Agreement avoids tax foreclosure
By Angie Landsverk
Twenty vacant lots in a subdivision in Waupaca will be transferred to the city by the end of 2017 as part of a settlement agreement with the developer.
The Waupaca Common Council approved a Memorandum of Understanding with Waupaca County and a settlement agreement with Jerry Lyons when it met on Sept. 5.
The two votes followed a closed session on the subject.
The lots are in the Woodland Park Estates Subdivision.
Under prior development agreements with the city, Lyons owed the city $351,132 for special assessments on the lots.
He also owed real estate taxes on 11 of the lots.
Those taxes totaled $42,179. The interest on that amount totaled $18,263, which meant the total amount owed to Waupaca County was $60,442.
The city negotiated with Lyons to transfer the property to the city.
It also went before the county’s Finance Committee and county board to seek a Memorandum of Understanding.
“It puts a hold on the property taxes and interest on these lots. We made an agreement with the county that we will pay the county as we sell them. The county discounted the interest. It will get made whole as we sell the lots,” said Kathryn Kasza, the city’s finance director/treasurer.
She said under the previous development agreement with Lyons, he had until 2014 to sell and develop the lots in the third phase of the subdivision.
He had until 2016 to sell and develop the lots in the second phase, after asking and receiving in 2011 an extension for that phase from the city, Kasza said.
“He was granted relief on some of them during the recession,” she said.
City Administrator Henry Veleker said housing took a hit here and throughout the country during the recession.
Development agreements related to housing have been the most difficult, he said.
As Lyons sold or built houses on the lots, the city would have been paid the special assessments on those lots, Veleker said.
Under the Memorandum of Understanding between the city and county, the city will pay the county all delinquent special assessments on the properties after Lyons transfers the property to the city.
The county will then reimburse the city all amounts paid for delinquent special assessments on the properties within 60 days of the city’s payment to the county.
Under the city’s agreement with Lyons, he will give the city $50,000 to go toward the taxes on the property, Kasza said.
The total 2016 delinquent taxes and 25 percent of accrued interest on the 20 parcels is $47,745.
Under the Memorandum of Understanding, the county will defer the payment of all delinquent property taxes on the property, without interest, until the city sells a property.
When the city sells a property, it will pay the county 100 percent of the sale proceeds until the $46,745 is paid in full.
The city will then maintain the sale proceeds of all the property sold after the settlement amount owed to the county is paid in full.
Veleker credits Kasza for her review of the city’s development agreements.
She found the city could begin legal action on three development agreements that had delinquent property taxes and special assessments on the tax roll.
The city has been working on the matter for more than a year and is in negotiations with two more developers right now.
Kasza said the city wants to conclude those two by the end of the year.
“Between the three, there were hundreds of thousands of delinquent charges to the city,” she said.
Negotiating a settlement agreement with Lyons means the city gets the lots back before the property goes into tax foreclosure, Kasza said.
“Once it goes to tax foreclosure, there is no obligation for the county to collect special assessments,” she said.
When lots in another subdivision in the city went into tax foreclosure, some property owners in that subdivision bought the lots and simply expanded their property, Veleker said.
“We have motivation to try to make these properties as successful as possible,” he said. “We will be working as a staff to bring ideas to council about how to market these properties.”
The lots are fully developed with water and sewer.
Kasza said it is a desirable subdivision with wooded lots.
“We’re looking to finish the development and get improvements on the properties that are not just expansions of property owners,” she said.
Increasing the city’s net new construction would allow the city to increase its tax levy, she said.
Kasza said all the other taxing entities also want to see new construction on the lots versus them remaining vacant.
“We will be marketing them to try to recoup the remaining taxes and the special assessments and are still working with the two other developers,” she said. “There are some communities in the southern part of the state in which the county allowed municipalities to take over lots prior to tax foreclosure and waived all taxes. We were unable to negotiate that with the county.”
If the city had not approached the developer and county, the property would have already gone to tax foreclosure, she said.
“We are trying to settle a debt with the city that had special assessments,” Kasza said. “Our decision was to take all the properties the LLC owns in the subdivision to settle the debt with the city.”