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VOL. 128 | NO. 224 | Friday, November 15, 2013

Tax Dead Dilemma

Vacant properties causing headaches thanks to owed taxes

By Bill Dries

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The brick church at 299 Chelsea Ave. in North Memphis shows up in records at the Shelby County Assessor’s office as “vacant land.”

The old church at 299 Chelsea Ave. is among 1,400 properties in Shelby County that are considered to be “tax dead.” Estimated property taxes and city negligence fees total nearly $250,000 on the property.

(Daily News/Andrew J. Breig)

The technical status of the church, which dates back to the 19th century, is just the first indication that the property is not what it seems to be on several fronts.

Owned by Centennial Baptist Church and Institute Inc., the property is appraised for tax purposes at $3,000 but it is among approximately 1,400 properties in Shelby County considered “tax dead.”

Buying the property would involve paying estimated property taxes and city negligence fees that total nearly a quarter of a million dollars – $248,672.51 according to estimates provided by County Trustee David Lenoir earlier this year. All but $902 of that is negligence fees for city code violations and cutting the grass.

“That property will never be developed under the current situation,” said City Council member Lee Harris. “We have got to figure out some way to do something about that.”

Harris is cosponsor of a still-developing proposed pilot program with council member Jim Strickland on the city side.

It involves the city and county waiving, with conditions, what is owed in taxes and penalties, if the property is transferred to a community development corporation or a similar entity for redevelopment over a specific period of time. The time period is one of many details being negotiated by leaders in both governments.

Shelby County Commissioner Steve Mulroy is the commission sponsor and the county action is where the detail work is currently underway.

“The city is going to have to make a decision to waive those fees in addition to the prospective city property tax liability and county tax liability,” Mulroy said. “The law currently does not allow us to forgive that. The whole point of this … is to deal with that problem by basically providing a grant to a (community development corporation), which would then give that money to the county and then the tax bill would be paid.”

Lenoir estimates there are approximately 1,300 “tax dead” properties that could qualify for the “blight abatement program.”

This property at 750 Marble has estimated taxes and negligence fees totaling  $291,834 owed.

(Daily News/Andrew J. Breig)

Harris and Mulroy say putting the “tax dead” properties on the block at a tax sale is a process that takes too long.

“We’re trying to provide an alternative to tax sales. The tax sale process sometimes takes too long,” Mulroy said. “This would be an alternative to that where we could avoid the tax sale option.”

Lenoir, whose office recently reached an agreement with the city of Memphis to collect city property taxes as well as county property taxes, isn’t so sure the tax sales the way his office has been conducting them recently for the county would be too slow.

“The thought is it could happen much quicker than a tax sale. If everything lines up, that may be true,” he said of the emerging proposal. “But I still have a lot of questions as far as due process and proper notification, liability as it relates to if an interested party comes back and says I didn’t get permission to donate this property.”

Mulroy, a law professor at the University of Memphis Cecil C. Humphreys School of Law, acknowledges those are valid technical concerns.

“We’re thinking that we may not have to cross every “T” and dot every “I” and show every detail,” Mulroy said. “We just need enough detail that the (Tennessee) attorney general can evaluate it. If he approves it, then administratively we can add some more of those details as we implement it.”

But at a meeting this week with all of those involved in parsing the details, Lenoir said he wanted to make sure someone is doing more than signing papers without laying eyes on the properties throughout the process.

“I requested in that meeting that not one dollar be spent until the oversight and ongoing compliance of this was determined,” he said. “I think too many times we paint the ship as it’s leaving the dock and the next things you know one of these programs that sounds good really isn’t working that good.”

Harris, who is a colleague of Mulroy’s at the law school, said a transfer to a community development corporation solves three problems at one time with both local governments and is revenue neither government stands a realistic chance of collecting in many cases.

“It would be organized as a loan – a loan to the person getting the property. However, the loan is forgiven if over two years (the person) maintains the property – and by that we mean there are no citations,” Harris said. “If you didn’t maintain the property … then all that would happen is that loan would not be forgiven and it would end up being a lien on the property, the same lien we have now. … It would be back to where we are now.”

PROPERTY SALES 124 481 17,865
MORTGAGES 127 530 20,565
BUILDING PERMITS 195 891 36,836
BANKRUPTCIES 52 262 11,426