Client: Chicago Community Trust
Source: Rock River Current
ROCKFORD — An Illinois House committee has moved forward legislation designed to close loopholes in the delinquent tax sale system that leave properties trapped between abandonment and new ownership.
Senate Bill 1675 Amendment 1 would limit reasons a “sale in error” can be granted. For example, when there is an actual error in the legal description that causes a tax buyer to bid on a parcel that doesn’t exist. Right now, state law allows refunds for minor errors, even when they’re made by the tax buyer.
“Over the past two generations, the tax sale system has evolved — whether intentionally or not — into a vehicle to strip wealth and drive inequality in some of our most vulnerable communities,” state Rep. Kam Buckner of Chicago, the bill’s lead sponsor, said in a news release from The Chicago Community Trust, a group that supports the measure.
We covered the issue in depth earlier this week. On Wednesday, state Rep. Dave Vella, D-Loves Park, signed on as a co-sponsor to the bill. On Thursday, state Rep. Maurice West did the same. The House Revenue and Finance Committee recommended adoption of the rules on Thursday. It still has several steps to go in Springfield before the reforms are approved.
Illinois law allows private investors to buy property taxes when the land owner doesn’t pay them. They purchase the tax debt in hopes of getting repayment, along with interest up to 18%. If the owner doesn’t repay the taxes after three years, the tax buyer can take ownership of the property.
However, instead they often file a “sale in error,” which allows them to avoid taking ownership of properties that could be blighted and be repaid the full amount of the taxes, plus 12% interest.
Several local municipal leaders across Illinois, including those in Rockford, say the process costs taxpayers money and leaves homes left to decay.
Since 2010, Winnebago County has refunded nearly $8.5 million in taxes from nearly 2,100 sales in error, according to records from the Winnebago County treasurer.
The problem for municipalities isn’t just refunding the money. It’s because the sale-in-error process prevents them from stepping in to get the property into the hands of a responsible owner through either the regional land bank or trustee program. Those programs can step in after two to three years, but when a sale in error takes place it “resets the clock,” as Karl Franzen, the city’s community and economic development director, put it.
“The process discourages development, gives out-of-state investors an edge over community developers and residents, and puts a virtual stranglehold on distressed neighborhoods where most vacancies are concentrated,” Buckner said. “This bill seeks to rebalance the tax sale system in the interest of local governments, residents and community developers who actually want to reinvest in their neighborhoods from the ground up.”
The measure is supported by cities including Chicago, Peoria, Rockford, Decatur and Kankakee.
The amendment put forward by the committee on Thursday is one of several changes to the system proposed in Springfield.