Transfer Tax On Rebound

Ever since Gov. George E. Pataki vetoed legislation in September that would allow East Hampton Town to hold a referendum on a proposed 2-percent tax on real estate sales to fund open space purchases, supporters have been working behind the scenes to resurrect the issue.

On Friday, the Southampton Town Board held an informal hearing with Assemblyman Fred W. Thiele Jr. and a group of environmentalists, real estate brokers, and farm and business representatives to air opinions on a new measure Mr. Thiele plans to introduce to the Legislature in January.

The new legislation would expand the transfer tax to the five East End towns and include an exemption for the sale of farmland for agricultural purposes.

"All Issues" Addressed

When he vetoed the first bill, Governor Pataki cited the facts that the legislation only included East Hampton and that it failed to exempt farmland as major flaws.

"I think the bill addresses all the issues in the veto message," said Mr. Thiele. He said he had discussed "specific language" of the bill with the Governor's office and said he had no reason at this time to think Governor Pataki would not sign the law.

Like the first bill, the new legislation would also exempt the first $250,000 of improved property and the first $100,000 of vacant land.

Supervisor On Board

One reason the original bill did not include the other East End towns was the failure of their Town Boards to throw their support behind it in time. Supervisor Vincent Cannuscio said he did not want to miss the boat this time.

"I wanted to lead the way to make certain it is on the ballot," he said in explaining the reason for Friday's meeting.

Mr. Cannuscio said the transfer tax would complement the town's $5 million open space bond and a dedicated open space fund that is included in the town's real estate tax and expected to raise millions more over the next 10 years.

"Hotter Than Ever"

Mr. Cannuscio called the hearing "a nice conversation" that would "give board members the opportunity to suggest modifications to the Thiele initiative or let it go to the Legislature as it is."

A number of supporters said passage of the tax was critical. The East End is "hotter than ever," said Edwin (Buzz) Schwenk of East End Forever, a preservation group. "We're being eaten alive. If we don't move, it's going to be too late."

Mr. Schwenk, the former executive director of the Long Island Builders Institute, resigned his post two years ago in part because of the group's opposition to the transfer tax.

Funding Essential

He likened the tax to an "insurance policy" that will help preserve the East End's beauty for new home buyers.

Kevin McDonald, vice president of the Group for the South Fork, said the tax would allow the East End towns to produce "comprehensive plans" to preserve open space. At the current rate of development, there will only be 10,000 acres of farmland left in Suffolk County in 12 years, he said.

The East End "is either going to go suburban, or we're going to try to preserve it," he said.

"Without additional funding, we're dead in the water," agreed Lee Foster, a member of the Southampton Town agricultural advisory committee. "There's not enough money for what we want to do," added Paul Brennan, a managing partner of Sotheby's International Realty and a member of the town's environmental advisory committee.

Farmer's Biggest Asset

The changes in the proposed law will probably bring another ally to its roster of supporters. Even though the Long Island Farm Bureau has a policy of "opposing new taxes," Joe Gergela, the organization's executive director, said it would most likely support the new bill "if the exemption is added in." The Farm Bureau withdrew its support for the last bill when the farmland exemption was deleted.

Mr. Gergela said it was important to understand that a farmer's land is his biggest single asset. "At the end of the day there's not much left" after a farmer pays off his creditors when selling his land, he said.

"The purpose of this legislation is not to impose a tax," responded Mr. Thiele, "it is to preserve open space." He said he expected the exemption would make it into the final version of the law.

Some Contrary Feelings

Mr. Gergela said the Farm Bureau also wants a "recapture" provision added to make sure the tax is collected if exempted farmland is resold within a short period for development.

The need for the recapture provision was also cited by Gil Flanagan, the chairman of the Southampton Town farmland committee, in a letter to the board.

While the Town Board heard from supporters of the law, it also heard from detractors.

Bob Wieboldt, vice president of the Long Island Builders Institute, while proclaiming the institute "supported most of the goals" of the proposed law, said it nonetheless posed problems.

Predicts Disappointment

Mr. Wieboldt said the current exemption, while adequate for houses today, would be too low if "inflation kicks in" and called for a provision that would allow it to be increased.

He also questioned whether there were enough vacant parcels available for under $100,000. Having to pay the tax for a vacant parcel would make it difficult for a "typical Joe" to build a house, he said.

Citing a wish list of $300 million of property on the East End, Mr. Wieboldt said supporters would urge the towns to "buy, buy, buy." But if the towns count on a "steady revenue stream" from the tax, they will be disappointed when the next recession hits, he said.

Divided Opinion

He also suggested limited developments, such as clustered subdivisions with reserved areas of open space, "could save half of that for nothing, and it would still be taxable."

Frederick Mayer of the Hamptons and North Fork Realtors' Association, saying he felt like "Daniel in the lion's den," also spoke against the tax.

Mr. Mayer stressed his opinions did not represent the position of the association. A poll of its members had ended "50-50, right down the middle," he said.

The transfer tax would be an "excise tax" because it applies only to buyers and sellers, Mr. Mayer said. "It falls on too few shoulders. Why should the new kids on the block pay the freight for all of us?"

Some Wariness

He argued as more land was set aside for preservation, the price of real estate would rise, squeezing out the poor and middle class. He also cited fears the tax would be raised over the years, calling it "a sleeper that will become a monster."

Mr. Mayer also said the tax would be "recessionary" because it would eventually slow down the real estate market, one of the biggest businesses on the East End. "The power to tax is the power to destroy," he said.

Anne LoWaal, director of the South ampton Business Alliance, also cited fears about the tax. Ms. LoWaal said the alliance would like to see "a high threshold for business property" and called for a higher exemption for it.

While the alliance does not support new taxes, it will support a referendum to allow residents to make a choice, she said.