Unpaid real estate taxes dip

Figures don’t indicate real estate upswing, expert says

— The sum of delinquent real estate property taxes in Benton and Washington counties decreased last year, but an authority on area economics said that doesn’t signal brighter days for Northwest Arkansas’ real estate market.

Delinquent real estate taxes dropped 16.4 percent in Benton County and 2.3 percent in Washington County, according to tax collectors.

Kathy Deck, director of the University of Arkansas’ Center for Business and Economic Research, said moreproperties went into foreclosure with the recession, which began in late 2007, and banks pay taxes on that property.

“It’s always wonderful news that people are paying their taxes, but this is not the piece of information that tells us we’ve turned the corner,” Deck said.

Selling prices for homes in the two counties declined by 10 percent to 15 percent for all of 2009, varying slightly from one city to another, Deck said. In December, however, prices rose by 6.2 percent in Benton County and 8.1 percent in Washington County.

“But there was a huge dip before December 2008,” Deck said. “So you have to pay attention to your starting point. ... With residential, we’re still seeing prices decline a bit year over year, but it’s getting worse more slowly.”

Property tax totals in the two counties increased in 2009, but that’s not necessarily a reflection of increased values, Deck said.

Amendment 79 to the state constitution capped the annual increase in property tax assessments at 5 percent for a taxpayer’s “principal place of residence” and 10 percent for all other properties. If the value actually increased by more than that during some years in the mid-2000s, it could take a few years of increases to make up the difference because of the cap.

Taxes on property assessed in 2008 were due in 2009 and delinquent if not paid by last Nov. 1.

Northwest Arkansas’ real estate market boomed before the bust. As a result, some developers were stuck with lots that were difficult to sell in a recession.

Four of the 10 largest Benton County subdivisions in default are owned by GaryBrandon of Springdale. Gary Brandon Enterprises owes $257,756 in taxes on 571 parcels in those subdivisions: Legendary and Charleston Park, both in Springdale; Versailles in Centerton; and Otter Creek Estates in Cave Springs.

Brandon didn’t return messages seeking comment.

Among developers in Washington County, William A. Lazenby of Fayetteville owes the most in delinquent taxes for 2009 - $101,682 on 173 parcels, according to the county tax collector’s office.

“When we get a loan to build a house, we go in there and pay the taxes,” Lazenby said. “We’re just building and paying the taxes as we go. We went from building 300 or 400 homes a year to building four - four houses!”

To keep up with demand in the mid-2000s, Lazenby said he bought large tracts of land that would accommodate 50-60 lots and developed the property. Then, financing for real estate and construction work all but stopped in 2007.

“It’s nobody’s fault,” he said. “You can’t point fingers at anybody. Nobody saw this coming. It shut off overnight.”

Lazenby said he believes the recession in the area real estate market could drag on for another five years.

He has three subdivisions: Miller’s Meadow in Fayetteville, and Oak Manor and Stokenbury Farm, both in Elkins.

Benton County logged $11.7 million in delinquencies in 2009 on total tax charges of $178.6 million. Washington County had $21.6 million in delinquencies on total taxcharges of $124.7 million.

For the past few years, the percentage value of delinquent real estate in Washington County has been about twice that of Benton County, but the tax collectors couldn’t say why.

“A lot of it went into bankruptcy, and the banks closed on that,” said David Ruff, the Washington County collector.

Gloria Peterson, Benton County’s collector, said banks usually just pay the taxes for one year, though.

If the state seizes property because the owner failed to pay taxes, it would be held for four years - two by the county then two by the Arkansas commissioner of state lands office - before being sold at auction.

But the owner usually pays the taxes before the end of those four years, said Bentley Hovis, chief deputy land commissioner.

“We don’t sell as much as everybody thinks,” he said. “The vast majority of it gets the taxes paid. The vast majority of it doesn’t see the auction block.”

Delinquencies could mean more money in the long run for cities, school districts and libraries, said Chris Villines, president of the Arkansas County Tax Collectors Association.

“It’s not necessarily a bad thing for the taxing entities,” said Villines, who also serves as the Saline County tax collector in central Arkansas. “The penalties involved are to the benefit of those entities.”

Arkansas Code Annotated 26-37-302 sets a 10 percent penalty for each year of delinquency and another 10percent per year in simple interest. That’s in addition to costs incurred by the county and the state land commissioner.

Northwest Arkansas, Pages 7 on 02/06/2010

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