The new tactics have already earned the county about $1.2 million in payments from 85 individual tax delinquents, according to county Tax Collector Beverly Buchanan.
The county’s hired attorneys have sent out dozens of letters during the past year to property owners owing back taxes, threatening that if the taxes aren’t paid by the end of that month, the county could foreclose on them. Often, that letter is enough to elicit payment. But, the county has actually followed through with foreclosure on six occasions to collect what it was owed — a tactic that previously hadn’t been used in almost three decades.
The county is obviously targeting the largest debtors first, County Manager Chuck Wooten said.
But, Buchanan also prioritizes who to go after based on how long they have had an outstanding balance.
The county only has so much time to collect its money because after 10 years the county’s authority to collect on delinquent tax bills expires. Some accounts can expire with thousands of dollars in an outstanding balance.
Previously, Buchanan said the county would attempt to tap bank accounts or garnish wages of delinquent taxpayers, or outline payment plans. In some cases those methods would be successful, but other cases proved fruitless, she said.
The threat of foreclosure seems to be the county’s most effective weapon, but until recently, the county hadn’t moved to foreclose on a property since the early 1980s, she said.
Counties have the authority to foreclose on properties in order to collect back taxes — effectively seizing the property and auctioning it off.
The change to a more aggressive tax collection strategy began in June 2011 following a push by the county commissioners, who directed tax collectors to utilize all tax collection tactics that exist, said Wooten. The new approach employs options already at the county’s disposal but put the weight of the commissioners behind the action.
“For a year plus, we have been doing foreclosure activities that we haven’t done in the past,” Wooten said.
Property taxes account for about $31 million out of the county’s total $52 million budget.
Jackson County’s collection rate on property tax is about 95 percent, Wooten said.
“The higher the collection rate: the more we can budget,” Wooten said.
Jackson County’s 95 percent collection rate is below the statewide average for counties of 97 percent. But, Jackson’s rate is on par with other counties of its same population size.
A letter in the mail
As part of its more aggressive collection approach, the county is contracting with two local lawyers who are paid $200 per hour for their collection work. The cost of collection is in most cases tacked on to the bill owed by the delinquent taxpayer, however.
The county has spent $135,700 on attorneys fees to collect back taxes so far, but most of that will be recouped, Wooten said.
The county first brought the Sylva law firm Ridenour and Goss on board in June 2011. Six months later, the county added another attorney, Kim Lay of Melrose, Seago and Lay, to pursue more delinquent accounts.
Jeff Goss, of the law firm Ridenour and Goss, which has elicited the majority of the $1.2 million in delinquent tax payments,. The first step is sending a letter to the person responsible for paying the taxes, said Goss.
The letter details the amount owed and explains legal fees may be added to that tax bill, which can surpass $1,500. The letter warns that if the amount is not paid by the end of the month, the county could take action, including foreclosure.
Goss said an ominous letter from a law firm is sometimes enough to prompt cooperation in some way from the recipient.
“There are only two things in life that are certain: death and taxes,” Goss said. “A lot of people get the letter and realize it’s something they need to deal with. Unfortunately, some people just ignore those letters and just stick their head in the sand.”
His firm has filed, or is ready to file, about 80 foreclosure suits.
A majority of those are large tracts of land owned by real estate developers, or properties where the owner has died and their heirs are unaware of the tax obligations.
The county has to petition the courts for permission to foreclose, and if granted, it is put up for bid in a public auction. The county gets a cut of the sale to cover what’s owed. The remainder goes to other entities with liens against the property, if there are any, and whatever is left over is returned to the property owner.
So far the county has gone through with foreclosure against six properties.
In two more cases, the delinquent taxpayer paid their back taxes on the very day of the proposed sale to avoid losing the property.
The foreclosure route to collecting back taxes isn’t always a popular move by elected officials, especially for those who may be subjected to the action, but County Commissioner Doug Cody said making people pay their fair share of taxes should be something the large majority of county residents can support.
“Foreclosure is the last resort,” Cody said. “But, it is something that has been done and will be done if all other avenues fail to produce the results.”
Foreclosure may be necessary to raise the revenue needed to run county government facilities and services such as law enforcement, education infrastructure, social and health services and pay county workers, Cody said.
“I think people ought to appreciate it,” Cody said. “The 95 percent that pay their taxes on time should appreciate the equal treatment that everyone is getting.”
The worst offenders
Many who top the list of delinquent property tax payers in Jackson County are real estate investors and big developers. Six out of the top eight delinquent property tax payers are real estate-related companies, and more than half of the top 20, according to a county list of delinquent taxpayers from July.
Collectively, developers and real estate companies among the top 20 owe a total of $311,000 in unpaid property taxes. The top two delinquent taxpayers are Cellars at Betty’s Creek, owing $63,000 for 65 unpaid bills; and Legasus of North Carolina, owing $35,000 for 47 unpaid tax bills.
Jackson County was at the center of the real estate boom in the mountains in the mid-2000s among speculative developers and investors. When the real estate market tanked, developers plans fell by the wayside — as did the property taxes they owed.