Article:
Orange County property owners are skipping their property tax bills in growing numbers.
Fresh stats from the county’s tax collector show that a sharp uptick in tardy payments that we saw for the December 2005 tax installment was no fluke. This past December’s deadline was missed by 53,880 taxpayers owing on $111 million, 25 percent more tardy dollars than the previous year.
It means that 5.32 percent of the slightly more than $2 billion tax dollars due went unpaid. Late bills haven’t taken that big of a slice from the tax pie since 1996.
The two-year surge in late payments is a turnabout from years of falling delinquencies that paralleled the county’s hot housing market. Increasing frequency of tax delinquencies fits a pattern seen elsewhere in the now chilled housing market: Some folks simply can’t afford their property.
Last year, market watcher DataQuick found that bankers sent out 5,865 notices of mortgage defaults to O.C. property owners, 88 percent more than the year before. It was the largest year for these notices – the first official step toward foreclosure – since 1999.
The local economy still churns out new jobs. So you can eliminate unemployment as a key culprit in the late payment surge. I’d blame some shoppers’ appetite for homes exceeding the girth of their budgets.
Most long-time property owners are protected from tax surges by Prop. 13. Recent buyers, though, can get hit with property-tax sticker shock if they didn’t do all their homework during their shopping process.
Chriss Street, the county’s new tax collector who was previously a private investor and corporate turnaround manager, wasn’t horribly concerned about the uptick in late payments.
“From what I see, I’m surprised there’s not more stress,” he says.
He blames much of the increased tardiness on a wave of new homebuyers who didn’t understand how the property tax process works – from the size or timing of their tax bills. He thinks ignorance, not any financial inability to pay, led to many late payments.
“They had no idea,” he said of new taxpayers.
BOTTOM BOUNCE
It’s been two wild years for tax collectors.
Collections of first-installment dollars rose 20 percent since 2004. In total, payments are up almost a quarter billion bucks – a staggering sum that shows the financial muscle of many Orange Countians.
But missed property tax payments are rising at an even faster pace, percentage wise, jumping 82 percent in two years.
This eye-catching expansion of the dollars going unpaid is not just due to a handful of tardy payers with big bills. The count of taxpayers missing the t
The tax collector’s bill mailings grew by 3 percent in the last two years. Yet 34 percent more owners failed to meet the December deadline this past year vs. 2004.
In many ways, 2004 was housing perfection. A strong selling market and cheap money meant most owners’ financial problems could be fixed with a sale or a refinancing.
Not today, though, when sales are sluggish and loans are somewhat pricier and harder to get.
The result? A bounce up from somewhat unsustainable low levels of house payment problems.
FIVE-YEAR ITCH
Watching tax collections can be an art. So caveats are in order.
Tax bill payments can be part of property owners’ financial planning. This can impact the timing of tax-bill payments.
For those in financial trouble – and being strategic about their shaky finances – the property tax bill may be one to skip.
Even though there’s a one-time, 10 percent penalty for late payments – plus ongoing 18 percent-a-year surcharges – the tax collector isn’t going to take a tax-delinquent property away any time soon. Typically, it can take five years from the first late tax bills before the county seizes a property. People in such straights are better off making the mortgage payment first.
“Everybody knows that,” tax collector Street says.
The income-tax game motivates some taxpayers to early payment of the second installment due in April. Usually, this means making two payments by year’s end.
The tax collector reports that slightly less than 12 percent of the tax dollars due in April are already paid. That’s the slowest early-pay pace in the 10 years of reports I have at my fingertips.
We will note that late house payments have been worse.
Mortgage defaults last peaked in 1996 at levels more than triple last year’s total. And tardy tax payments topped out in that ugly 1990s real estate debacle in 1993 at a pace one-third faster than 2006.
Street, the tax collector, isn’t convinced we’ll get back to those kind of sad days: “I just don’t feel it, from the conversations I’m having. Not yet.”
With late payers’ share of all bills now running above the county average since 1990, I don’t completely share his optimism.
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