesday to pay off an additional $7.2 million in debt tied to the Community Preservation Fund. Riverhead already has an annual payment of $2.7 million due Aug. 1.

Paying off the debt ahead of schedule lifts a long-running financial burden for the town, which incurred the debt between 2000 to 2008 as it aggressively purchased land under its Community Preservation Fund program.

“We want to benefit the taxpayers and get out from any debt,” Supervisor Jerry Halpin said in an interview, adding that doing so could improve the town’s bond rating and allow it to continue preserving land. “We still have capital to do projects in the CPF.”

Riverhead currently has $30.1 million in its preservation fund, according to financial administrator Jeanette DiPaola. About $19.7 million would remain in the fund after the debt is paid off.

Bolstered by 2% tax

The Peconic Bay Region Community Preservation Fund, established by all five East End towns in 1998, raises money for farmland, open space and water quality protection through a 2% tax on most real estate transactions.

In the early 2000s, Riverhead borrowed against future CPF revenues to snap up farmland when land prices were cheaper. The town has spent $52 million protecting over 1,500 acres of agricultural land by purchasing development rights, according to the town’s 2024 comprehensive plan.

But when the market crashed in 2008, CPF revenues plummeted, forcing the town to dip into reserves to cover the shortfall.

Annual fund revenues fell from more than $6 million in 2006 to less than $2 million in 2011, according to deputy town attorney Annemarie Prudenti.

Prudenti helped advocate for state legislation allowing the town to refinance the bonds.

“In 2018, the Town seized the opportunity to refinance and by restructuring the future principal payments … the town reduced future debt service payments by approximately $1.5 million,” Prudenti wrote in an email.

Without refinancing, Riverhead officials debated tapping its general fund to cover debt repayment, which could have resulted in steep tax increases.

DiPaola called that possibility a “last resort” in an interview. “You never want to do that to taxpayers,” she said.

$2.36B in revenue across 5 towns

Riverhead’s annual CPF revenues have rebounded in recent years. Last year, the town raised $7 million through the transfer tax, according to town records.

That represents the second lowest total in the region. By comparison, Southampton Town took in $85.6 million and East Hampton collected $46.9 million last year. Southold raised $11 million, while Shelter Island made $2.2 million from the tax, according to data released by Assemb. Tommy John Schiavoni (D-Sag Harbor).

Across the five East End towns, the CPF program has raised more than $2.36 billion in revenue since it began.

The bond was scheduled to mature in 2030, putting Riverhead five years ahead of schedule.

DiPaola said it’s a good idea to pay off the debt.

“We’ll still have at least $19 million after we pay this down that we can use to purchase properties going forward if the town chooses to do so,” she said.

A portion of the 2018 bond is related to the general fund, so DiPaola said the town will also spend $92,000 in general fund balance to complete the payoff.