The town of Essex is initiating its first tax sale under a new policy that aims to recoup delinquent payments.
Defined in state law, tax sales are auction-style transactions in which municipalities can sell a person’s home to recover owed property taxes.
Staff requested the tax sale policy after the town’s audit showed taxes more than 60 days overdue totaled about $585,000 in deferred revenue, assistant finance director Sarah Macy told the selectboard March 19.
“There’s a lot to be said about balancing the financial realities of our taxpayers and the needs of the town,” Macy said. “I’d like to use this policy as a chance to initiate a conversation about where we all stand and what we think the right balance of carrot and stick.”
Macy informed the selectboard that as of May 2, tax delinquencies totaled about $967,000, or 7.9 percent of the town’s budgeted tax revenues for fiscal year 2018. That’s down from $1.3 million when the board first adopted the policy a month ago, but Macy said the drop is likely due to people catching up to the March 15 deadline.
The town bills for taxes annually. Payments are due twice a year, and the town sends out quarterly delinquent notices. A missed tax payment prompts a one-time 8 percent penalty and delinquent payers are charged an additional one percent interest per month.
The new policy establishes when to initiate a tax sale and defines what properties should be included.
Sales will now be trigged whenever the town’s total delinquent taxes, interest, penalties and fees are more than 3 percent of the current year’s budget for property tax revenues, and will include properties without payment plans that are either delinquent for multiple years or for one year while owning more than $10,000.
Fifteen accounts are now under payment plans, leaving 36 under the new policy’s guideline as of last week totaling about $683,000, or 69 percent, of the total delinquencies. They will now receive a demand letter from the town that indicates the final date to pay before heading to the town attorney, who will send another demand letter sometime in the next month.
Tax sales can also be trigged if one or more accounts without a payment plan have more than $50,000 in delinquent taxes and related fees.
Taxpayers can seek abatements with the Board of Civil Authority, and Macy said the time-frame between the town’s letter and the attorney’s letter is residents’ “last chance” to work with her for a more lenient payment plan — agreements that require taxpayers to stay up-to-date on all current taxes while working to pay off delinquencies.
“We want communication,” she said. “We want a reasonable plan to pay off the delinquent taxes. You’re only going to be penalized if you just ignore us.”
But once the town attorney gets involved, the policy kicks in: Property owners must then either pay 100 percent of the delinquent balance plus associated fees or pay 50 percent upfront along with a signed agreement to pay the balance in monthly installments over a year.
Meanwhile, the town attorney will begin research to identify all lien holders, who are also notified of the delinquency. The town must then post an advertisement in The Reporter three weeks in a row before the sale.
The highest bidder wins the title but doesn’t receive it for 366 days, giving homeowners a year to pay back all the delinquent taxes and associated fees.
Members briefly discussed whether they wanted to decide on an annual basis whether to initiate the tax sale process, but selectman Andy Watts said he’d prefer to operate strictly off the policy so that members aren’t “doing it arbitrarily.”
Based on the current timeline, the town could be hosting its first tax sale this August after six years without one.
Macy believes the process is a “big wakeup call” and said while she would prefer to see all delinquent payers catch up in time, the tax sale process is necessary to ensuring accountability and fairness.
Selectboard chairman Max Levy agreed.
“Most people pay their taxes on time,” he said. “Those few that don’t, if there’s no consequence, then others may decide if there’s no harm, why pay?”