13 INVESTIGATES: Property Tax Sale - Alabamas13.com WVTM-TV Birmingham, AL

13 INVESTIGATES: Property Tax Sale

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Recently, counties around Alabama held property tax sales.

Private investors bid on properties whose owner does not pay their property taxes.

"It gives each county the authority to have these sales in order to provoke compliance with the tax code of Alabama," said Jefferson County Tax Collector J.T. Smallwood.

Jefferson County's tax sale is the largest.

About 4,500 were on the auction block here in Birmingham.

That included some very large property owners we profiled in a recent investigation.

The Jefferson County Racing Association, which owns the Birmingham Race Course, owed the County $409,918.

Nilkanth LLC, that owns a Holiday Inn off Lakeshore Parkway, had not paid another $112,841.

Emerald Parc Partners, the listed owner for the Oaks Apartments near Huffman High School, had yet to fork over $91,284 in property taxes.

Two of the five largest we highlighted were removed from the tax sale list.

The Forestdale Mobile Home Park, number two on our list, has filed a lawsuit challenging $131,974 in overdue fire dues.

CRF Gardendale LLC, which owns a shopping center on Fieldstown Road, paid its $66,505 tax bill in the nick of time.

Tax Collector J.T. Smallwood said they see investors from across the country.

When they successfully bid on a property, they do not own the property.

However, if the owner ever sells or refinances, they must pay the investor all the back taxes plus 12 percent annual interest on the bid.

"You can get the full interest off the excess bid up into 15 percent of the appraised value of the property," Smallwood pointed out.

We sat through hours of the tax sale to see which of the big properties investors would bid on.

An investor bought the Holiday Inn property's taxes with a $210,000 bid.

The Oaks Apartments' property taxes were sold for a $10,000 bid.

The Birmingham Race Course had no takers.     

In fact, only 353 of the original 4,511 properties on the tax sale list were 'sold'.

The Race Course and the other 4,158 parcels are turned over to the State.

So we drove to Montgomery to ask State Revenue Commissioner Julie Magee what happens to those other properties.

She says the properties are placed on the state's delinquent tax rolls, where they try to market them to private investors.

However, the more owners who fail to pay the property taxes not only hurt the tax base, but are adding more cost to the taxpayer.

"It costs us money to do this.  We have to pay advertising costs, tens of thousands in advertising costs, sometimes per county, annually for the state, because we are bound to provide notice and we have to provide notice in print advertising," Magee said.

Those costs are higher than ever.

Delinquent property advertising has cost the State $1.9 million over the last three years.

Right now the Alabama Department of Revenue is advertising 38,200 properties state-wide.

Magee said the combination of the April 27, 2011 tornadoes and the recession have pushed that number to an all-time high.

"The ultimate goal would be let us get our Alabama economy strong again so we have less defaults.  It helps the city and the counties with their revenue stream and it's less of an administrative task for the state to handle," Magee concluded.

So more of us paying our taxes mean less of our tax money the state has to spend trying to get it.

While most of the delinquent properties did not receive bids, May's property tax sale did help.

Last month, $6.8 million in property taxes had gone unpaid here in Jefferson County.

The tax sale produced $1.3 million in tax revenue.

About $225,000 of that goes to the County.

The other $1.1 million is distributed to cities and other local agencies.

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