Southampton Town's mortgage tax revenue still lagging

Recommend

Comment

Email this article

Print this article

Get news alerts

RSS Feeds

Share Digg Mixx Linked In Facebook Twitter Delicious

As Southampton Town officials are gearing up to start the 2011 budget process, and the local economy starts to recover from the recent recession, one revenue stream that is not bouncing back—despite the turnaround in the real estate market—is mortgage tax receipts.

It’s an unusual trend. Property sales on the East End have risen dramatically over the last year, a pattern evidenced by the uptick in the town’s Community Preservation Fund, which is fed by a tax on real estate transfers. But it seems that most of those sales, according to Town Supervisor Anna Throne-Holst and Comptroller Tamara Wright, have been cash deals on high-end properties, meaning buyers aren’t financing the purchases with mortgages. So while the CPF revenue, earmarked for preservation of land, is returning, the amount of mortgage tax revenue—which the town can spend more widely, as part of the general fund—is remaining at unusually low levels.

Although no firm budgetary projections have been offered by the supervisor, and aren’t expected to until sometime in September, town officials are bracing themselves based on figures the town received from Suffolk County. Among the chief indicators found in county figures provided by the supervisor and comptroller is the fact that while the town’s CPF revenues for March 2010 were some 268 percent higher than in March 2009, the town’s mortgage tax revenue increased just 36 percent in the same time frames.

Looking at a slightly bigger picture, the town’s CPF earnings from January through April of this year were up 124 percent from the same period in 2009. The mortgage tax, though, was up just 1.2 percent, according to the statistics provided by Ms. Wright.

Last year, for the first time in about seven years, the town took in less than it budgeted for in mortgage tax revenue—the actual revenue was $2.5 million, or about a third, less than budgeted. The Town Board had to amend the budget to account for the drop. Ms. Wright and Ms. Throne-Holst said the town made up the difference through cost-cutting measures, such as scaling back on employee overtime, consultant fees and not filling vacancies.

“That is in stark contrast to what was, in many years, the reality here, where mortgage tax was estimated in many years at $8 million to $10 million and came in at $12 million to $14 million,” Ms. Throne-Holst said. During the real estate boom in the last decade, town officials frequently underestimated the amount of mortgage tax revenue each year, then used the surplus to plug budget gaps and keep the property tax rate low.

This year, Southampton Town officials budgeted for $6 million in mortgage tax—a number that Ms. Wright worries won’t be met if the market doesn’t pick up by the end of the summer. “We always know the summer months are stronger,” she said.

“We are concerned,” Ms. Throne-Holst said. “We’re watching it very carefully.”

Meanwhile, the town is expecting to net nearly $9 million more in its Community Preservation Fund this year, up from $21 million to $30 million, according to the comptroller.

“The observation we’re making is that sales have obviously strengthened, CPF [revenues] are strengthening, and we look at mortgage tax and we don’t see the same level of strength,” Ms. Wright said.

Meanwhile, the real estate market is much improved, according to reports from local real estate agencies. Town & Country Real Estate, with offices across the East End, reports that this year’s second-quarter residential sales numbers are more than double that of last year’s second-quarter reports, up from 175 to 384 units.

But contrary to Ms. Throne-Holst and Ms. Wright’s assessments, Judi A. Desiderio, the chief executive officer of Town & Country Real Estate, said the increase in sales has largely been concentrated on the lower end of the market—among properties valued at between $500,000 and about $1 million. Those sales rose from 64 to 142 units, she said.

But she also noted that the number of high-end sales—those on properties valued between $3.5 million and $5 million—more than doubled from last year’s second-quarter reports, from six to 15. “So when you say it’s mostly high end, that’s simply not true,” she said. “It’s mostly from $500,000 to $1 million, that’s mostly where the sales occur.”

Ms. Desiderio said it’s difficult to determine whether those sales were financed or made in cash, but she suspects those in the lower range had some sort of financing component. “That’s hard for me to ascertain,” she said. “In my opinion, though, the lower the price of the home, the more often there is a finance contingency.”