Towns taking in millions of dollars in prepaid 2018 taxes this week are now rushing to deposit thousands of payments in amounts bank officials say they rarely see this time of year.
In Hempstead, property owners on Wednesday paid about $8.3 million in 2017-2018 second-half school taxes in person and online, Tax Receiver Donald Clavin said.
Southampton Town has been processing about $25 million in prepaid taxes each day this week. By Friday afternoon, Tax Receiver Theresa Kiernan said her office was up to $108 million — of the $365 million in total taxes owed — paid in person, by mail or online.
Gov. Andrew M. Cuomo’s executive order last Friday allowing tax prepayment in municipalities such as Nassau County that previously prohibited it set off a flurry of activity during a typically quiet holiday week.
Tax receivers’ offices were first swamped by phone calls asking about prepayments of second-half 2017-2018 school and 2018 general taxes. Then hundreds of property owners lined up at the offices to get ahead of federal tax code revisions that go into effect next year limiting state and local tax deductions. Now tax receivers are scrambling daily to make deposits at the commercial banks handling municipal funds.
Long Island-based Bridgehampton National Bank takes in between $20 million and $30 million in deposits on a normal day, chief financial officer and executive vice president John McCaffery said. On Wednesday, that figure more than tripled to $92 million — about 70 percent of which came from several town tax receivers trying to keep up with the payments, he said.
“Wednesday night, it was larger than we had ever seen,” McCaffery said.
Towns usually spread their deposits — most of which are electronic — across several commercial banks, including Bridgehampton National Bank and Gold Coast Bank. The banks must be approved by town boards and meet several requirements, such as having the ability to post collateral for the towns’ deposits. Some banks also provide electronic transfers and lockbox services for taxpayers to mail their checks.
Bridgehampton usually handles $150 million to $200 million in town deposits during a typical tax season, McCaffery said. But with some receivers holding weekend office hours and the Nassau towns offering a discount for full payment of the general taxes, the banks may see further unprecedented deposits next week.
“I would expect it would be an additional $50 to $70 million.” McCaffery said.
James Johnis, Gold Coast’s president and chief operating officer, said his bank has seen increased town deposits this week, but it’s still too early to estimate how much.
“I don’t think there’s any surprise that there’s going to be additional deposits,” he said.
Town tax receiver accounts are not typically lucrative for commercial banks because they must pledge collateral to protect the money and the funds are usually quickly transferred out of the bank, McCaffrey said. Banks try to attract smaller municipal clients, such as school and fire districts, where the funds would be kept in the accounts for more time.
Regardless of which account the money is in and for how much longer it remains there than during a typical year, it likely won’t accumulate much interest because of the current low rates, officials said.
“It’s not like they’re going to make a fortune holding the money for an extra couple of days,” said James Manseau, Bridgehampton’s executive vice president and chief retail banking officer.
Clavin said Hempstead will disburse the school taxes to the school districts early.
“It doesn’t benefit the town or the receiver’s office to hold onto this money,” he said. “As it comes in, we want to send the schools their money.”
Charles Berman, North Hempstead’s receiver of taxes, said he previously scheduled dates to turn the money over to the school districts. He may add earlier dates because of this week’s activity.
“We can’t keep the interest money anyway,” he said, noting that school districts get to keep the interest on their funds.
David Flatley, superintendent of the Carle Place school district and president of the Nassau County Council of School Superintendents, said he didn’t anticipate any districts receiving a significant “windfall” in interest from the longer time period.