Tax Realty Consultant

With all the news about how the housing market slowdown is squeezing homeowners, lenders and real estate brokers, it might be easy to forget that the bottom line of state and local governments also is getting pinched.

That’s certainly the case in Shelby County and statewide in Tennessee, where over the past year the collection of some taxes and other fees affected by real estate activity has dropped off to varying degrees.
In a pinch

The office of Shelby County Register Tom Leatherwood, for example, turned over just more than $29 million in tax revenue his office collected for the state between Jan. 1 and Nov. 8. That amount, which includes transfer and mortgage taxes, was down about 3 percent from the $29.8 million collected during the same period in 2006.

Those totals are comprised of payments Leatherwood’s office makes to the state on a monthly basis.

Document filing fees collected by Leatherwood’s office between January and November also have decreased, which presumably reflects a decrease in mortgage filings. Through Nov. 8 of this year, the register collected just more than $5.1 million, which is about $1 million less than the $6.1 million taken in between Jan. 1 and Nov. 8 of 2006.

“Our fees are basically just based on how many pages your document is,” Leatherwood said. “The state taxes are based on the value of the property. So you could have fewer transactions, which would reduce our fees, but these are big properties that are selling for big dollars and they’re taking out big mortgages. Hence, the state taxes could be higher.

“Basically we get our fees - the higher the volume, the more money we collect. As far as the state goes, it doesn’t really matter how many documents are filed here. They’ll make more money off one $1 million sale than off 1,000 $10 sales.”

Sophie Moery, a spokeswoman for the Tennessee Department of Revenue, said realty transfer taxes collected by the state between July and October have decreased about 7 percent from collections one year ago.

“That’s likely a result of slowing property purchases,” she said.

From July through October of this year, about $53.5 million flew into the state’s coffers as a result of realty transfer taxes. That’s down about $4.1 million from the $57.7 million collected between July and October 2006.

The state’s realty mortgage tax revenue is down about 4 percent during the same time period. The total haul between July and October of this year was $24.2 million, down from the nearly $25.3 million collected during the same period in 2006.
Crunch felt

Back on the local level, Leatherwood’s office has another source of income that also has taken a hit recently. His office’s operation is funded entirely by fee revenue, but the register also collects a $2 data processing fee that is earmarked to go toward the technology needs of the register’s office.

That data processing fee is not immune to swings in the real estate market, given that each document has the $2 fee attached to it.

“In 2006, between Jan. 1 and Nov. 8, we collected $384,770 in data processing fees,” Leatherwood said. “In 2007 over that date range we collected $338,226. So there was a little less than a $50,000 drop.

“In my office, the DP fee probably impacts our office more than anything else, because that is money dedicated to our office that we can spend exclusively on our office. There’s just more things we’d like to do than we’re able to do.”

Recent additions to the register’s Web site, at www.register.shelby.tn.us, reflect Leatherwood’s desire to add new data capabilities whenever possible. The office recently made it possible, for example, to narrow a search of available property records by combing though recent and comparable sales and then limiting that query to specific dates and locations.

“The (DP fee) is important to us in our technology budget, because as you know from the Web site and everything else we try to stay on top of things, adding new data sets and so forth,” Leatherwood said. “But we’ve got to have the money.”