Official: Law will aid tax lien sales
The law allows negotiated lien sales in counties of more than 200,000 people.
By BOB JACKSON
VINDICATOR COURTHOUSE REPORTER
YOUNGSTOWN -- Mahoning County Treasurer John Reardon went to Columbus this spring hoping for a new law that would change the way he deals with delinquent property taxes.
The resulting legislation wasn't all that he wanted, but will be enough to help him collect about $5 million in unpaid taxes, he said.
In Ohio, the 12 largest counties by population are permitted to hold tax lien certificate sales to recover delinquent property taxes. The treasurer sells the county's tax lien against delinquent property to a private investor for the full amount of the back taxes plus an administrative fee.
The buyer then collects the delinquent tax amount from the property owner, plus 18 percent interest. If the money isn't paid within a year, the buyer can foreclose on the property to recover the investment.
Mahoning County's first tax lien sale was in November 2000. A Florida company paid more than $1.2 million for delinquent taxes on nearly 300 parcels.
Won change in law: The old law required counties to sell a tax lien for the full amount of back taxes. Reardon wanted it changed to allow negotiated lien sales, in which a county treasurer can sell to the highest bidder, even if the high bid is less than the full delinquency amount.
Reardon sought and got legislation that allows counties with populations of more than 200,000 to conduct negotiated tax lien sales. In the past, only counties with a population of at least 1.4 million could conduct such sales.
Only Cuyahoga County, where Cleveland is situated, qualified at that time.
Trumbull County Treasurer Christ Michelakis said he doesn't plan to use the new law because he doesn't face the same problems as Reardon.
"Our delinquencies are way down, so that would not be advantageous for us," he said, noting that Trumbull County uses an aggressive foreclosure program to keep its delinquencies in check.
Columbiana County's population is too low to qualify for the sales.
Mahoning numbers: Reardon said he wanted the law changed because of the high number of delinquent parcels in the county -- more than 20,000. Many of them are not attractive for a standard lien sale, though, because the tax delinquency exceeds the property value.
Investors are generally not interested in buying liens when they have no chance of recovering their initial investment, let alone any interest, Reardon said.
With the law changed, the county can sell an additional 2,000 liens, which should generate about $5 million in revenue.
"In the past, that money would have been absolutely uncollectable," Reardon said.
Now, if an investor buys the tax lien certificate for less than the total delinquency amount, and the property owner does not pay up within the 12-month period, the investor can foreclose and the balance of the delinquency is wiped off the books.
Added expense: The problem is that the new law requires the county to do a title search on each parcel that's included in a lien sale, something that wasn't required before.
"That's a very expensive proposition," Reardon said, noting it generally costs about $175 per parcel. That can be passed on to the investor in the form of an administrative fee, but Reardon isn't happy about doing that.
"The more costs you impose on a bidder, the less attractive a bundle [of tax liens] is," he said. Reardon said that he will push to have the title search requirement removed from the legislation but that he plans to move ahead with a negotiated lien sale early next year.
"We didn't get everything exactly the way we wanted it, but the bottom line is that we can do it now, and we will," he said.