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Tax bill auction nets big gains for counties
Friday, June 11, 2010
by Anjali Fluker, Staff Writer
Central Florida's counties are feeling a lot better about 2010 after this year's tax certificate sales.
In a year when investors were expected to continue to hold tight to their money, Lake, Orange, Osceola and Seminole counties sold 52,988 delinquent property tax bills at this year's auctions, or 91.1 percent of the certificates up for grabs, netting a combined $164.7 million in revenue for the cash-strapped local governments. That, tax collectors said, provides a ray of hope that the local economy is improving.
The annual tax certificate sales - sold at an auction to investors when property owners don't pay their property taxes by the late May deadlines - saw a big turnaround compared with 2009, when there were 65,286 delinquent tax bills up for grabs but only 73.5 percent sold at the counties' auctions.
This year, Orange County saw great success with its sale, offering 25,691 certificates for a total face value of $92.2 million at the auction and selling 25,299 bills for $92.1 million. "We got 99.9 percent of the money," said county tax collector Earl Wood. "That sure does indicate market improvement."
And Osceola County's tax department sold 80.8 percent of its 12,965 delinquent tax bills that went to auction on June 1, earning $30.5 million, or 98.4 percent of the value, on the sales. "We were so not expecting that," said Julie Wilson, director of the department. "With the economy the way it is, we didn't think there would be as many investors willing to put money out."
Other Central Florida counties experienced the same trend: Seminole County sold 98.3 percent of its tax certificates, up from just 79.7 percent last year, and Lake County sold 81.6 percent of its certificates, up from only 47.5 percent last year.
Counties have been selling tax certificates for decades to raise cash on unpaid property tax bills. Properties with unpaid taxes are advertised online. Investors bid the lowest interest rate they're willing to be paid in exchange for buying a tax certificate, and the bidding starts at a maximum rate of 18 percent.
Investors preview the properties via the property appraiser's website to determine if they want to bid on them. If a property gets multiple bids at the same interest rate, the computer randomly picks the winning bid. Investors usually watch early bids on properties to adjust their own bids.
Before 2007, most bids were less than 1 percent. If the investors bid less than 1 percent, state law allows tax certificate buyers to get a minimum of 5 percent regardless of when the tax bill is paid.
However, as property foreclosures mounted, leaving banks with ailing balance sheets and less inclined to make loans, large financial institutions found credit in short supply. As a result, bids by investors went from less than 1 percent to 10-15 percent last year.
This year, demand pushed the interest rates to one-quarter of a percent in some cases, tax collectors said.
The investors hold a lien on the delinquent properties, and the property owners have two years to pay off the investors plus the interest. If the certificate holders still haven't been paid after two years, the investors can foreclose on the liens and, eventually, the property.
"Compared to other investments, this must be the safest place you can put your money," said Lake County Tax Collector Bob McKee. "This is a good place to invest, if you do your homework."
http://orlando.bizjournals.com/orlando/stories/2010/06/14/story2.html
