The District came up more than $8 million shy of expectations during its annual property tax auction as conservative, skittish bidders refused to bite on more than 700 properties with delinquent bills.
The relatively unsuccessful sale, compared with previous years, leaves the District’s coffers millions short in a down economy when the revenues are most needed.
During the auction, held over three days this fall, the Office of Tax and Revenue sold the liens on 1,079 delinquent properties for a total of $10.77 million. In 2008, the office auctioned 1,366 liens and collected $21.3 million.
Unlike previous years, buyers in 2009 left hundreds of properties on the auction block. The 724 unsold liens account for $8 million in potentially lost tax revenue — owed from the 2008 tax year — that OTR would normally have collected through the sale.
Real property taxes comprise nearly 38 percent of all tax revenues collected annually by the District.
Richie McKeithen, director of the Real Property Tax Administration, blamed the economy for the poor showing. Bidders invested less money in fewer properties because they had less to spend, he said.
“The banks simply aren’t loaning money like they did in the past and many of the buyers get their capital to participate from the banks,” McKeithen said.
He also said bidders are leery of Class 3 vacant property, which was briefly taxed at $10 per $100 of assessed value until the D.C. Council rolled the rate back this summer. He was unable to say how many of the 724 delinquent properties were Class 3.
“I always thought the $10 rate was ill considered, and in the end it proved to be a bad idea,” at-large Councilman Phil Mendelson said Friday.
The 724 unsold liens do not include 4,000-plus properties with back-tax bills of less than $1,200 that the District opted not to offer at auction. That decision will cost D.C. coffers roughly $1 million unless the property owners pay up voluntarily.
“What we’re going to do is continue to accrue taxes, penalties and interest on these properties and they will naturally roll into the next tax sale,” McKeithen said.
The $1,200 threshold spurred a lawsuit against the District and a court ordered delay of the auction, which started in September but did not end until early December.
