Every November, dozens of people gather in a courtroom at the Cabell County Courthouse for the county's tax lien sale.

Up for bid are the delinquent tax tickets for hundreds of properties. Some fall into the sale because their owners are unable or unwilling to pay their taxes on time. Other properties are simply abandoned.

For Cabell County and its levying bodies, the tax lien sale works as it is intended. Taxes are paid on a delinquent property, funneling much-needed revenue into the coffers of the school district and county and local governments.

But for Huntington's rapidly deteriorating housing stock, a tax lien sale can be its worst enemy.

"Very rarely is there a happy ending for a piece of property that ends up in a tax lien sale," said Tom Bell, Cabell County's chief tax deputy. "These are properties that people have walked away from because they have little or no value."

And most of the time, they fall back into the hands of people who already have abandoned them or a land speculator who is looking for a quick profit rather than a home to redevelop.

Neither outcome helps the city's vexing problem with its housing stock.

The city's Unsafe Building Commission ordered the demolition of more than 80 homes since last year, and another 220 have been labeled as fire-damaged, unsafe or in need in major upgrades. City housing inspectors say there are probably hundreds of more homes that they have not inspected yet or are a couple years away from disrepair.

It's likely that many of these properties will eventually appear at a county tax lien sale.

A slow-moving process

A piece of property is put up for auction at a county's annual tax lien sale if the taxes on it are delinquent for the previous year. At the sale, people bid on the tax lien, or the tax debt on the property, not the property itself. The minimum bid must cover the taxes for the previous year and the current year, Bell said.

The money collected from the minimum bids is disbursed to the county and its levying bodies. Any amount that a lien holder bids above the minimum price is placed into a separate account.

If a lien is purchased at a tax sale, the original property owner has 18 months to pay the taxes plus 1 percent interest per month. That money, including the interest, is then given to the lien holder. The lien holder also gets back any amount bid above the minimum price.

"It's a process by which the lien holder can receive a pretty good return on their investment," Bell said. "I don't know of too many places these days where you can get a 12 percent annual return."

If the original property owner, however, fails to pay the taxes within 18 months, the lien holder has the option of taking title of the property or forfeiting his or her bid and returning the property to the original property owner.

"When it reaches this point, it has been three-and-a-half years from the time that the original property owner stopped paying their taxes," Bell said. "The whole process is crazy, because we're teaching people to not pay their taxes. People call in all the time asking what the last day is to pay their taxes before they can lose their property.

"In the meantime, nothing productive is happening with the property."

The tax foreclosure process can take even longer if a property lien goes unsold at a county sale. In that case, it is sent to the state auditor's office, which gives the original property owner another 18 months to pay the taxes before the property falls into a statewide delinquent tax sale. If the property lien is purchased at the state sale, the original property owner has another 90 to 120 days to redeem the property before the title is transferred to a new owner, said Russ Rollyson, a deputy state auditor who handles delinquent real estate.

"If the property is not sold at a delinquent land sale, then anyone can walk into our office and make us an offer," he said. "That happens a lot, too."

Buyers motivated by money, deals

Tax lien sales attract different people for different reasons, but there are generally three broad groups, Bell said.

The first, and largest group, is out-of-state investment companies looking to make a quick profit, he said.

These companies have no interest in acquiring real estate, Bell said. Instead, they purchase a large number of delinquent tax tickets at a sale in hopes that the property owner will pay taxes months later so they can collect interest.

"All these companies are looking for is the 12 percent annual return on their investment," Bell said.

At the county's 2006 tax sale, 501 tax tickets were sold. Of those, 121, or 24 percent, were purchased by Sun Rise Atlantic LLC, an investment company based in Atlanta. Thirty other tax tickets were purchased by a group listed as Sass Muni V DTR, which, according to the Cabell County Clerk's Office, is an investment company based in Philadelphia.

Requests for comment were sent to representatives of the companies and others that purchased tax tickets at the 2006 sale but not returned.

Landlords looking to acquire rental property at a bargain basement price comprise the second group that regularly attends tax sales, Bell said.

"Their thinking is that if they can end up with an undesirable piece of property for a couple thousand dollars, then they can turn it into rental property and make their money back within a few months," he said. "After that, it's all profit."

Sprinkled among investors and landlords are average citizens looking to acquire a specific piece of property, Bell said. It might be a side lot they are looking to buy or the dilapidated house next door that is dragging down the value of their own home, he said.

"They have to up their bids considerably to ensure they get the property," he said.

Fixing the problem

Tax lien sales are increasingly becoming the death knell for communities with dilapidated housing problems, particularly those that have dealt with massive job and population loss, said Dan Kildee, chairman of the Genesee County Land Bank Authority in Flint, Mich.

Kildee was one of several local government officials who convinced the Michigan Legislature in 1999 to overhaul the state's tax foreclosure system. Tax lien sales that often mired properties in a legal limbo for as long as seven years were eliminated and replaced with land bank authorities, public-private partnerships that acquire tax-delinquent properties and redevelop them.

"Local officials all over the country struggle to make the tax lien sale process work for them, but it's a 19th century system designed for an agricultural economy that is being applied in a 21st century environment," Kildee said. "It places a much higher value on the few dollars you collect through a tax lien sale and no value at all on the condition of properties after they are sold.

"My advice is to explore every legislative option to avoid mortgaging the future of a community for a few dollars on the front end."

Huntington Mayor David Felinton said the city has explored the possibility of a land bank that would be managed by the Huntington Urban Renewal Authority. In theory, the land bank would encourage property owners to hand over condemned or demolished properties so it could redevelop them.

Felinton hopes to have a policy implemented by the end of the summer, though there are significant challenges, he said.

"The immediate concern is that if the city gets involved in owning real estate, we suddenly become responsible for maintaining that property," he said. "We don't have the best track record of providing maintenance."

Jim Hunt, past president of the National League of Cities and a Clarksburg city councilman, agrees that West Virginia's tax foreclosure system requires sweeping changes. But pooling the political will to make those changes won't be easy.

"West Virginia has always leaned heavily toward the rights of the property owner," Hunt said. "On the other end of the spectrum is rundown, abandoned housing and the negative effect it has on the neighboring community.

"I'm not saying let's become Big Brother, but local governments definitely need to be more aggressive in going after these properties."

As a short-term fix, state lawmakers should shorten the amount of time delinquent taxpayers have to redeem their property after a tax lien sale from 18 months to 6 months, Hunt said. However, that still doesn't provide a guarantee that anything positive will happen to a piece of property, said Rollyson, the deputy state auditor for delinquent real estate.

"Expediting the tax lien sale process will not necessarily resolve the problem," he said. "You can't force someone to buy or redeem a piece of rundown or abandoned property."

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