Life Out East

The Peconic Bay Tax: How Much It Costs and What It Pays For

Part of the allure of the Hamptons and North Fork is the vast open spaces and wetlands that remain undeveloped, preserving incredible natural vistas. But many new home buyers don’t realize that they must pay a tax to make sure this land stays untouched — 2% on the purchase of any home or lot.

Known informally as the “Peconic Bay Tax,” the one-time levy is officially the Peconic Bay Region Community Preservation Fund (or CPF), and is basically a real estate transfer tax.

The CPF is a public program established in 1998 by voters in the five East End towns (aka townships) of East Hampton, Southampton, Shelter Island, Southold and Riverhead, and it covers purchases made in all the villages and hamlets within those towns. It was introduced by state Assemblyman Fred Thiele of Sag Harbor, and originally based on a program that was established in the mid-1980s on Nantucket.

“It’s clear that conservation could not have kept pace with development here without the CPF,” Thiele has said.

Here’s how the tax works: The first $150,000 of the purchase price of improved land in Riverhead and Southold, and the first $250,000 in East Hampton, Southampton and Shelter Island, is exempt from the tax. (The exemptions are $75,000/$100,000 for vacant land.)

After that, the remainder of the purchase price is taxed at 2% and folded into a buyer’s closing costs.

The money raised in each town stays in that town, and is used to protect historic structures, open space and farmland. It helps support conservation efforts and wetlands, and is sometimes used to purchase development rights to keep building density under control.

As you might imagine given the sale prices on the East End, the CPF revenues for each town are substantial. In 2018, the town of Southampton alone listed CPF revenues of $27.3 million, and spent $16.4 million on projects. More than $1 billion has been collected since the program began.

In 2016, voters passed an additional stipulation allowing the towns to use up to 20 percent of CPF revenues in water quality projects — a focus that many consider the leading conservation issue on the East End.

Detailed lists on exactly how the money is used and what projects are pending can be found at each town’s website. CPF advisory boards, comprised of citizens from each town, contribute input to help their town boards make decisions on acquisitions in their area.

The Town of East Hampton, for example, has used its CPF funds to protect over one-third of the land area within the town borders.

The Town of Southold has established a goal of ensuring at least 80 percent of the farmland remains devoted to agriculture.

The Town of Southampton recently used CPF funds to buy the the former Lobster Inn property in Shinnecock Hills, with the goal of turning it into a shellfish hatchery. The town made another outlay to assist with the renovation of the façade of the Sag Harbor Cinema, a village landmark that was destroyed by fire in December of 2016.

Inspired to find your next home on the East End? Search Out East for rental and sale properties in the Hamptons and North Fork.

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