Legislative measure would curb profits off tax lien sales

Last year, the AJC revealed how Ferdinand’s quick sales of delinquent tax bills handed millions of dollars in potential revenue to Vesta Holdings, the biggest lien buyer, with a corresponding loss to taxpayers.

Another investigation revealed he has been earning an extra $22,000 to $31,000 per year by taking 50 cents every time he sells a tax lien to a collector or a taxpayer pays off a lien himself or herself.

Today’s story describes how outraged state lawmakers seek to tighten restrictions on tax lien sales.

MYAJC.COM

Log on to MyAJC.com to learn more about how Tax Commissioner Arthur Ferdinand profits from the controversial tax collection system he set up. Then read more of the AJC’s coverage of his extra payments, including:

» His receipts from the federal government through the EQIP program

» Documents pertaining to Ferdinand’s FiFa fee requests and extra payments received

State lawmakers will try again this year to rein in the sale of overdue property tax bills to private collection firms, aiming to cut profits for both the Fulton County tax collector and his biggest buyer of tax liens.

House Bill 819, introduced this week, seeks to end practices exposed last year in several investigations by The Atlanta Journal-Constitution.

The measure would stop Fulton County Tax Commissioner Arthur Ferdinand from earning 50 cents every time he sells a delinquent tax bill or a taxpayer settles a lien on his or her own. Ferdinand is apparently the only Georgia tax commissioner collecting that money, and critics have called it a staggering conflict of interest because it gives him a profit motive to sell more liens.

As a result of the fee, Ferdinand, the state’s highest-paid elected official, has been pocketing roughly $22,000 to $31,000 extra per year, boosting his pay to about $383,000. He began billing the county for the fee two years ago, but the County Commission was unaware of the arrangement until the AJC uncovered it in August.

The legislation also seeks to keep private companies from profiting off late taxes that property owners may not know they owe. It would require the tax office to go to greater lengths to inform residents of overdue bills.

And if the county does sell a tax lien, a 10-percent late penalty must be included in the price. That means the county would collect the penalty, rather than the debt buyer collecting it from the taxpayer. The tax chief could no longer give away millions of dollars in potential revenue from late fees, which the AJC discovered in an analysis of Ferdinand’s tax database last year.

Over an 11-year period, his quick sales of delinquent bills — before a 90-day, 10-percent penalty kicked in — resulted in the county handing as much as $20 million in potential profits to its biggest lien-buyer, Vesta Holdings, with a corresponding $20 million potential loss to taxpayers.

“That’s been the big windfall that the buyer of these things receives,” said Rep. Wendell Willard, R-Sandy Springs, who is co-sponsoring the legislation after trying for years to cut Ferdinand’s pay and tighten lien restrictions. “It’s unconscionable.”

Ferdinand and Vesta’s attorney, Robert Proctor, did not immediately respond to requests for comment Friday.

Ferdinand sells more liens than any other commissioner in the state, a practice he has defended as a guaranteed way to boost collections.

But for the past three years, the AJC has reported how residents have nearly lost their homes because of tax bills they claim they never received. Some have said that Vesta’s legally required mailings can be easily mistaken for junk mail. The newspaper also discovered hundreds of liens sold for less than $50.

If taxpayers don’t know about the tax bills, the collection firm racks up more interest, and they can eventually auction a home to settle the debt. Some homeowners told the AJC they didn’t find out about the bill until their houses were headed for sale on the courthouse steps.

HB 819 would require tax commissioners to try to find taxpayers through Internet searches and people-finder databases, among other records, before slapping a lien on a property.

Rep. Chuck Martin, R-Alpharetta, the bill's main sponsor, said some people deliberately don't pay their taxes, and they should be punished. But there are other people who make honest mistakes, or purchase property just as the tax bill is due and don't realize it, he said.

“We need to give those people the opportunity to get right,” Martin said. “It’s good public policy that protects the taxpayers.”

R.J. Morris, a tax activist who lobbied for tax collection reform at the Capitol two years ago, said he’s skeptical that the due diligence requirements could be enforced. Willard conceded it would probably come into play in lawsuits between taxpayers and the county.

Morris said keeping the 10-percent penalty fees with the county — which was part of his platform in his unsuccessful run for tax commissioner — will help taxpayers more.

“That is the greatest thing they could do,” he said, “because that would bring millions of dollars in revenue back to the county.”