May 14, 1997|By Dana Hedgpeth | Dana Hedgpeth,SUN STAFF
Problems with Maryland counties' annual tax sales continued to crop up yesterday with Charles County suspending its sale because of hyper-inflated bids, Baltimore County establishing new rules to prevent that in its sale tomorrow, and Howard County coming under attack in a criminal complaint over alleged improprieties at its recent sale.
All of the problems stemmed from the growing trend at local jurisdictions' tax sales: bidders offering fantastic sums -- with at least one bid going as high as "infinity" -- to claim the right to collect high interest on modest properties' tax liens.
The continued problem with outlandish bidding shows the need for new state legislation governing tax sales, some local officials in Maryland said yesterday.
"The problem is how high do you allow the bidding on a property to go?" said William Hagedorn, assistant financial officer of Anne Arundel County's Department of Budget and Finance. "All the counties are worried about it, but without changing state law we're locked into this process."
In Charles County yesterday, officials said they sold 125 properties before stopping their annual auction -- after bidders refused to put their cards down at $300 million on a property worth $40,000.
The county's remaining 225 properties with unpaid tax liens will be sold in June after the county receives guidance from the attorney general's office. Frederick County postponed its auction Monday until June after bids reached exorbitant amounts.
"It was so out of the ordinary for us to have these crazy bids," said Joseph Norris, Charles County's treasurer. "It makes me very uncomfortable because it just doesn't make sense. These bidders are putting their own necks on the line."
In Baltimore County, where an annual tax sale is set to begin tomorrow, officials drafted a new four-page contract for bidders -- one that requires that anyone bidding more than 150 percent of a property's market value must show within 30 days the financial ability to pay the bid price.
"If we don't do this, we'll have loads of people not redeeming on $100 million bids, and the county will be sitting here with taxes that are going to be unpaid again next year," said Virginia W. Barnhart, a Baltimore County attorney.
Joel Schlanger, deputy director of finance in Baltimore County, added: "We've seen what's happening in other jurisdictions and we're saying, 'You're not going to mess with us.' We're trying to put the sanity back into this process."
According to state law, each county is allowed to control bids to keep its auction orderly -- so long as the properties go to the highest bidder.
But some bidders who attended the Howard County tax sale April 23 claim properties were awarded arbitrarily and improperly.
"You had to be willing to yell out a million dollars on every property to play the game," said Timothy French of Elkridge, a builder and investor who attended Howard County's auction. "It left no room for the mom-and-pop investors."
Another prospective investor, Eric Bers of Ellicott City, filed a complaint late Monday with the Howard County District Court alleging that Dale Neubert, the county's director of finance, violated state law by not awarding the properties to the highest bidder. "There was so much abuse, and it was so flagrant."
At the Howard County auction, officials put a $1 million cap on bids, but then removed it after several bidders complained.
But then, even before descriptions of the properties could be read, bidders yelled out bids into the millions of dollars, according to tape-recordings of the auction. These were followed quickly by bids into the billions and trillions of dollars -- even, in one case, by a bid equaling infinity.
That left the auctioneer with no single high bidder -- and with the problem of deciding who should get the properties.
French said that at various points in the auction, the auctioneer, Ellen von Forthuber of Baltimore, arbitrarily awarded the properties to "the woman in the front," "the guy with the nice tie" or "the man in the corner" -- not based on the amounts bid.
County officials -- who said they had never encountered such astronomical bids -- did not deny yesterday this account of the awarding of the properties.
But they said that they did the best they could given the unusual bidding and that it was not improper because they have discretion over awarding properties.
"I believe it could have been done better than it was, but hindsight is always 20/20," Neubert said yesterday.
At the Howard sale, William Richardson's Columbia townhouse -- assessed at $45,000 -- had $1,828 of unpaid taxes. A Bordentown, N.J., investment company bid $55 million on it.
Green Capital, the winning bidder, now can try to collect from Richardson the $1,828 plus 18 percent interest on the $1,828 for as long as two years, plus certain legal fees.
If he doesn't repay Green Capital fully, it could take his home -- an unlikely event given that it would have to pay the amount it bid, $55 million.
But like most large national investment firms entering the bidding frenzy, Green likely would walk away from the deal instead -- writing off the $1,828 as a loss.
Such outlandish bids -- for the right to collect interest on relatively small amounts of unpaid taxes and to charge property owners certain fees -- have been growing increasingly common in Maryland in recent years.
Pub Date: 5/14/97
