Legislation introduced in the Senate on Friday is meant to curb abuses of the sale of property tax liens, but broad language in the bill would obstruct tax collection by counties that do not sell liens, according to tax experts.
Senate Majority Leader Chip Rogers, R-Woodstock, who introduced the bill, said the language will be changed to affect only the practice of selling tax liens to private companies and not the collection of taxes by the counties.
Rogers also agreed with critics of lien sales who said the bill falls short of its goal of protecting property owners, but added that it is a first step and future legislation will be needed.
A series of stories by The Atlanta Journal-Constitution over the past two months detailed how the sale of tax liens can create outrageous costs for property owners and stall community revitalization efforts. The stories also raised questions about whether selling tax liens saves the county money as Fulton County Tax Commissioner Arthur Ferdinand has said.
Fulton County is the only metro county that relies on tax lien sales as its primary method of collecting delinquent taxes, according to Georgia tax experts.
Rogers said he proposed the legislation in response to complaints from Fulton County taxpayers to address the most egregious aspects of the sale of tax liens first.
“It’s creating an undue hardship for people who are not receiving proper notification of the status of their tax bills,” Rogers said.
He said he wants legislation to prevent counties from selling tax liens on properties whose owners are appealing their assessed value and to require county tax commissioners to wait one year to sell liens after notifying property owners of delinquency. Current law requires 30 days.
The legislation would also require counties to send notification of a lien via certified or statutory overnight delivery. Ineffective notification caused financial problems for many of the property owners the AJC talked to about lien sales.
While the legislation as currently written would accomplish Rogers’ goals, the bill also appears to prevent all counties from using the lien and foreclosure process to collect delinquent taxes for one year, said Frank Alexander, a law professor at Emory University who specializes in Georgia real estate and foreclosure law.
Alexander said his quick reading of the bill Friday suggests it would drag out collection of delinquent taxes, benefiting only property owners who want to avoid paying taxes.
An improved notification process would help property owners, but the bill would not accomplish that, Alexander said. A certified letter sent to the wrong address would still fail to provide notice.
Sending letters by certified mail could cost counties hundreds of thousands of dollars in additional postage costs.
Alexander said tax lien sales are an abdication of government’s taxing authority and should be banned by law.
“These legislative tweaks really don’t address the fundamental questions,” he said. “Why not require tax collectors to collect taxes?”
Short of outlawing the practice, a better intermediary stepwould be to prevent companies that owe property taxes or have affiliates that owe property taxes from purchasing liens, Alexander said.
An investigation by the AJC found county records show Harpagon, a sister company of Vesta Holdings, the largest tax lien purchaser in Georgia, owes about $120,000 in overdue Atlanta and Fulton property taxes dating from 2008.
Doug Dean, a former state representative from Fulton who in the past attempted to ban the sale of tax liens, said the legislation falls short, but he hopes amendments will add punch until the practice can be prohibited completely.
“Our tax commissioner ought to collect these taxes himself and until we change that, we’re going to have a haven of corruption,” Dean said.
Rogers said he will introduce additional legislation next year to further regulate the practice.
A 2006 state law gives tax commissioners the option to sell tax liens to private companies. Gwinnett also sells tax liens, to a lesser degree than Fulton.
It’s not clear how the newly introduced bill would affect Fulton tax collection, because Ferdinand will not comment and the county attorney’s office will not make data on the sale of tax liens available to the AJC or academics who have asked for the information. Ferdinand and his staff have not returned phone calls placed over two months regarding this issue.
Fulton County Commission Chairman John Eaves said in a meeting with AJC editors last week that Ferdinand even refuses to provide information to county commissioners. Eaves has declined to comment on the practice of selling tax liens.
Ferdinand is an elected official, and the county commission cannot prevent him from selling tax liens.
Ferdinand was appointed tax commissioner in 1997 by the Fulton County Board of Commissioners. After a 2002 law made the position elected, Ferdinand ran unopposed in 2004 and was re-elected again in 2008. He faces election for another four-year term in 2012.
Fulton’s use of lien sales to collect overdue taxes is unusual in Georgia. There apparently aren’t national statistics on the practice, but GovernmentAuctions.org reports that 20 states and the District of Columbia allow the sale of tax liens to third parties.
Cities and counties typically issue liens when a tax bill becomes delinquent. Most public agencies pursue tax debt collection with staff, but Fulton sells liens to private companies. After that, the property owner deals with the private lien purchaser, not the county.
Private companies purchase tax liens because they can pump up the lien value by tacking on monthly interest charges and other fees and use foreclosure to collect the debt.
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