he Brooktrails Township continues to struggle with an unusually large number of property tax delinquencies, for fiscal year ’13-’14 a total of $178,356.49 was owed in delinquent taxes, from a total of 635 parcels. There are currently 316 parcels with a recoded power-to-sell in the District, meaning the county has the authority to auction them to recoup back-taxes, of those 110 are owned by one company, Tom Porter’s Deerwood Corporation.
Shari Schapmire, treasurer and tax collector for Mendocino County, explained that this density of delinquent parcels is unique to Brooktrails. In 2012 the Mendocino County Board of Supervisors determined the county was effectively subsidizing Brooktrails by collecting fees on parcels it could not sell in a tax foreclosure auction to the tune of $80,000 in unpaid fees each year. The board voted unanimously to suspend Teeter Plan payments for unpaid Brooktrails fees. In 2013, the board decided to take no further action on whether to remove Brooktrails from the Teeter Plan entirely. This move would have stopped the county from collecting and distributing property taxes through the Teeter Plan. The board formed an ad hoc committee to evaluate the long-term issues related to the future of Brooktrails Township but it sputtered out due to lack of consensus.
The Teeter Plan authorizes the county to pay all cities, townships, school and other districts their annual property taxes-whether the taxpayer pays or not. The county collects all property taxes and fees in the county. As long as everyone pays their taxes on time and in full, the county just collects the money and passes it on to the right agency. The Teeter Plan gets involved when taxpayers don’t pay on time or at all. When this happens the county still pays the other government agencies their full tax allotment, with the extra money being paid from the Teeter Plan account. The Teeter Plan account is paid back when the county collects on the owed taxes and fees plus a substantial amount of interest and penalties. After 5 years of unpaid taxes the county sells the property at auction and repays the Teeter account for the original taxes and fees plus penalties and interest. This works well as long as the properties sell at the tax auction.
The difficulties in auctioning Brooktrails parcels have led the tax-collector to no longer even try to auction them at the general auction. Schapmire’s office is planning to hold a special auction just for Brooktrails this year. There is also talk the county could hold an unusual “chapter 8” auction, using a different section of California law to allow the county to sell the parcels at a loss, not collecting all of the back taxes owed, but making some money and taking the parcels off their hands.
Schapmire and Brooktrails officials seem to agree in concept that eventually the solution may be a special negotiated sale of the delinquent parcels to the Brooktrails district itself, possibly at a loss, to remove tehm from the tax rolls altogether. Said Schapmire, “Here we’re selling them at public auction and keeping them in private ownership when really the best thing is to have Brooktrails Township as the owners.” Adding that she believes Brooktrails should have a thousand or couple thousand fewer parcels.
Keeping in mind that many of the parcels remain delinquent year after year for fiscal year ’13-’14 a total of $178,356.49 was owed, from a total of 635 parcels, for ’12’-13′ $165,850.99 was owed from 553 parcels, for ’11-’12 $277,061.12 was owed from 498 parcels, from ’10-’11 $279,779.36 was owed from 445 parcels, and from ’09-’10 $274,513.35 was owed from 402 parcels; ’08-’09 $254,631 from 344 parcels; ’07-’08 with $176,708 on 176 parcels showing a pattern of an increasing number of parcels delinquent over the years.
However, the removal of Brooktrails fees from the Teeter Plan has alleviated much of the urgency. “It’s not pressing for the county anymore because the county deteetered Brooktrails,” said Schapmire. Adding, “But we still need to do something.”
The county tax collector-treasurer is the property tax collecting authority for the whole county, receiving all property taxes, regardless of where they will end up. Once the county collects the taxes it then disburses the funds to cities, fire districts, school districts, special districts and all the other kinds of myriad districts that exist in California government. However, this means that for some part of the year the county is holding all the tax revenue.
The first disbursement of the fiscal year is 55 percent in December, followed by 38 percent in April and the last 7 percent in June, along with corrections. Whatthe Teeter Plan does is give the smaller municipalities-the cities and districts-a steady cash flow by having the county pay out the full amount of expected tax revenues, rather than what it actually collected.
So if a district has some property owners who failed to pay their taxes, the county will make up the difference, and the district will have its full expected revenue. The county with its much larger budget, and with the special provisions of the teeter plan in place, can afford to make up these shortfalls, where a smaller district, like a fire district, might just have to cut its budget back.
In return the county gets to collect the penalties and interest on delinquent taxes. This makes the arrangement ultimately profitable, or at least sustainable, for the county. Most people will eventually pay their taxes, or sell the parcel to someone that does. With a 10 percent initial penalty, and an 18 percent interest penalty thereafter the county also stands to make a bit of money by playing banker to the municipalities, that is if the taxes get paid back.
And if they taxes aren’t paid for five years the county records a power-to-sell, auctioning off the parcel for at a price that at least matches the back taxes and interest. This system works well across the state, under ordinary circumstances, but when a large number of properties default at once, and when they cannot be sold, a situation arises in which the county is regularly paying out tax revenues to a district beyond what it can collect, with no hope of ever being able to make up that shortfall-a de facto subsidy.
This was the situation that Brooktrails found itself in during the recession. A variety of factors combined, most importantly the weak housing market and the persistent water connection moratorium imposed by the Water Board, making many Brooktrails parcels impossible to develop and very difficult to sell. With no hope of selling parcels, or building on them, hundreds of property owners simply stopped paying property taxes.
Yet the county kept paying out money to Brooktrails for those parcels. The gap amounted to a subsidy from the county to Brooktrails, and was deemed untenable by the county, potentially threatening the whole Teeter plan. “We started figuring out that we were unable to sell Brooktrails parcels at public auction…and we knew that there a was going to be more and more…so now what happens is the county does not Teeter brooktrails.” This means Brooktrails only receives the fee revenues that are actually paid in.
However, in recent years Deerwood has been managing to sell some of its parcels again, dropping down from 150 delinquent parcels two years ago, to 110 this last recorded tax year.