Memphis to close loophole with tax sale
City seeks more than $6M in delinquent taxes
In a departure from past policies, the city of Memphis will conduct its first tax sale in the fall in a bid to collect more than $6.1 million in delinquent property taxes from the past decade.
The city this week notified the owners of 2,531 properties delinquent 18 months or more on their city-only taxes that the city will initiate a tax sale if owners aren’t current by March 31, Memphis Chief Financial Officer Brian Collins said Thursday. The Shelby County trustee’s office already runs a regular tax sale for properties delinquent on both county and city taxes, and the city receives a share of those sales.
But some people have figured out they can pay their county taxes without paying their city taxes, allowing them to avoid a tax sale — and any other consequences, Collins said.
“What it’s basically saying,” he said of the notices, “is the party’s over.”
Also, delinquent owners owe the city 18 percent interest, Collins added.
The tax sale — and the threat of the sale — could generate some much-needed revenue as the city stares down a
widening $52 million budget gap in 2021 from costs related to pensions, hiring more police officers, the loss of the $15 million from the state’s Hall income tax, and other expenses; what Mayor Jim Strickland is calling the city’s “$50 million challenge.” So far, the city has identified cost saving measures that will reduce the gap to about $8 million.
Collins recently told City Council members that he was looking under “every rock” for money, although next year’s tax sale revenue will be considerably diminished after erasing the 10year collections backlog.
“I wish I had more rocks with $6 million under them,” he said in his office Thursday.
City officials did not have a list of the specific properties or owners.
Taylor Caruthers, a local property tax consultant and developer, said he was surprised the city hadn’t already taken action with so much in delinquent taxes on the line and knowing the move could stimulate the city’s real estate market.
“It’s probably something that should have been done a long time ago,” he said. “I don’t see any downsides.”
The city has programs to aid homeowners who haven’t paid their taxes because of financial hardships, Collins said.
To the best of Collins’ knowledge, no one can recall when or why the city stopped selling properties for delinquent taxes. His guess is past administrations decided the small amount of annual revenue from the city-only delinquent taxes wasn’t worth collecting.
But over the course of 10 years — as far back as the city tracks delinquent taxes — the money adds up, Collins said. Also, more people realized they could “game the system,” sometimes openly telling county trustee clerks they were paying their county taxes and not their city taxes.
Another factor: The City Council didn’t create its nonprofit land bank the Blight Authority of Memphis Inc. until 2015. Any properties that aren’t sold through the tax sale will go into the land bank, freeing the city from the liability and trouble of managing and keeping up the properties.
Collins said he’s not sure how much of the $6.1 million the city will receive this year, but suspects most owners will pay up when threatened with losing their houses, considering they’ve paid county taxes for the time they’ve been delinquent. Also, he doubts many properties will be blighted because, in most of those cases, the owners don’t pay county or city taxes and go to tax sale anyway.
The trustee’s office will oversee the tax sale for the city at no additional cost to the $1.5 million it’s receiving to collect city taxes. The city treasury office still collects delinquent taxes, although the trustee’s office may eventually take over that function as well.
Steve Barlow, an attorney who often works with the city on blight and property issues, said the change — which makes the city’s taxing process the same as the county’s process — shouldn’t tax the trustee’s resources: “It’s a change to the marching orders.”