Cyberattack slows mortgage-tax processing in Suffolk, delaying payments to towns

Mortgage taxes processed and received by the Suffolk County Clerk’s office dropped by more than half to $34.8 million dollars between September and mid-December compared with $71.7 million for the same period in 2021, as impacts from the September cyberattack slowed processing, according to records received through a Freedom of Information Law request by Newsday.

Separately, mortgage-tax payouts to the10 Suffolk towns dropped by $16.7 million from Sept. 1 through Nov. 30, according to separate information provided by the county comptroller’s office. Payouts to the towns in 2022 were $12.49 million, compared with $29.2 million in 2021. The comptroller’s office is responsible for making the payouts of the taxes to towns and villages.

Community preservation taxes processed by the clerk’s office also dropped sharply, to $26 million for the September through mid-December period, compared with $54.3 million in 2021, according to the clerk’s documents.

Newly elected Suffolk County Clerk Vince Puleo said the process of processing mortgage taxes paid by residents and businesses on the sale of properties “is going to get better and better as time goes on.” In any case, he emphasized, “everybody is going to be made whole.” 

Puleo said he hoped by month’s end to “be able to speak to the rest of the internet community” in bringing back online filing of the taxes. 

The clerk’s office through the end of 2022 continued to process mortgage taxes, but filing them had to be done in person, rather than through an online system, as the county continues to gradually restore services following the Sept. 8 ransomware attack. Last month, the county said the first signs of the cyberattack were detected in the clerk’s office, and it put the clerk’s information technology director on administrative leave.

Newsday has reported the clerk’s office had been requesting higher levels of computer security for months, including a hardware-based firewall, which the county installed in mid-September, a week after the attack. The county said the IT director resisted its recommendation to install a “virtualized” version of the firewall from California-based Palo Alto, which also conducted the county’s forensic investigation of the cyberattack.

Prior to the Sept. 8 ransomware attack, the clerk’s office had been on course to report higher mortgage-tax revenues for 2022, according to the documents provided to Newsday. Between Jan. 1 and Aug. 31, the office had processed and received $179.2 million in mortgage taxes, compared with $172.1 million for the same period in 2021. Community preservation taxes for 2022 were slightly down, however, to $127.2 million for the January through August period, from $128.7 million a year ago.

County Comptroller John Kennedy in an interview called the slowed payments to towns “just another example of the profound and long-lasting consequences of this hack.”

“We see it in almost every aspect of county governance,” Kennedy said. “The consequences will run well into 2023, if not into 2024.”

Every Suffolk town received lower mortgage-tax distributions from September through November of last year compared with the prior year, according to information provided by the comptroller’s office. The reductions represent a delay in payouts to the towns once the all the mortgage taxes are processed.

Brookhaven’s tax distribution was down $3.7 million to $3.33 million for the September-November period in 2022, compared with $7 million the prior year. Southampton’s was $3.4 million lower than in 2021 — amounting to $1.95 million for the three months of 2022 compared with $5.39 million for the three months in 2021.

Huntington’s was $2.47 million lower, to $1.58 million compared with $4 million a year ago. Babylon’s was down $1.5 million, to $1.26 million compared with $2.8 million in 2021. Islip saw its mortgage tax distribution drop by $2.38 million, to $1.81 million compared with $4.19 million.

East Hampton saw its mortgage tax distribution drop by $1.25 million during the period to $936,635 compared with $2.19 million in 2021. Smithtown’s was down by $1.21 million to $896,113 compared with $2.1 million a year ago. Southold’s dropped by $415,018, to $349,160 in the three months of 2022, compared with $764,178 in 2021. Riverhead’s dropped by $192,803 to $254,704, compared with $447,507 in 2021. And Shelter Island’s dropped by $96,454 to $87,552 compared with $184,007 for the three months in 2021, according to the comptroller’s figures.

Southampton Supervisor Jay Schneiderman said that while the town has a surplus to cover funds it expected to come via the mortgage tax distribution, the delay has been a cause for concern. 

“It’s a problem,” he said. “We had a whole bunch of money we normally would have gotten” from the county. There have also been delays in receiving property tax payments from late payers, which automatically is shifted to the county for payments, Schneiderman said.

“We’ll get our money,” he said. “It’s a delay.”

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