Buyers sought for town's biggest tax lien sale
Published 1:03 am, Wednesday, April 28, 2010
Fairfield is looking for some buyers for the largest tax lien sale in town history. There are 43 properties with delinquent taxes of more than $20,000 each, and the town is hoping to unload $1.97 million in tax liens to the highest bidder.
"Our expectation is that we'll get several bidders and then we'll select the most advantageous," said Stan Gorzelany, the Fairfield tax collector.
By selling the liens, the town can instantly receive the money that it has been trying to collect, while the highest bidder will have the right to collect the taxes with an 18 percent interest rate from the property owners as it sees fit, possibly through a foreclosure.
The due date for the request for proposals (RFP) to purchase the liens is May 20. After that, a contract will be worked out with the company that's selected. The goal is to have the money in town coffers by the end of the fiscal year on June 30.
Lien sales are typically offered when enough delinquent taxes are accumulated throughout town, as was the case in 1995 and 1996. The most recent sale took place in 2006 and totaled $738,000.
Gorzelany believes the economy is to blame for the recent number of delinquencies.
The value of the tax liens would have been even higher, but the Representative Town Meeting (RTM) voted to raise the threshold of delinquent taxes needed for a property to be included in the sale. Previously, the bar was set at $10,000. Now it's $20,000.
The money will help bolster the town's general fund in the coming years, and Paul Hiller, chief fiscal officer, said it will primarily help the town's AAA bond rating with rating agencies.
"We always knew [the money] was out there," he said.
In the request for proposals, a minimum bid of the total taxes and interest already owed to the town is specified. Gorzelany said that in the past, potential buyers would even bid more of the total value in order to get a piece of the continuous interest rates. He expects that the market for selling liens is good, but a bill that the legislature is working on to lower municipal interest rates from 18 percent to 12 percent could lower the amount of money the town might be paid.
When tax liens are sold, Gorzelany said there is no legal requirement for the town to notify the homeowners. However, he's mailed out letters to each of the property owners.
"There's no obligation to even contact homeowners, but we do it because we are trying to induce payment," he said. "By letting them know that they're being included in the sale, we're hoping that they make payment before it actually happens."
He said that while his department hasn't received any additional money it's owed, there have been several promises to pay.