Memorandum
Date: March 11, 2025
To: The Honorable Lake County Board of Supervisors
From: Patrick Sullivan, Treasurer - Tax Collector
Jenavive Herrington, Auditor - Controller/County Clerk
Subject: Discussion of Delinquent Property Taxes including (a) Impacts of Tax Defaulted Land Sale (TDLS) Deficit Sales; and (b) Development of a Low Value Ordinance
Executive Summary:
Impacts of Tax Defaulted Land Sales - Deficit Sales
Due to the prevalence of low value properties and other properties where taxes, coupled with direct charges, exceed the sale price of the property, there is an approximate $4 million tax sale deficit this year. These deficits occur when the minimum bid necessary to cover all taxes, direct charges, interest and penalties is reduced to the point where the property will actually sell. By the time a property becomes eligible for tax sale after 5 years of delinquency, the balance owed in an individual tax year can already have effectively doubled. With low value properties, that balance can quickly exceed the actual value of the property. This results in balances owed to agencies that will ultimately be uncollectible.
Approximately $2.6 million originally fronted by the County will be recouped from agencies during the apportionment process. The growing inventory of low value properties and increased frequency of high-volume deficit sales will continue to grow the potential for large deficit sales, and potentially preclude a sufficient number of non-deficit sales to provide necessary offsets to balance these apportionments.
Low Value Ordinance
The Assessor-Recorder, Treasurer - Tax Collector, and Auditor - Controller’s office have all been in involved in discussions to develop a low value ordinance. There are approximately 8 counties remaining that have not passed a low value ordinance. Once the costs of delinquent enforcement is considered, the inventory of low value parcels in Lake County creates an untenable situation. Costs to take a property through the tax sale process can range from $500 - $700, in addition to staff time and resources that have to be redirected from other activities.
In a recent tax sale only 22% of properties offered received a bid. When looking at data from 2022, delinquent properties worth less than $5,000 constituted:
- Approximately 22.4% of parcels;
- Only 0.8% of total tax bill (taxes and direct charges);
- Only 0.25% of base tax billed;
- A current delinquency rate of 34%;
- 74% of tax defaulted inventory eligible for sale.
Even with the unsustainable pace of tax sales at 1,000 properties per year, the inventory of auction eligible properties under $5,000 continued to grow both numerically and proportionately. The workload associated with each tax sale spans 2 - 3 years, which has a compounding effect. In comparing 2022 to 2024, the number of 5+ year defaulted parcels increased from 74% to 78% of existing inventory, with an additional 401 parcels.
If the County does not pass a low value ordinance, ultimately this will result in massive volumes of deficit sales, as previously discussed. These sales lead to increased workloads for both the Auditor-Controller and Treasurer-Tax Collector’s offices, while at the same time realizing little value for the County and other entities. A low value ordinance set at $5,000 for secured taxes would bring our inventory in line with best practices throughout the State.
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Recommended Action: Provide direction to support development of a low value ordinance.