Weekly Feature

2018-07-12 / Front Page

Comptroller warns of declining mortgage tax revenue

Housing market seeing less inventory, rising interest rates and fewer mortgages as a result

Erie County Comptroller Stefan Mychajliw and County Clerk Michael Kearns met recently with town supervisors across Erie County to discuss the decline in revenue generated from the New York State-mandated mortgage tax due to a drop in mortgage closings.

Twice a year, cities, towns and villages receive a check from Erie County for revenue generated from taxes on each mortgage. After reviewing the data from Oct. 1, 2017, to March 31, 2018, the comptroller is alerting towns and villages that revenue for most municipalities declined.

“Towns and villages should be prepared for this loss of revenue,” Mychajliw said, noting that some municipalities experienced a sharper decline than others. “Supervisors across the county should be aware that the money generated through the mortgage tax declined for the first six months of the year. That could negatively impact budgets.”

Mychajliw said the red hot housing market has added to a unique storm of higher interest rates and less inventory on the market.

In West Seneca, mortgage tax collection totals in June were almost $116,000 lower than in 2017, with $376,839.22 collected to date.

West Seneca Supervisor Sheila Meegan said the amount the town has received to date is reasonable as compared to what was budgeted for in 2018.

“The town uses a four-year average to forecast the amount of mortgage tax it expects to receive,” she said. “We received $649,460 in 2014, $754,637 in 2015, $843,871 in 2016 and $905,383 in 2017. While it looks like we will not receive as high of an amount as we did in 2017, we are in line with our average.”

Mychajliw said there are areas that are seeing growth and an increase in mortgage tax revenue. Those areas include Clarence, Concord, Evans, Grand Island and the Town of Tonawanda.

The Comptroller’s Office recently calculated the revenue totals and found that for Oct. 1, 2017, through March 31, 2018, the revenue generated from the mortgage tax was $8.9 million. This is down 5.9 percent compared to the first half of 2017, which totaled $9.4 million. That’s a decrease of approximately $552,084. In 2017, the total for 12 months was $18.7 million. In 2016 the total mortgage tax collection was $18.2 million.

“Historically, mortgage tax revenue has increased in the second half of the year. We saw this occur in both 2016 and 2017. We will continue to closely monitor trends and immediately report information to our towns. As soon as we hear anything or have final numbers later in the year, we will reach out to our supervisors one more time,” Mychajliw added.

County Clerk Kearns said he is concerned but not surprised about the decline in mortgage tax revenue. Through the clerk’s new ALERT program, foreclosures are being tracked when they commence in individual municipalities.

“My office will be releasing a report on the data collected through the ALERT program. Based on the data from this program, there is no denying that there is a zombie property crisis in Erie County,” Kearns said. “When banks hold on to foreclosed properties, there is a trickle-down effect on each municipality, as we can see this year with the declining mortgage tax revenue.”

The trend is being closely watched by many professionals throughout the county, according to Mychajliw.

“It is disheartening that the number of mortgages have dropped so significantly. Additionally, the fewer homes sold means less is being spent locally by the new homeowners,” the comptroller said, which he noted has a major effect on everyone.

Statistically, when a home is purchased, more than $45,000, on average, is spent by the new owners locally on appliances, paint, carpeting, furniture, gardening materials and other home improvements, according to John Leonardi, CEO of the Buffalo Niagara Association of Realtors.

“While I am cautiously optimistic about the second half of the year, inventories remain extraordinarily low, and for planning purposes towns that rely on these funds need to plan for less mortgage dollars through 2019,” Mychajliw said.

Meegan added that home prices continue to increase despite the low number of houses for sale.

“We are in a very hot market,” the supervisor said.

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