Palm Beach County collected record returns from its $5 billion investment portfolio, but a sharp increase in property foreclosures raises some concerns about future revenue, according to the county's top finance official.
The investment portfolio includes the controversial purchase of $700 million of Israel Bonds to support the war effort in Gaza.
Clerk of the Circuit Court & Comptroller Joseph Abruzzo, who oversees the county's investments, told commissioners this week the county earned a record $172 million from its nearly $5 billion-dollar portfolio in fiscal year 2023.
The county, he said, projects to bring in a record $215 million in the county coffers by the end of this year.
Abruzzo defended his decision last year to put 15% of the county’s funds into Israel Bonds. Commissioners had increased the cap on Israel Bonds from 10% to 15%, making the county the largest buyer of the debt in the world.
“No one has received more criticism than me and I'm happy to take that criticism all day, everyday,” Abruzzo said. "I'm proud of what they're returning. I'm proud that at the end of it, we should have about $83 million earned off of 15% of our portfolio, which is, quite frankly, really good.”
In May, dozens of residents protested outside the Palm Beach Courthouse amid the ongoing war in Gaza and mass humanitarian crisis. They urged Abruzzo to divest from Israeli bonds. That same month, three residents of Palestinian descent filed a lawsuit against the Palm Beach County government.
The county purchased the bonds last year after Hamas militants stormed into southern Israel on Oct. 7, 2023, and killed some 1,200 people — mostly civilians — and abducted about 250. Israel’s nine-month war against Hamas has since reportedly killed more than 37,900 people in Gaza.
Abruzzo said the Israel Bonds yields are paying a higher interest rate than U.S. Treasuries and that the Israel Bonds are in two- to three-year terms, which can be renewed. He said the bonds represent 15% of the county's investment portfolio, and generates $35 million in investment income annually, noting that the county was previously getting $27 million in income yearly from its entire portfolio.
"Everything is in safe investments," Abruzzo said.
Steep rise in foreclosures
In presenting the financial state of the county, Abruzzo also told commissioners that property foreclosures rose last year to more than 2,400 cases, nearly double the total from 2022. He said he expects foreclosure numbers to climb due in part to adjustable mortgage rates and high interest rates.
“It's really a changing marketplace on interest rates and the overall workforce is changing before our very eyes,” said Abruzzo.
“They [property owners] were paying 2% to 3% and then all of a sudden they're paying 7% to 8%,” he said in noting the rising interest rates.
Abruzzo provided the annual comprehensive financial report in a detailed layout on how tax dollars are spent to commissioners.
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Commissioner Marci Woodward said the rise in housing foreclosures makes her “a little nervous,” noting the high number of properties that sat empty during the 2008-2009 Great Recession when housing prices plummeted during a global economic meltdown.
“We are arguably the hottest property market in the country,” Abruzzo added. “Right now, that could change. I would submit that there will always be investors who come in and grab properties so I don't see those homes sitting vacant for very long.”
Among other concerns, he said, is the advancement of artificial intelligence which could lead to job displacement alongside potential long-term pains over the ballooning $34 trillion national debt, which could hurt purchasing power, increased inflation and higher interest rates.
Mortgage applications declining
Housing prices have soared in recent years. The median sales price for a single family home in Palm Beach County is $650,000, according to data from the county's new housing trend dashboard. Nationally, home prices increased 46% between March 2020 and March 2024, according to the closely followed Case-Shiller 20-City Composite Home Price Index.
Other worrisome data: the low number mortgage deeds, according to Abruzzo. He said the number of mortgages and deeds recorded with the Clerk's office are in steep decline.
Abruzzo said "a massive uptick in people paying cash for homes" may explain, in part, why so few mortgages are being recorded.
That translates into less money for Palm Beach County and the clerk's office because some of that revenue comes from recording of fees and documents.
Abruzzo plans to return to the commission to break down how taxpayers can benefit from the county investments, where exactly that extra income can go and what commissioners have at their disposal as the county makes decisions on millage rates and the upcoming budget.
The new fiscal year begins Oct. 1.
