Usually, within 30 days of a property sale within Ocean View town limits, the transfer tax — 1.5 percent of the sold property’s worth — is deposited into the town’s bank account.
That tax has been the town’s largest source of revenue since 2002, and helps cover expenses in the town’s public safety and public works budgets.
It has also allowed the town to build a general fund that reached as high as $5 million last year.
But, now, Ocean View’s transfer tax revenues are at their lowest in recent history.
“I knew the market was going soft,” said Kathy Roth, Ocean View’s town manager. “But I didn’t know it would be so drastic so soon.”
Since 2002, the town has received an average of about $1.5 million in transfer taxes, and in the 2005 fiscal year, transfer tax revenues peaked at $2.35 million.
From December 2004 to January 2005 alone, the town of just more than 1,000 people received more than $460,000 in transfer taxes.
But this January, the town only took in $13,000 from the tax.
And despite the fact that there are 108 homes for sale in Ocean View, not one was sold in January.
Because of that, town officials don’t expect to receive any transfer tax revenue in February.
Eric Magill, Ocean View’s Long Term Financial Planning Committee chairman, said he has talked to local Realtors about the situation.
“No one has a guess if this is a long-term thing,” Magill said. “They’re hoping things will pick up in March.”
Although the town made more than about $1 million on the tax since April of 2005 and expects to have a surplus beyond the 2006 budgeted number of more than $1.45 million, town officials are worried that the last two months may be the start of a reoccurring trend.
They have, therefore, only set aside $500,000 in transfer tax revenues in the proposed 2007 town budget, which will go before council for approval in March.
In consequence, the general fund, which now sits at about $4.5 million, will serve as the main source of funding for public works and public safety expenses.
Over the next few years, according to a plan set forth by the town’s Long Term Financial Planning Committee on Tuesday, the general fund will cover about $1 million lost in transfer tax revenue until 2008.
The fund, which will likely be under $3.5 million by that time, will also mostly fund a $1 million drainage project until at least 2010.
In a forecasted 2011 budget, annual transfer tax revenue will have again reached over $1.25 million because of projected growth in the area.
That’s if all goes well.
“If I’m a developer and I know the market is the way it is right now, I wouldn’t develop,” Roth said.
The town relies on a secure general fund so it won’t have to tax residents to cover budget deficiencies, Magill and Roth said.
When Magill joined council in 2001, the general fund sat at about $1 million, but high transfer tax revenues have allowed it to grow in the last four years.
Town Council said that the general fund would have to get down to $1 million again before it would consider raising taxes.
Using six homes as an example, Magill said that local property owners can help deter that from happening.
“Take six homes,” Magil said. “Even if you have the best home, take the worst and price below that. The question is: Is anyone willing to do that? It really depends on each person’s situation.”