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Hartford Quickly Sells $12 Million In Tax Liens

JEFFREY B. COHEN

August 31, 2009

HARTFORD — - Former City Manager Saundra Kee Borges admits that she was a few months late on about $3,600 in 2007 real estate taxes.

But when she went to pay the bill on her Terry Road property in June, the city told her that it had already sold her lien to an outside tax collector — roughly four months after the bill was technically overdue. She paid, but the whole thing left her confused. Because when she managed the city, it sold liens — just not new ones.

"They had to be at least three years old, or it was a logistics nightmare — for this very reason," Kee Borges said. "You're selling something that's so new that you haven't had a chance to catch up with yourself."

More than $17 million in property taxes due the city last year became delinquent on Feb. 2. In June, the city started selling anything that wasn't yet paid. In three separate tax sales, the city sold more than 2,300 liens valued at a total of nearly $12million to two outside tax collection agencies. Roughly half of those liens were on properties that had previous liens. The other half, though, were first-timers.

"Some of the urban centers, Hartford and others, may need to move more quickly as Hartford has done … because the state of their revenues coming in are not too good and they have to take severe actions in order to create some kinds of revenue," said Kevin Maloney, a spokesman for the Connecticut Conference of Municipalities. "I suspect Hartford may be moving more quickly than others."

In lean years, cities like Hartford have to figure out how to keep the money coming in. Tax lien sales like this allow the city to take the upfront guaranteed cash while forgoing its ability to collect on interest in the future. It's a process that has, on the whole, worked well, says Tax Collector Marc Nelson.

"The main story that I see when I look at the list is the wide variety of entities and individuals who are, many of them for the first time, facing extraordinary challenges," Nelson said. "I think it's a sign of the times."

There are higher value liens — $2.4 million at Cityplace (which has since been paid); $56,000 for condominiums at Bushnell on the Park; $378,000 at the Crown Plaza Hotel; and more than $100,000 for one of the city's biggest apartment owners, the Marks Group. There are smaller liens — more than half of the liens sold were valued at under $3,500, including the $2,600 owed on The Pantry, a small Capitol Avenue restaurant.

"Yes, I am late on taxes," said Miguel Matos, the owner of the building that houses the Pantry and the city's director of grants management. Matos — who makes $93,000 a year — owns the property; his niece owns and runs the restaurant.

"It's just a tough time to keep the rents coming in," said Matos, adding that he set up a payment plan to clear the taxes after being contacted by The Courant. "One of the reasons we're behind is we've been trying to help her out in keeping the restaurant open. Everybody's in the same boat, and all of us are trying to catch up."

Taxes included in this lien sale are relatively young — the second installment came due in January, and the taxes were officially delinquent by February. Nevertheless, Nelson said, property owners with delinquent taxes should be well aware of it. The city has sent out numerous letters, some printed in Spanish and English. They were also informed, by mail, that the city would be selling their liens.

The first batch was sold for about $6 million to Xspand — one of Nelson's prior employers — and consisted of more than 1,000 liens on properties with no prior liens. Because these liens are considered fairly collectible, the city sold them at nearly full value, Nelson said. Xspand hopes to profit, then, off of the 18 percent annual interest allowed by law.

"They are willing to enter into reasonable payment plans with taxpayers," Nelson said, calling it "extremely unlikely" that the firm would begin foreclosure actions within a lien's first year. "They don't want the property, they're not seeking to foreclose. They're there to benefit from the interest rate."

American Tax Funding LLC bought the second two batches of liens, Nelson said, on properties that have had liens on them before.

The question of how soon to sell a lien is a complicated one. Waterbury says it doesn't sell liens in bulk anymore because, the last time it did so, it wound up in a protracted court battle. Other towns and cities have some criteria for selling the liens — like only selling those on the books for three years or worth more than $10,000.

But such thresholds could open up the city to criticism that it selectively sells its liens, Nelson said. He's happy with how the city has handled things, if not with the current state of affairs. The city, he says, knows taxpayers are hurting.

"It's like this: I don't have the money, see?" said Thomas Armstrong, owner of the North End's Rajun Cajun restaurant, who owes more than $14,000. Any money he did have he's given away to people who need it, he said. And any money he expected from the federal government hasn't come to him or to the city's North End. "What do you want me to do? I don't have it."

"In the North End, it's not a recession," Armstrong said. "It's a depression in our community and there's no one speaking about it."

Then there are those who say they want to pay. They just haven't done so yet.

Like real estate agent and former state Rep. Clyde Billington, who owes on various properties but has been in and out of the hospital. And developer Carlos Mouta, who says his nearly $88,000 lien on 30 Arbor St. is the product of a clerical error and will soon be paid.

And like Jose Reategui, of Rego Realty, who owes tens of thousands of dollars on various properties. "I did a business decision that didn't go my way," Reategui said.

Besides, sometimes even if he has to pay 18 percent annual interest, his money could be making more than that elsewhere, he said.

"We make a decision to wait, but we're getting current," he said. "We'll be done by next month."