Nassau real estate fee shortfall expected to top $35 million

Nassau County is expected to have a shortfall of more than $35 million in real estate-related fees this year, the result of a decline in 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's budget director, told county legislators last week that lagging real estate fees were among the county's biggest challenges. Nassau collects a $350 fee to record a mortgage and another $350 to record a deed. A third fee of $270, known as a "tax map verification fee," verifies a property's section, block and lot.

Nassau recorded 25,698 mortgages and 11,369 deeds in the first six months of this year, according to the county clerk's office.

That's compared with 52,881 mortgages and 15,366 deeds in the first half of 2022.

"The real estate market has taken a downward turn, in which we're not seeing significant revenues coming in," Persich 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.

The county missed budget projections for real estate fees last year by $17.4 million. 

A year earlier, in 2021, Nassau 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 moment's 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 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 the fee to bring in $45 million, but received $9.5 million through the first half of the year.

Deed and mortgage recording fees were budgeted to bring in $39 million, but the county had collected $11.2 million through June 30, according to NIFA.

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.”