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Jul 28, 2008 3:26 PMPublication: The Southampton Press

New CPF exemption enacted; June numbers are lowest in five years

Jul 28, 2008 3:26 PM

New York Governor David Paterson signed legislation last week that gives first-time homebuyers in Southampton, East Hampton and Shelter Island towns an exemption from the Community Preservation Fund’s 2-percent tax on real estate transactions.

The Southampton Town Board passed a resolution in March backing the exemption, and both East Hampton and Shelter Island support the exemption. The town boards of Riverhead and Southold have not yet thrown their support behind the legislation introduced in Albany last year by Mr. Thiele.

In order for a prospective homebuyer to qualify for the exemption, the property being purchased must be listed for no more than $660,000, and the buyer’s annual household income must not exceed $97,100.

This number is indexed to the State of New York Mortgage Agency’s low-interest mortgage program, so as the median home price goes up, so does the amount exempted. Because the exemptions are already written into state law, a referendum is not required, Mr. Thiele said.

Gov. Paterson also approved a series of reforms aimed at enhancing fiscal oversight over the CPF. The legislation, co-sponsored by State Senator Kenneth LaValle, comes on the heels of the creation of a task force charged with finding ways to improve the fund’s management, and a mandate that each town conduct an independent audit of its individual fund at year’s end. An audit of the entire CPF, the first since the fund was created in 1998, is presently being conducted by the state comptroller’s office. That review should be finished by the end of the year, according to Mr. Thiele.

Under the new provisions, towns must approve a report estimating how much debt will be incurred if future CPF revenues are borrowed against to acquire parcels. The practice of borrowing against future revenues to buy land immediately is a common one and usually favored by Albany as long as it is done judiciously. To ensure that the towns toe a fiscally conservative line, the new provisions also require that the town borrowing against future CPF income indicate how that debt will be repaid.

The towns must also outline the preliminary and incidental costs related to any CPF acquisition. Stewardship and management plans must be formulated by the towns for lands purchased with preservation funds. Only expenses detailed in those plans may be charged to the CPF. Those individual town plans must be approved by local law after a public hearing.

To clear up any ambiguity over how and for what purposes preservation funds may be used, the new provisions define authorized preservation projects as those that “promote the protection or enhancement of the natural, scenic, and open space character for which the property was acquired.”

Accessory uses charged to the fund must relate to the purpose for which the property was acquired, and restoration of acquired properties to their natural state—including demolition of existing buildings and structures—is permissible under the new legislation.

To prevent any inappropriate charges to the fund, only employees and independent contractors directly dedicated to preservation purposes may be paid with CPF monies. All five towns have supported the new measures, according to Mr. Thiele’s office.

On July 8, the Southampton Town Board created a separate Department of Community of Preservation to tighten up controls over its own CPF program by establishing a Community Preservation Manager to oversee the department and a stewardship and management program subject to periodic review.

A Low for CPF

Community Preservation Fund revenues in June throughout the five East End towns were the lowest they’ve been since 2003, New York State Assemblyman Fred W. Thiele Jr. noted last week.

Only $4.46 million in cumulative CPF revenue was collected in the five towns—Southampton, East Hampton, Riverhead, Southold, and Shelter Island—in June, the lowest monthly total in five years, Mr. Thiele noted on July 25. Additionally, mid-year totals for 2008 have dropped 33.7 percent, with only $35.3 million collected in the first six months of this year.

So far, East Hampton Town has been hit the hardest, suffering a 49.6-percent decline for the first six months, compared to last year. Southampton Town’s total revenue dropped 28 percent in the same time period.

“It is clear that the national economic slowdown and housing crisis are finally impacting the real estate economy on the East End,” Mr. Thiele said. “We have been among the last to feel these negative impacts, but there can be no doubt that real estate activity has now slowed significantly.”

He added that, despite the slide, the news isn’t all bad, as the slowdown also provides the opportunity for the towns to acquire environmentally sensitive lands. CPF revenue—generated by a 2-percent tax on real estate transactions, paid by the purchaser—is on par with the price of land being purchased; in other words, less revenue coming into town coffers means that land prices have gone down, thus presenting opportunities for acquisitions.

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