The East Baton Rouge Parish Redevelopment Authority spent $300,000 this year to scoop up tax certificates on 21 properties — with an estimated market value of close to $60 million — in an effort to build revenue for the group’s main mission, the fight against blight.
The owners of those properties had failed to pay their 2012 property taxes, and RDA obtained the tax certificates at a summer online auction.
The properties still belong to the owners, who have three years to pay the back taxes, penalties and interest to redeem their properties. Walter Monsour, RDA president and CEO, said the interest is 1 percent a month until the principle is paid.
RDA will take ownership of any properties not redeemed.
By purchasing the tax sale certificates, the RDA pays the back taxes to the city-parish and, if the properties are redeemed within three years, gets the back taxes refunded plus the interest and penalties.
Monsour and RDA Land Bank Project Manager James Anderman said the 21 properties were chosen based on factors such as market value and the probability they will be redeemed. Monsour said 93 percent of the properties sold at tax certificate sales, on average, are redeemed within three years.
Monsour said two of the 21 properties have already been redeemed.
One is the personal home of Baton Rouge real estate developer J.T. “Tommy” Spinosa, who had failed to pay $15,000 in property taxes for his South Lakeshore Drive home.
Just before 3 p.m. Friday, a spokesman for Spinosa, Jeff Wright, said Spinosa paid the overdue taxes earlier in the day. Wright blamed miscommunication for the late payment.
Anderman confirmed Spinosa’s taxes had been paid Friday.
Monsour said the tax certificate strategy is just one part of the authority’s Land Bank program, which is modeled after the Genessee County Land Bank in Flint, Mich.
The Michigan land bank was established by Congressman Dan Kildee, a former Genessee County official, in an effort to flight blight in the Midwestern city.
Frank S. Alexander, a law professor at Emory University in Atlanta and a nationally recognized expert on blighted and abandoned property, said RDA’s plan to buy tax certificates is one that has been an effective tool to generate revenue in Michigan and Ohio.
“The practice is one that helps make the local government whole by paying the back taxes plus generating a potential revenue for the authority,” Alexander said.
The RDA, created in 2007 through state legislation, started operating in 2009.
The legislation, written in part by Alexander, gives RDA an advantage in purchasing the tax certificates on delinquent property. RDA bids take priority over all other bids except for a higher bid submitted by the property’s mortgage holder.
“The reason the legislation was created in the first place was to create a revenue stream for the RDA so that money could be put back in the community for the public good,” Monsour said.
According to the legislation, any revenue that comes to the RDA must be used for the authority’s mission to fight blight in the community.
Monsour said the legislation may crowd out land speculators looking to personally profit from the tax certificates. Such speculators aren’t forced to put the money they make back into the local community, he said, and in all likelihood, won’t.
Metro Council members John Delgado and C. Denise Marcelle both said RDA’s tax certificate strategy seems to be a sound one.
“If it’s generating money for the RDA, it’s a good thing,” Delgado said Friday.
Marcelle said she likes the idea because it may force some property owners to pay their taxes.
Anderman said RDA waited until 2013 to pursue the tax certificates after studying the process and creating a strategy over a two-year period.
“We wanted to make sure that we understood the trends and had a good handle on the locations and market value,” Anderman said.
The $300,000 used to buy the tax certificates was taken from a $4.5 million grant the RDA was awarded in 2010 from the East Baton Rouge Mortgage Finance Authority.
There is no dedicated funding source for the RDA.
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