County hopes for $9M advance on back taxes

Luzerne County property owners who owe back taxes should expect to hear from the county.

Hoping to raise an ambitious $9 million in revenue, the county plans to sell a portfolio of back tax bills owed on properties.

Interested companies figure out what they’d expect to recover and then offer the county an up-front payment – hopefully amounting to the expected $9 million, said county Budget/Finance Chief Sam Diaz.

When property owners pay, the full amount is then turned over to the company that buys the portfolio, giving the company a profit, Diaz said.

Even though the company is the party taking the risk, the county’s tax claim office will still be responsible for collecting the money and pushing property owners to pay, Diaz said.

He believes companies will have confidence in the county’s ability to aggressively seek the money because the tax claim office has streamlined records and become more efficient.

County officials had planned to hire an outside collection agency to crack down on scofflaws in 2005, but Diaz said the plan never got off the ground. County officials may revisit the use of a collection agency if the tax claim office isn’t successful in getting property owners to pay, he said.

Diaz expects the county will receive 90 to 93 cents for each dollar owed, although he won’t know until the county receives responses to a request for proposals. He calls the process “monetization.”

The portfolio would cover back taxes from 2005 through 2007, perhaps going back to 2004, Diaz said.

“We won’t allow the companies to red line or pick and choose which properties they want to take,” Diaz said.

People who owe back taxes get at least two years of leeway until their properties go to back-tax sale, and many of them end up finding enough money to stave off a sale at the last minute.

The county tax claim office will continue auctioning properties that have failed to pay back taxes, Diaz said.

County minority Commissioner Stephen A. Urban believes the $9 million revenue projection is significantly inflated, which could lead to another deficit.

Diaz has promised to update commissioners on the status of the initiative, although that task will fall to his successor because Diaz has accepted another job and will finish working for the county on Friday.

Urban has also questioned the accuracy of $70.3 million budgeted from current-year property taxes in 2008.

The county brought in $67.1 million last year, and new construction is only expected to generate another $587,300 in 2008.

On paper, the county has the potential to receive $77.2 million in revenue on $813.5 million in assessed property value this year, Diaz said.

To be realistic, Diaz said he knocked off 1.5 percent to cover abatements and tax forgiveness programs, such as Keystone Opportunity Zones, leaving $76 million.

Diaz then applied a collection rate of 92.5 percent to come up with the $70.3 million.

“Why 92.5 percent? We know there are people who can’t pay, and we know there are people who are not going to pay,” he said.

Diaz said he is also pushing tax collectors to hand in by the end of the year the roughly $1 million in property tax revenue collected in December, rather than holding it until January.