Public Funds Pay Brownfields Tax Bills

Taxpayers Foot Bill
For Brownfields

by Jane L. Bock

August 20, 2007

Having paid the property taxes for owners of brownfields properties for over a decade, Suffolk County is, for the first time, attempting to sell the tax liens on seven parcels with past due taxes totaling $8,966,620.95.

Suffolk’s new Department of Environment and Energy officiated at the August 15 auction on behalf of the Suffolk County Treasurer who is the only official legally permitted to purchase or sell tax liens. While over three dozen bidders registered for the auction, only two parcels garnered bids.

The lien on a small corner lot in Riverhead, which according to county sources was likely not contaminated, sold for the minimum bid amount of $79,059.97, or an amount equal to the past due taxes plus interest.

A lien on a second parcel, with a minimum bid of $155,786.17 had competing bidders and went for a final bid of $280,000. The half acre Bay Shore property is also the subject of an adverse possession suit and ultimate ownership is further complicated by a lawsuit which prevents any changes to the existing deed.

The Suffolk County Tax Act, a NYS Law which governs county property tax actions, directs the County Treasurer to pay delinquent property taxes to towns, schools, and other tax districts. A lien for the amount paid is placed on the property. After a prescribed period (one year for commercial property and three years for residential) the Treasurer usually forecloses or "takes" the property and either uses it or auctions it at a public sale. There has been some controversy in the past over the fact that the county keeps all proceeds from the foreclosure sale above and beyond the lien amount and does not return excess proceeds to the former property owner, creating a windfall for the county in some cases.

Until the County forecloses on a tax lien the property owner enjoys unrestricted use of the property. According to estimates, there are more than five dozen such parcels on the county tax rolls that Suffolk County has refused to take. Each year the lien amount increases with the new annual assessment and interest on the debt. In some cases the property owners have not paid any property taxes for decades. During that time the owners continued to run businesses or lease the parcels, profiting while taxpayers pay their tax bills.

Suffolk County has refused to take the property because "it may not be in the best interests of the County of Suffolk to acquire title to Brownfield properties due to cleanup costs and liabilities which could result from ownership of such properties." Suffolk County has now elected to sell the tax liens on these distressed parcels and keep itself out of the line of title and potential liability for cleanup.

County officials were hopeful that bidders would be willing to pay the back taxes on the seven properties and invest in the remediation necessary to reuse the properties. Unfortunately, many of the parcels are not only delinquent in the property tax but have DEC and EPA fines and penalties assessed against them as well, and the list includes several so-called Superfund sites.

One of the parcels, a five acre site in Smithtown, was the subject of a lawsuit by the Town in the mid 1990’s. A recycling business accumulated hundreds of thousand of tires on the parcel. The town ultimately hired a firm to "cleanup" the property, removing mountains of tires which were burned at the nearby Huntington/Smithtown incinerator. While the Town recouped some of the cost through the sale of energy produced during the incineration, an assessment of over $1 million was entered on the property’s next annual town tax bill. This million dollar cost was then routinely paid by Suffolk County and included in the lien. While the remediation of the parcel was not complete, Smithtown effectively got County taxpayers to pay for the partial remediation of what many considered an eyesore and hazardous condition. The current tax lien amount, over $2.1 million, for this parcel received no bids at the auction.

Purchase of these tax liens does not give the lien buyer title to the property, nor does it make them responsible for clean up. There is however a foreclosure process that could ultimately generate a quit claim deed. Bidders were forewarned to undertake their own investigation as to other liens, fines or issues on the property. And since the property was not owned by the County, any site examination was subject to approval of the current owners - to simply enter the property would be trespassing. In addition to the auction fee, a successful bidder had to pay a 1% nonrefundable auction fee.

The County Legislature must approve all tax lien sales and has a pending resolution to offer additional brownfields property tax liens for auction in the future.