Revenues drop across the county

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With the economy faltering and the real estate market in decline, a mid-year report from the Suffolk County clerk’s office paints a bleak picture of county finances.

While total county revenues from real estate transactions are down by 36 percent, Southampton and East Hampton towns will particularly feel the pinch of a steep decline in mortgage tax revenues, as well as a drop-off in the amount of money collected by their respective Community Preservation Funds.

In Southampton Town, mortgage tax revenue fell by $3.2 million, or 36 percent, to $5.5 million for the first six months of 2008. In contrast, the town collected $8.7 million in mortgage tax revenue during the first half of 2007.

According to Daniel J. Panico, senior deputy Suffolk County clerk, the first half of the year typically generates better mortgage tax numbers than the second half. This is due, in part, Mr. Panico explained, to the fact that most families move during the early part of the year in order to place their children in the appropriate school district for the start of the new school year. “Even in the best of years there is usually a slackening in the second half,” Mr. Panico said.

For the entire year, Southampton Town collected $14.9 million in mortgage taxes for 2007, according to county records. In Mr. Panico’s opinion, with $5.5 million in Southampton coffers for the first six months of 2008, the town would be fortunate to break the $10 million mark.

The mortgage tax is especially important to the towns, because the county returns the money directly to them, allowing them to use the revenue to offset spending and reduce property tax levies.

With the total town budget for 2008 at $77 million, and $8.3 million in mortgage tax revenue expected this year, the mortgage tax income accounts for 11 percent of the overall budget.

In East Hampton Town, which has been trying to dig out from under a budget deficit, mortgage tax revenue slid by 42 percent in the first half of 2008, from $4.1 million last year to only $2.4 million so far this year.

East Hampton Supervisor Bill McGintee said the county’s report will make balancing the town’s budget more difficult. “Any loss in revenue is something to be worried about,” Mr. McGintee said.

Because of the volatile nature of mortgage taxes, Southampton Town budgets conservatively by underestimating the amount of mortgage tax revenues it expects to collect in any given year, according to Southampton Town Management Services Administrator Richard Blowes. For instance, in 2007, Southampton took in $12.5 million in mortgage taxes, Mr. Blowes said, but budgeted for only $8.25 million.

“We’ve also been strict on spending outside the operating budget,” he said.

Mr. Blowes said the town’s comptroller, Steven Brautigam, will soon be releasing the town’s own six-month revenue report. “We’re going to also start looking at monthly budgets to help us better monitor the town’s financial health,” he said.

Countywide, mortgage taxes fell by 46 percent, from $65.9 million collected during the first half of 2007 to only $35.6 million this year.

The slumping real estate market is also taking its toll on both towns’ Community Preservation Funds, which were established 10 years ago and have raised hundreds of millions of dollars through a real estate transfer tax of 2 percent, with the proceeds used for the preservation of open space and farmland.

Though Southampton Town has so far taken in $21.5 million in CPF money this year, that represents a 28-percent drop from the $30 million collected during the same period in 2007. East Hampton’s CPF revenue has declined by 50 percent to only $8 million for the first half of this year.

Mr. Blowes said Southampton Town looks at its CPF as conservatively as it does its mortgage taxes. “We project $4 million a month,” Mr. Blowes said, adding that the CPF was a much less a volatile budgetary concern than mortgage taxes.

“We limit what we acquire based upon our CPF income,” he said. “We monitor our fund before we commit to a land purchase.”

Scott Wilson, East Hampton Town’s CPF manager, said he does not expect as severe a drop for the second half of the year and noted that the reduced revenues will not result in the purchase of less land. “The large number of properties to be protected have been diminished to just a handful,” Mr. Wilson said. “We will not likely miss out on much due to the reduction in income.”

The decline in revenues could still pose problems for both towns because they often borrow against future revenues in order to purchase lands before they are gobbled up by developers. For instance, Southampton Town recently approved a $10 million bond for the purchase of open space, to be paid back as transfer taxes fees roll in.