Peekskill's New Home Sale Transfer Tax Explained

You can buy a home in Peekskill for less than it cost a year ago, but it now costs more to sell it. 

On Dec. 1, the Common Council enacted Local Law #11, later authorized by the state Legislature, to create a transfer tax on all residential and commercial deeds "delivered by a grantor to a grantee" in the amount of 1 percent of the sale price.  

The money will go into the city's General Fund which in turn will be turned over to a Fire House Building Fund. 

"We were in a situation where we needed to either rehabilitate all six of our firehouses and bring them up to code, or construct a new central fire house," explained Mayor Mary Foster, "and we found that the price differential between $14 million for rehabilitation and $15 million for new construction was not that far different. So, after public hearings and some consideration, we decided that we should de-commission the old firehouses and get the properties back on the tax roll."

The current average price for a home selling in Peekskill is $285,100, which means that a home seller would have to ante up $2,851 to the city for the sale of a home at that average price. This is in addition to an already-existing state transfer tax of $4 per $1,000 of the sale price, or $1,140. That sale would now cost the seller $3,991 in those fees. 

Since January 2010, 110 homes have sold in the City of Peekskill and, at an average price of $285,100, the income the new tax would have been $313,610 for the year, and this amount doesn't include sales of commercial properties.

"There could be some large commercial properties that change hands," Foster said.

Another consideration for increased income from the tax is that home values in Peekskill have bottomed out and, in fact, increased 2 percent in value this year and will likely increase more in 2011.

"We recognize and understand that there would be some concern among home sellers who might say, 'We're moving, why should we have to pay this?' But, we've had public hearings and the consensus was that this was the best option to create a debt service reserve fund," Foster said, adding "We have gone on record saying that as soon as we can get the reserve fund established, future councils can consider reducing the amount of the tax. 

"If we had increased property tax to accommodate a new fire house, it could have been a 6 percent increase, and we certainly didn't want to do that, nor did we want to ask for an increase in the amount of gross receipts utility tax," she continued. "Once you do that, the tax never comes back down. But with a transfer tax, people are aware of it, they see it and know it's there for a very specific reason.

"Also people know that it's not being used to fund our budget to spend for benefits, pensions and medical costs.  But it is a way to fund infrastructure without having to increase our overall property tax levy," she said. "At the same time, we're committed to keeping our day-to- day operating needs within our existing tax levy and revenues."

The mayor underscored the point that her hope is to have half the debt reserve fund in place in the early years so that the tax can be brought down to one or two basis points (a basis point is one-tenth of one percent).

Local realtors expressed some concern that the new tax would be a further deterrent to potential home sellers who would otherwise consider placing their homes on the market now or in the near future.

"This is a definitely a negative in a depressed market, and further, when home sellers work with an agent to price their homes, they are going to want to include the cost of the tax transfer into the selling price," said Michael O'Connor of Coldwell Banker Residential Brokerage.

But one homeowner lent her support to Foster and the council for the transfer tax.

Margaret Bryan, who owns a Queen Anne house on a corner of Elm Street, said, "Taxes are inevitable, and we need a new central fire house.  I think the mayor and council have come up with a creative plan for it." 

Bill Primavera is a Realtor with Coldwell Banker. For comments or questions about this issue, he can be reached at bill@PrimaveraHomes.com or directly at 914-522-2076.