Nassau County is expected to have a shortfall of more than $35 million in real estate-related fees this year, the result of declining home sales and refinancing, new budget projections show.
Real estate fees are a recurring source of revenue for Nassau’s $4 billion annual budget, and the collections often indicate the strength of the local economy. But the housing market has softened since the Federal Reserve began raising interest rates last year, according to mid-year financial reports from the Nassau Interim Finance Authority, the county comptroller and the Office of Legislative Budget Review.
The county is still expected to record an overall budget surplus in 2023 because of strong sales tax receipts and investment gains, officials said. The surplus could range from between $17.9 million and $73.1 million, according to NIFA, the county’s fiscal oversight board.
Andrew Persich, Nassau County’s budget director, told county legislators last week that the lagging real estate fees were among the county’s biggest challenges.
“The real estate market has taken a downward turn, in which we’re not seeing significant revenues coming in,” he said. “We’re having a volume decrease, and that’s creating a little hole in the budget.”
Revenue from investment income gains will offset the losses, he said.
Nassau collects three real estate-related fees: one to record a mortgage, another to record a deed and a third known as a “tax map verification fee” to verify a property’s section, block and lot.
The mortgage and deed recording fees are $350 each, and the tax map verification fee costs $270.
The county missed budget projections for real estate fees last year by $17.4 million.
A year earlier, in 2021, the county had a surplus of more than $40.6 million in real estate fees.
In 2020, the county exceeded projections by $7.8 million.
Adam Barsky, who chairs NIFA, said Nassau needs to lower its projections in future years, given the “risky and volatile” nature of the revenue source, he said.
“This is not going to change course anytime soon,” Barsky said.
County Executive Bruce Blakeman, a Republican, said in a statement: “We continue to monitor all markets including the real estate market on a daily basis and have the ability to pivot on a moments notice if market conditions should materially change.”
“As of now, we are extremely confident that the conservative forecasting in our budget is within reasonable parameters of what is expected including sufficient cushion should there be a downturn,” Blakeman said.
In April, the Nassau County Legislature voted to reduce the tax map verification fee from $355 to $270 after a state appellate court upheld a lower court’s ruling that declared it an unconstitutional tax.
The county budgeted for $45 million for the fee, but received $9.5 million through the first half of the year.
Nassau had budgeted for its deed and mortgage recording fees to bring in $39 million but had collected $11.2 million through June 30, according to NIFA.
The county recorded 7,938 fewer deed and mortgage transactions for the first half of this year compared to the same time period last year, according to the County Comptroller’s Office.
The Comptroller’s Office projects a $36.1 million shortfall in mortgage and tax map verification fees. NIFA projects a deficit of $35.7 million.
Legislative Minority Leader Kevan Abrahams (D-Freeport) said in a statement:“While overall economic conditions appear to be stabilizing and the job market remains strong, such a sharp decline in mortgage tax receipts is concerning and should be monitored closely as we craft the County’s budget for the 2024 fiscal year.”
Abrahams continued: “It is important for us to all be cautious stewards of Nassau County’s hard-fought surplus so that we can preserve essential services and deliver tax relief on a long-term basis even if this trend continues.”