Although CPF Is Flush With Cash, Most Eye Expanding Its Reach Warily

In April 1999, when the first revenue from the newly created Peconic Community Preservation Fund started to trickle in, Southampton Town received a modest $1,500.

How times have changed.

In February 2015, just 16 years later, the five East End towns that participate in the CPF surpassed the $1 billion mark in total revenue. And, earlier this year, just eight years after that auspicious milestone, the fund eclipsed the $2 billion mark, even as the pandemic-fueled real estate boom cooled off.

Southampton and East Hampton towns, which have by far the priciest real estate, have led the way in collecting money from the 2 percent tax that is levied on most property sales, with Southampton collecting a staggering $1.15 billion and East Hampton nearly $581.65 million over the life of the fund, according to figures provided by State Assemblyman Fred W. Thiele Jr., the chief architect of the CPF.

Both towns also saw record years in 2021, thanks to the pandemic-fueled real estate frenzy, when Southampton took in $118.39 million, and East Hampton collected $67.42 million.

Inflows have fallen off since then, with Southampton seeing revenues dip to $94.97 million in 2022, while East Hampton collected approximately $55 million, although a final figure has not yet been generated.

Thanks to that pandemic windfall, both towns find themselves sitting on large balances, with Southampton holding about $240 million, and East Hampton having about $80 million on hand.

CPF managers in both towns say much of those funds are already spoken for, and they will have no problem putting the rest to work. But some have begun to ask, given the CPF’s overwhelming success, whether the restrictions on what it can be used for shouldn’t be relaxed a bit.

When the CPF was adopted, towns were allowed to buy farmland and other open space, such as wetlands and woodlands, as well as historic properties or those that could be used for passive recreational purposes.

The CPF’s mandate has already been amended once. In 2016, voters overwhelmingly approved bond measures that allowed each town to allocate up to 20 percent a year for water-quality improvements, ranging from grants for modern residential wastewater treatment systems to municipal sewer lines. The catch is that if the money is not used for those types of projects in a given year, it has to be returned to the land acquisition fund.

Southampton Town Supervisor Jay Schneiderman is one who thinks the CPF’s purview could be expanded a bit.

“The first thing I would do is allow some of the funds to be used to maintain historic buildings,” he said, “even operate historic buildings.”

While CPF money can be used to restore historic buildings, as was the case when the town poured millions of dollars into renovating the Nathaniel Rodgers House, now the home of the Bridgehampton Museum, it can’t be used sometime in the future when, say, a shingled roof needs to be replaced.

Historical societies, often operating on limited budgets, care for historical buildings, “but I can’t offer them CPF funds to keep the lights on or the doors open,” Schneiderman said, arguing that such a use would fit in nicely with the CPF’s mandate to protect a community’s character.

Similarly, Schneiderman said he would like the town to be allowed to use CPF money to improve and maintain parks. “It would be nice to be able to put in a comfort station or provide matching money for athletic facilities,” he said.

Schneiderman also joins East Hampton Town Supervisor Peter Van Scoyoc in suggesting that a greater percentage of funds should be earmarked to underwrite water-quality projects, now that the amount of land that is available for purchase has declined and concerns about protecting water quality are growing.

“I’d like to see the 20 percent cap removed or increased,” said Van Scoyoc, “and I’d suggest they take out the provision that money not used go back to the general fund.”

In East Hampton, sewer systems have been considered for both Montauk and East Hampton Village. Southampton has also seen sewer upgrades proposed for Southampton Village and the Riverside area. And both towns have already awarded funds to the Village of Sag Harbor, which straddles the town line, and is in the midst of an expansion of its own sewer system.

Besides water-quality projects, Van Scoyoc said he saw the funds being used to protect more properties that are threatened by climate change.

“The legislation goes through 2050,” he said. “It’s my firm belief that as we continue to buy open space, there won’t be the properties to preserve. There will be a shift to buying out properties that are on the waterfront and vulnerable to rising sea levels — that’s really where the fund’s focus will shift.”

But Van Scoyoc said that East Hampton officials are wary about expanding ways the fund can be used because of the backlash the town faced during the tenure of Supervisor Bill McGintee, who resigned in 2009 after it was revealed that the town had used millions of dollars from the CPF to plug budget shortfalls during his administration. And he suggested that Southampton Town has been able to be more creative with some of the projects it has funded, such as the Poxabogue Golf Center in Sagaponack or the Sag Harbor Cinema.

“East Hampton has a much higher bar,” he said. “We’ve had more scrutiny ever since the financial crisis.”

Jacqueline Fenlon, who was recently appointed CPF manager in Southampton, said the town might be viewed as creative, but it is following the letter of the law. “Absolutely,” she said when asked if adequate safeguards were in place.

Thiele said it would not be unreasonable for the program to be amended to allow more money to protect water quality, given its growing relevance, but he pointed out that towns can fund a major project over several years’ time, provided sufficient revenue is collected.

And he added that any changes to the CPF need to be weighed carefully. To that end, Thiele said he plans to create a committee of stakeholders to review the law.

“It’s been 25 years, and we have roughly 25 years left,” he said. “It’s a good time to take stock of where we are and see if there are any modifications that should be made.”

That committee would include government officials, environmentalists, and representatives of the agricultural community and construction trades, he said.

First, though, Thiele said he wants to wait for the state comptroller’s office to complete an audit of the five town funds, a request he and State Senator Anthony Palumbo made several years ago, he said, not because of any concerns about how the towns were overseeing their funds, but because it has been well over a decade since the last state audit.

That audit was slowed by the pandemic, but Thiele said he expects it to be completed within several months.

Thiele also cautioned that while the real estate market can soar, as it did during the pandemic, it can also tank, as it did during the financial crisis that began in 2008 and lingered for several years.

“As far as money in the bank, that’s a South Fork story, not a North Fork or Riverhead story,” Thiele said. “About 85 percent of the money gets generated on the South Fork. That’s where people are paying astronomical prices for real estate.”

He said the balances accrued by Southampton and East Hampton were “not a continuation of a trend but a one-shot deal,” and he cautioned against making long-term decisions for the future of the fund based on short-term revenues.

Another observer who urges caution is Bob DeLuca, the president of the environmental watchdog the Group for the East End.

DeLuca said it was important to remember that the CPF was established to give government a tool it could use to compete with the private sector to protect vulnerable land from development.

“That’s what the fund was created to do — to match the market — and I wouldn’t want to lose sight of that,” he said.

DeLuca added that just because the 200-acre and 100-acre purchases are no longer common doesn’t mean that there isn’t lots of valuable land that still should be preserved.

“These kinds of purchases don’t get the headlines,” he said of the smaller deals, “but I don’t think we’re in a position to declare victory and go home.”

He added that expanding the use of the fund to maintain properties represented a form of mission creep that would dilute the effectiveness of the program.

“Through the fund, the public was going to provide the gift of the land to the municipalities — the fund would create the tangible acquisitions,” he said, “not serve as a budget offload for the cost of maintaining them.”

He said he would recommend that tight restrictions for the use of the money remain in place. “Whenever there is excess money in a dedicated fund, there is a temptation to use that money for other things,” he said. “It’s not just Southampton. It’s not just Suffolk County. It’s everywhere.”