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Liens a cash cow for Fulton tax chief

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A series of investigations by The Atlanta Journal-Constitution this year has spotlighted concerns about operations of the Fulton County Tax Commissioner’s Office. Among the stories, the AJC reported in February that Tax Commissioner Arthur Ferdinand’s quick sales of delinquent tax bills, before the county collected a 10 percent penalty, handed as much as $20 million in potential profits to Vesta Holdings, the biggest lien buyer, with a corresponding $20 million loss to taxpayers.

In April, another investigation showed how savvy investors use tax liens to short-circuit legal safeguards and quickly snatch homes away from taxpayers who get behind on bills, sometimes for a fraction of the properties’ value.

In May, the AJC discovered that Ferdinand had dipped into his budget to buy a 2013 Ford Explorer Limited for $39,000, which he can use for his commute to work.

For this story, Fulton County reporter Johnny Edwards used the Georgia Open Records Act to pore through hundreds of documents showing Ferdinand’s compensation and expense reimbursements. Among them were income tax forms revealing that the tax commissioner, the state’s highest-paid elected official, has been earning even more money than previously reported.

Edwards examined campaign finance disclosure statements and property tax records. And with assistance from database reporter Jeff Ernsthausen, he used a tax lien database that the AJC obtained after a two-year open records battle with Ferdinand and the county.

When the housing crisis was squeezing Atlanta and many homeowners struggled to pay their property taxes, life was getting sweeter for Fulton County’s chief tax collector.

Seizing on a law on the books since the Great Depression, by 2010 Tax Commissioner Arthur Ferdinand had found a way to personally profit from the controversial collection system he set up.

Now, Ferdinand takes a cut every time his office sells a tax debt to a private collection firm or the taxpayer antes up, an investigation by The Atlanta Journal-Constitution has found. He already was Georgia’s highest-paid elected official, but a 50-cent fee he now gets on each and every paid-off lien has added tens of thousands a dollars a year to his pay.

With the boost, Ferdinand earned $383,000 last year for a job where he started out earning $77,400 in 1997.

Not even county commissioners knew how much he really makes, even though the fees were going into county coffers before they were diverted to Ferdinand’s pocket. He may be Georgia’s only tax commissioner taking that money.

» MORE:   Ferdinand takes nickels, dimes and luxury trips

» ALSOArthur Ferdinand By The Numbers

Ferdinand wouldn’t discuss the payments, saying only that they are “permitted by law.” And Fulton County’s lawyers have blessed the arrangement, though they will not explain their reasoning.

Other attorneys, though, are not so sure Ferdinand can legally take both a full salary and a slice of lien proceeds, and they say the arrangement creates a staggering conflict of interest. The tax commissioner, critics say, now has a profit motive to hurl more taxpayers into a system that can put them at risk of losing their homes over small debts.

No other tax commissioner in Georgia sells so many tax liens to private debt collectors. With each sale, Ferdinand hears cha-ching!

» MEMOSFerdinand makes FiFa fee requests

» DOCUMENTS:  Extra payments to Arthur Ferdinand

“This incentivizes him to pass your debt to a third-party collector,” said Hugh Wood, a partner with Wood & Meredith, a law firm that handles real estate litigation. “The tax commissioner now has two masters. Either he is serving himself, or he is serving the taxpayer.”

Ferdinand said of his motives in an email, “My intent is to make sure taxes are paid as quickly as possible.”

To questions about his personal profits and the potential conflict, Ferdinand’s only response was to cite the state law that the Fulton County Attorney’s Office said justified the payments — a law dating back at least to 1933, when most tax commissioners earned their pay through fees.

“Just because there is a law on the books that authorizes certain behavior,” state Rep. Lynne Riley, R-Johns Creek, said, “that doesn’t mean it’s ethically or morally the appropriate thing to do.”

Seizing a new cash stream

The lien fees Ferdinand is paid come on top of his six-figure county salary and on top of the $1-per-parcel fees he collects from Atlanta, Johns Creek and Sandy Springs for adding their city tax bills to county bills.

So far Ferdinand has been pocketing roughly $22,000 to $31,000 extra per year from the lien fees. The county doesn’t give rank-and-file employees in Ferdinand’s office, who do the paperwork and average about $35,000 per year in pay, a portion of the extra compensation.

The payments came to light through earning statements and other documents the county turned over to the AJC in response to open records requests.

An interoffice memo shows Ferdinand began seeking the money in 2010, citing the old state law. He initially wanted back payments for about 365,000 liens paid off since 2002.

“At your earliest convenience,” he wrote to Finance Director Patrick O’Connor on Nov. 10, “please issue a check in the name of Arthur E. Ferdinand for the full amount of $182,492, in accordance with State Law.”

O’Connor and his staff turned to Fulton County’s law department for advice, emails show.

The County Attorney's Office issued a legal ruling saying Ferdinand had a right to the money, Assistant Finance Director Sharon Whitmore told the AJC. The county would only agree to go back to July 2007 with retroactive payments, she said, so in 2011 Ferdinand received a lump sum payment of more than $87,000.

That year, he took home more than $438,000.

There was no public discussion of the change, and county commissioners, who set Ferdinand’s budget, say they weren’t aware of it until contacted by the newspaper.

“If what you’re saying is accurate, I seriously wouldn’t support that,” Commissioner Robb Pitts said. “I think it’s a terrible practice. A base salary ought to be sufficient.”

The executive director of the Georgia Association of Tax Officials said he isn’t aware of any other tax commissioner in the state collecting such payments.

When most tax commissioners began receiving salaries, local legislation forbade them from still keeping fees, too, Dan Ray said. In Rockdale County, where he formerly served as tax chief before leading GATO, county code specifies that.

Tax commissioners in Cobb and Gwinnett are paid a salary and the lien fees go to their counties, not to them. DeKalb Tax Commissioner Claudia Lawson earns personal fees for billing nine cities’ taxes — earning nearly $237,000 last year including her salary — but gets nothing extra when liens are paid off.

Not even Haralson County Tax Commissioner Barbara Ridley, who still relies on commissions from tax collections and motor vehicle fees for her pay, keeps the 50-cent lien fees.

The law department won’t release its opinion to the AJC, citing attorney-client privilege.

And even though the Fulton Commission is the county attorney’s No. 1 client, commissioners said they did not receive a copy of the opinion. None of the memos or emails obtained by the AJC through the Open Records Act appear to have been forwarded to commissioners or their staff members, either.

Wood, the real estate attorney, said he is not convinced Fulton County is on solid legal ground in routing the funds to Ferdinand. His research turned up contradicting case law and state Attorney General’s Office opinions from decades ago, and he finds it troublesome that Fulton’s tax chief is operating unlike any of his Georgia counterparts.

“I’d say the answer is, ‘We’re not sure,’” Wood said, “because they’re sitting on their opinion and they won’t give it to you.”

Commissioner Tom Lowe said he wasn’t aware of the payments. Still, he is hesitant to criticize Ferdinand.

“Look at the collections on time — tremendously better than before he came into office,” Lowe said.

Before Ferdinand took office in 1997, the county’s collection rate averaged between 89 and 92 percent — with more than $200 million in delinquent taxes slipping through its grasp.

Upon winning the job, he promptly vowed to crack down on delinquents, and he was very much on board with then-County Commission Chairman Mitch Skandalakis’ push for lien sales — essentially using the private sector to pay tax debts.

In Ferdinand’s first year in office, the collection rate jumped to 96 percent and has reached 98 to 99 percent in years since. That’s about the level of other counties’ collection rates.

“I’m not looking to excuse Arthur Ferdinand, don’t get me wrong,” Lowe said. “But I think anything he did, he did it because the law permits it.”

Northside’s elusive target

Several North Fulton state lawmakers, though, were livid upon being informed of the profits from liens. They called Ferdinand's position audacious, considering that he already earns more than twice as much as Gov. Nathan Deal.

“That’s outrageous,” said state House Speaker Pro Tem Jan Jones, R-Milton, who had to pay the county’s biggest lien buyer — Vesta Holdings — $105 to satisfy a lien against her home in 2011. “He has a built-in incentive to slap a lien before a taxpayer has had adequate notice to clean up a mistake, even.”

Jones and state Rep. Wendell Willard, who chairs the House Judiciary Committee, said they would work to overturn the state law he's using to justify the payments and expressed hope the revelations will attract support for a bill targeting Ferdinand that stalled in the Senate earlier this year.

House Bill 346 would make Fulton’s tax commissioner an appointed county official again, serving at the will of the County Commission, starting in 2017. Willard — who has failed repeatedly to curb Ferdinand’s compensation — said it’s his only avenue left to stop the tax commissioner from enriching himself through public office.

“It’s just not reasonable,” Jones said, “for someone to have compensation, a public official, at that level.”

To Mark Scott, the personal fees Ferdinand receives explain a lot about the tax chief’s policies.

Last year, Ferdinand’s office placed two liens against his Buckhead house when he was three and two months late paying his city and county tax bills. A Vesta company bought the liens on the same days they were filed, records show.

Scott paid $34,650 to settle up. He has moved to Florida and assumes blame for not having his mail forwarded, causing him to miss his tax bills.

But he blames the tax commissioner for slapping liens on him and turning him over to a private collector before he had a chance to pay.

“I am just shaking my head in disbelief,” he said of Ferdinand’s profits. “My guess is, it doesn’t put him on the same page with taxpayers. I’m guessing he does things to make more money.”