By By JOHN EBY / Dowagiac Daily News
In 2006, Cass County Treasurer Linda Irwin's office took on the property tax sale, realizing $240,642 in August.
Previously, the tax sale took place in Lansing and was conducted by the state Department of Natural Resources (DNR).
"The Board of Commissioners and I decided we would bring it back," Irwin told Dowagiac Rotary Club Thursday noon at Elks Lodge 889, "because when the state held the tax sale, the county was made whole for only the delinquent taxes. The state kept the profits. When we brought it back, after the delinquent tax revolving fund was made whole at our first sale, the county kept the $140,000 profit."
Irwin said that money sits in a restricted fund for two years to run the tax sale.
In 2008, the Board of Commissioners has the option of transferring whatever money is left in that fund from the 2006 sale into the general fund.
Irwin said proceeds of this summer's tax sale can be transferred in 2009.
"You have to reserve the funds for a certain amount of time in case there's any litigation that arises from the sale," she explained. "That's going to be good news for Cass County, that we'll be able to keep those profits.
"The state made approximately $1 million from Cass County in the five years it held the tax sale."
Irwin added, "Right now there are no counties in Michigan opted out. They've all opted in as of this year. All counties are holding their own tax sales. There were 13 that have now opted in."
Irwin said while the tax sale is profitable in Cass County, the DNR likely absorbed a loss elsewhere. "There are other counties where it lost big money," she said. "They use the whole pool to make everybody whole. Our profits went to people in Detroit and Saginaw, where the houses are horrible and they have to tear them down. In smaller counties the real estate is worth money. It's not all blighted properties."
The sale does not reduce the tax bite because "we can't count on this money. We can't budget for it," said Irwin, who was appointed county treasurer Oct. 1, 2002, elected in November 2004 and is a daughter of a former Dowagiac treasurer, Marcia Pruett. "We don't know how many people aren't going to pay their taxes."
She detailed the process, which starts with forfeiture of a parcel.
"That gives you one year to redeem that property before it's foreclosed on," Irwin said. "When we forfeited the properties in 2005, 567 were forfeited and only 50 went to sale. Most people redeem their properties."
Retired superintendent of schools Larry Crandall asked Irwin about non-residents who file for homestead exemptions which mean the difference between paying 18 mills and six mills of school operational tax.
"We have a very active program in Cass County which I personally do," Irwin answered. "I have been to the Tax Tribunal 15 times when people object to my taking their homes. I'm happy to report that I've won all 15 times. The county has transferred around $45,000 because the county keeps a portion of the interest – not what goes to the schools. The schools are made whole."
Irwin said she can run a computerized report that shows where every homestead tax bill is mailed in the county.
"If you have a homestead in the county and your tax bill's going to Illinois, Indiana or Maryland, I've got to kind of figure you don't live here. That's where I start. I send a letter pointing out that their tax bill is being mailed out of state. 'I need from you copies of your Michigan income tax return for the present year and three years back. If you can't provide me with that in 30 days, I will take your homestead and bill you for all those back taxes.'
"We have sent bills out to taxpayers in excess of $20,000 for four years of taxes," Irwin said. "I've found that there are a lot of them out there and some of them are real creative. After I take their homestead, they go to their assessor and file a homestead affidavit which they sign under penalty of law that they live there. I check on the Board of Review when it comes through our office and I look and see homesteads that were just taken away. I write and he sends me copies of his Michigan driver's license and voter registration, which you can get if you have a Michigan address. You show me your Michigan income tax return and prove to me you're paying taxes in Michigan. I had one person say they would file those Michigan income tax returns to get that homestead. It cost her $22,000, but she got her home back."
Conversely, "We also find people who should be getting the homestead exemption who are not," Irwin said. "Those people love me when I call them up and say, 'We owe you $3,000.' "
Crandall said he learned by building a new home three years ago that the homestead exemption paperwork is not filed automatically.
Fortunately for him, he was familiar with the process, noticed the discrepancy on his tax bill and was able to quickly rectify his new home being charged at the non-homestead rate, which is three times more – 18 mills versus six mills.
"You're entitled to a principal residence exemption," she agreed. "That makes you not responsible for 18 mills of school tax. If you don't live in Michigan, you fund the schools," because of Proposal A, which shifted from property tax to a sales tax boost from four percent to six percent.
"We all pay six mills and debt, if the school has one," she said. "But residents don't pay 18 operational mills."
She said land contracts need to be recorded to claim a homestead exemption.
"A lot of people don't want to record land contracts because then the cap comes off and they have to pay more taxes," Irwin said.
Crandall added, "The six mills for school operations does not go locally to the Dowagiac schools. It goes to the state. All the people who have a second home pay the non-homestead rate of 18 mills. That money also goes to the state for K-12 only, then the state divides that money out and sends it back to all the schools. It has no effect on (Southwestern Michigan College)."
Irwin said title searches are done on every parcel, with notices sent to anyone who ever had an interest in the property – "even if you sold it 35 years ago on a land contract. I've even gone so far as to go out to people's homes where I thought maybe they didn't understand and personally talked to them.
"At the very end, when we're getting close to the foreclosure, I run a report. If any have a homestead and I know somebody lives there, they'll get a personal visit from me to make sure they can read. We notice these people a tremendous amount of times by certified mail and personal service. We pay someone to go out and post every parcel with a sign pounded into the ground, so their neighbors can see it if they're not there. And it's published in the paper. We go to extreme lengths to try and contact these people. When you take back the tax sale at the local level you have the ability at a show-cause hearing (required to be one hour, but she holds them all day). If you were laid off and don't have the ability to pay these taxes, but you don't want to lose your home, I can set you up with a payment program. I have the ability to withhold that parcel from sale.
"I take partial payments," Irwin continued. "I work with people because getting those taxes paid is the goal. The goal is not to make a big profit, but to keep people in their homes. It's more personal at the county level."
Irwin was asked about property owners with a residence in one state under the husband's name and the other one under the wife's name.
"That's not legal," she said. "If you know of any at Sister Lakes, let me know. I have caught several of them. If you have a homestead in Illinois or a homestead in Florida, you can't have one here if you're married and file a joint tax return. They could if they filed separately, but I have to see that tax return. That's how they prove it to me. Guess what? Not one of them has."
Irwin also explained the process of "making whole" local entities. Taxes can be paid until the end of February. "Rolls are turned over to us March 1. We make every unit whole – schools, city and townships.
"Say the City of Dowagiac billed out $2 million in taxes for operations," she said, "and $400,000 of that came back delinquent. I pay them that $400,000 so they can operate" from the delinquent tax revolving fund the county established in the mid-1980s, which has built into the past two decades into more than $5 million. It was tapped to construct the Law and Courts Building and to make bond payments and to maintain the courthouse.
"Our payoff every year to make all the units whole is about $3 million," Irwin said. As that sum is repaid, she invests it and draws interest.
"Every year has its own fund," Irwin said. "When 2002 is sold at tax sale, we have a 2002 delinquent tax account. When all the funds are made whole, that spills into the parent account at the top, so there are a whole bunch of little funds that have more money in them. The parent account has in excess of $5 million, but we'll be using about $3 million of that in May to pay off the units."
Retired Judge Herbert E. Phillipson, who hired Irwin to work in court system when she first joined the county, credited Rotarian Harlan Lyle for the county investing funds, which at one time languished in bank accounts.
"When an investment matures," Irwin said, "I go out, for lack of a better word, bids. Keep in mind, only 40 percent of the county's funds can be tied up in one institution. The banks are pretty close on their investment rates. I put the funds in the highest yield I can get, but it also has to be a secure investment. We can't invest in the stock market. We can't invest in anything where we could lose the money. It has to be a safe investment. We invest in CDs (certificates of deposit) and commercial paper. Right now I don't have any commercial paper. Because of the way the market is, I'm investing in CDs and going out as long as I can to get the best interest rate because interest rates are starting to fall a little right now. Most county funds aren't in vehicles that are longer than 12 months because we have to have money for cash flow."
"I think you should come to my house and take care of my check book," remarked Rotarian Marilu Franks.