July 7th, 2018
Abandoned, blighted property is a huge drain on a community. Not only does it look bad when an unused building falls into disrepair or a vacant lot gets overgrown, it costs the community money. Sometimes that cost is in maintenance or repairs the government has to invest to prevent a safety hazard. Other times it is the lost tax revenue from the property.
Earlier this week, the Rapides Parish Police Jury’s Parochial Board Liaison and Legal Committee approved contracting with Civic Source, a New Orleans-based company that specializes in auctions of tax-distressed real estate on behalf of parishes and municipalities across the state. The issue will need approval from the full Police Jury before it takes effect.
We see this as a good move and encourage jurors to support the proposal.
A current estimate put the number of adjudicated properties in the parish at about 4,000. “If we put 100 to 200 pieces of property back into use, where somebody is paying taxes on them and somebody is maintaining them, that’s a win,” said Police Jury legal counsel Greg Jones.
But wait, some may say, if the government can seize property for failure to pay, why don’t they just auction it themselves? Why engage an outside company? Isn’t that what Sheriff’s sales are for?
Short answer, yes, governments can do it themselves. But the problem is, it’s a lot more complicated than one might think and often the seized property doesn’t sell.
Buying property at a tax sale is inherently risky. Governing bodies do their best to find the property owners, or the rightful heirs in cases where the property owner has died, but its not that uncommon for a property to be sold and then the rightful heir or owner comes forward.
Under Louisiana law, there is a three year window in which the property could be reclaimed. So buyers have that issue to deal with. But even if that isn’t a problem, real estate acquired through tax sales can face title issues. And if a buyer can’t secure a clear title they are less likely to buy the property.
Doing all of the necessary due diligence work on the front end is costly and time consuming. Contracting with a company that specializes in such minutia and has an established reputation with other communities in the state makes sense. Larger areas, including New Orleans, Lake Charles and Shreveport, have chosen to use Civic Source as well.
Using an established broker hosting online auctions also expands the base of potential buyers. There are many regional and national investors who look for tax sales and are willing to take the risk of purchasing a property for the past due taxes in the hopes that they can fix it up and sell it at a profit. That’s a win-win, for the investor and for the community that sees its property values increase and the government regains its recurring tax revenue. Sites that aggregate tax sales are a natural place those investors will check regularly. And, with the online auction system, potential buyers initiate the sale and cover associated costs — so the process costs local governments and taxpayers nothing.
In Shreveport, which last year had an estimated 1,000 adjudicated properties when they contracted with Civic Source, the estimate was $250,000 in new revenue from the program. With the financial challenges currently facing Rapides Parish, bringing in outside expertise to help get blighted property back into productive use and generating revenue without adding to the burden of local taxpayers sounds like a good plan.