Budget shortfalls: A statewide solution

Published 2:33 pm Wednesday, May 5, 2010

As we read and listen to the local news most of us understand that many cities and counties are coming up short in their budget projections for the coming fiscal year.

Most of us know in Southampton County and Franklin City there will be an even bigger gap due to the International Paper mill closure and the supporting business that closed down along with it and the loss of revenue due to property tax now not being collected from this business.

Now is the time for cities and counties of Virginia to take an assessment and scale back spending, cut programs that are wasteful and do not have fiscal production. However there is another alternative many do not know about that could fill up city and county coffers in Virginia.

I know this solution is taking a large step away from the norm and many will balk especially lawyers who make a great deal of money from the process currently in place. This solution is viable and this solution is successful and it has been working in the U.S. for hundreds of years.

I always found it strange that this solution to let others invest in your city or county is not implemented in Virginia, home of Jamestown, George Washington and Thomas Jefferson. This system works in Florida, North Carolina, Illinois, Arizona, West Virginia and many other states.

So now, as we in Southampton County and Franklin City are experiencing severe shortfalls in budgets, this solution presented locally, possibly getting sponsorship from local communities in Hampton Roads via mayors and state representatives and senators, could work in our favor and allow money to flow in from other sources, instead of trying to tap the local community via more property and user taxes. Do you want to know the solution?

Tax lien certificates are the absolute best way for city and county government to create income from delinquent property taxes. In Virginia properties can sit up to seven years being delinquent in property taxes before they revert to the state, city or county for foreclosure or auction.

Years are wasted while local governments are missing income. Properties are many times empty, decaying and blighting our communities.

The simple explanation for curing local government shortfalls is to create a movement from a tax deed state to a tax lien state. When a property owner does not pay their taxes and the local city or county is relying up the revenue there is nothing in the Virginia law that lets local government seek sources for the budget shortfall.

In West Virginia, when your property taxes are a year delinquent the local government (city or county) can issue a tax lien certificate for your property. This allows local government to set a means to replace those taxes from an outside source via an investor.

The investor purchases the certificate with the promise from the local government that interest will paid to them upon the property owner becoming current on his property taxes. The interest paid to the investor can vary from 8 percent to 18 percent depending on the state and municipality.

If the property owner does not pay the taxes, the investor does not receive his/her interest back on the money they invested. They receive the property.

Tax lien certificates are the priority lien on the property above mortgage loan and any other interest on the property.

The local government does not pay the investor the interest on the tax certificate, the property owner pays this upon redemption of becoming current with his/her property taxes by paying the interest due and any penalty assessed by the local government.

The property does not immediately revert to the purchaser of the tax lien certificate ample time is always given to a property owner to become current on their property taxes. In states like Florida it is two years, however they issue a tax lien certificate for each year so that the local governments continue to have the necessary funds to continue their operations.

Tax lien certificates are the absolute best way for state and local governments to fill budget shortfalls. The investors come from all areas and walks of life, a local banker, farmer or businessman or someone from out of state.

Tax lien sales create revenue for local governments short and simple. They fill budget gaps. It is a much better alternative then raising property taxes, gas taxes and grocery taxes. Virginians are taxed enough.