Dipping

Using Real Estate Transfer Funds to Support a School Shortfall

By Dan Rattiner

The Southampton Town Board met on Tuesday to discuss whether the Hampton Bays School District should be allowed to dip into the real estate transfer tax to make up for a shortfall in this year's school budget. They are asking for $1.3 million. Some people spoke out for it. Some people spoke out against it.

This is the dumbest thing I have ever heard. And I cannot believe that the Town would spend its time seriously considering such a proposal.

The real estate transfer tax was made into law twenty years ago, when it became apparent that, because of the scale of real estate transactions, the towns were financially unable to stop rampant land development throughout the Hamptons. Developers would come into town hall looking for the approvals to turn farmland into home sites. The Town would object, but they didn't have the money to outbid the developers.

I recall one developer famously walking out of a town board meeting, when the board offered further delays and on his way out, turning and shouting at them, "You want to save it? Buy it! Buy it!" It was a sick joke. He knew the towns did not have the money.

On another occasion, a developer in Sagaponack announced the proposal of "Farm View." It was a 40-acre residential development surrounded by a farm on three sides and on the fourth, a road. From this development, you could build a house and look out at the farms. That is, until the farms you were looking at got sold. Then, you'd have to change the name of Farm View to McMansion View. But that would be far in the future.

During that time, there were a lot of editorials in the newspapers, including this one, that expressed serious concern that, if the market place took its natural course, someday this place would be so crowded with homes that nobody able to afford it would want to come out here anymore and the place would become a distressed eyesore.

And then, somebody got this great idea of using a part of the huge pile of money that these developers were putting into play to save the open space. Laws were passed in all of our Towns, creating a mandatory 2 1/2% tax on all real estate transactions over $300,000.

Suddenly, each Town had $10 million in taxes a year. Then $20 million. And now, $25 million. These funds have provided a huge war chest for the town. And so if a developer says, "You want to save it? Buy it!" You can.

In a way, the developers secretly applauded the appearance of this remarkable tax. With the town in the action, there was money to be made without actually having to do development. And parcel after parcel, mostly farmland would be preserved in perpetuity, thus maintaining the magnificent character of the area that makes all this possible.

$25 million in real estate transfer taxes is really quite a remarkable sum, especially when one considers that the whole budget for a Town is just $80 million per year, for everything.

Let me tell you what will happen if the idea of taking $1.3 million from this fund to shore up the budget of the Hampton Bays School District is approved. It will open the floodgates for everybody in every Town, Village and Hamlet to plan their annual budgets with the secret thought in mind that if they go into the red, why, there is the transfer tax to dip into. Surely our Board of Health budget or Buildings and Grounds Budget or Police Official Budget is of equal importance to the Hampton Bays School District.

This is not to say that the Hampton Bays School Board shortfall is of no concern. It is. It's for the kids, after all. But get real. School taxes in Hampton Bays were voted in by the taxpayers of the Hampton Bays School District. Everybody has a school district. And if they go over, then they have to tighten up the next year.

An interesting analogy about this was played out thirty years ago, when the State of New York proposed Off Track Betting. Many people, particularly church-going people, felt that gambling was an immoral and unattractive thing to bring into a community. At this time, by the way, Sunday was the Lord's Day. All stores in the Hamptons were closed on Sunday. But Governor Rockefeller prevailed with OTB by announcing that every penny of profit from the OTB operations would be put into the State school budgets. Albany would have the gamblers help the children. And so OTB was approved.

But does the state give OTB money to the school systems? Do pigs have wings? The State followed their rules for the first two or three years. But then, there was a shortfall in the State Health Department that needed to be shored up and so they put their hand into the OTB money to get out of the red, while the governor looked the other way. Then, the Highway Department budgets were short, so they took still more of the OTB money. Then the State went into one of their periodic financial crises and suddenly, there was a need from everywhere for those OTB funds.

At that point, the governor himself ended the mandate of putting the OTB money into the State Board of Education fund. After all, there wasn't much staying in there anyway. And so he ordered that all OTB money from then on go into the State general fund, rather than the education department's fund. It would be easier for all the other agencies to get at the OTB money there. There is no OTB money going into the education fund today and there hasn't been any for the last twenty years.

The East End deserves a better fate than that. At the present time, the Towns are agonizing over whether horse stables and polo ponies are "agricultural" enough to qualify for the right to be allowed on open space saved by the Towns. I personally think they are, but the point is that the Towns are very careful and concerned for what they have saved.

The Hampton Bays School District should not be allowed to scoop up money from the real estate transfer tax funds.

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