Dan McAllister, San Diego County Treasurer Tax Collector.
Related Story: SD County To Auction Delinquent Properties, But Buyer Beware
CAVANAUGH: This is KPBS Midday Edition I'm Maureen Cavanaugh. Every year, San Diego County auctions off properties from Jamul to the south bay. Those the owners of those homes and lots are chronically behind on their property taxes. This year, about 150 properties wound up on the list. There's still a little time left for the owners to redeem their properties, and that's even more important this year because some owner-occupied properties may still end up on the block. My guests, Dan McAllister is San Diego County treasurer, tax collector. Welcome back to the show.
MCALLISTER: Thank you very much. It's a pleasure to be here.
CAVANAUGH: How does a property get on this auction list?
MCALLISTER: It's not a complicated thing. It results from people not paying their property taxes for five years or longer. And the state law says that we have a responsibility as the treasurer/tax collector to collect those taxes in one way shape or form or another. And by giving people five years to pay what they owe, the people who authored the law felt five years was a very reasonable amount of time. When you consider that 97% of all taxpayers pay on time and pay what they owe us each year, it leaves us with a 3% gap out there. But most of those people then pay. Let me put this in perspective. We have 978,000 taxable parcels in the county of San Diego, and only 142 remain on our list for auction next week. So it's a relatively small number. When you consider that many of those properties are without home, without any improvements on them, it really then does diminish down to a very, very small number.
CAVANAUGH: As you say, they range from small plots of land, undeveloped parcels. Some homes are involved too. I wonder what would be the reason that somebody would let that go if indeed some people just do? I don't want to pay the property taxes, I have an undeveloped parcel of hand. What would be the reason for that?
MCALLISTER: There are a number of reasons. One is that sometimes people inherit property. They may inherit a parcel of property in northeastern San Diego County that the only way they could see it was through a telescope on Mt. Woodson, for instance. And if that was the Kay, there's no ingress, egress, roadway, it's covered with chaparral, shrubs, and large granite bolders with graffiti on half of them. When people stop to look at those they say, well, wait a minute, uncle harry was a great guy, and I'm really flattered he put me in the will, but what am I going to do with this property? So they walk away. And even though they may encounter some credit issues as a result of that, it's minor compared to, say, bankruptcy. So people weigh those things and turn them back in, in essence.
CAVANAUGH: Can you give me a couple examples of the properties that will be included?
MCALLISTER: Yes, these are some incredible property this is year. More than I have seen in recent years. We have one property at 100 Coast Boulevard in La Jolla, an ocean-front condominium, and the minimum bid is $320,000, a remarkable value by La Jolla standards. We have another property that is a 3 or 4-bedroom house, 2-car garage, up in Carlsbad. A starting bid of $300,000 for this property. In those instances, these are situations where people may have fallen behind on their mortgages, on their taxes, and banks just have not yet stepped in. Sometimes the lenders wait until the very last day and wait for people to come in and retire those taxable debts. And if people do not show up, they swoop in and take them off the auction by paying the taxes.
CAVANAUGH: Now, you mentioned the idea that there are some parcels of land that are really marginal, you know, with the worlds, but it ranges from that to this time for the first time in at least several years the auction may result in people being evicted from their homes, in other words owner-occupied properties are on this list. That's a terribly serious and sad matter, isn't it?
MCALLISTER: It is sad. And it is serious. I will say though that in ten years of doing this, that has not happened once that I'm aware of. And I will also add that with five years to pay, we have made phone call, met with people in person, knocked on doors, posted announcements, we have sent through the mails regularly announcements of back taxes owed. And I think it's very difficult for the vast majority of people who pay their taxes, the rest of the taxpayers, to have patience with someone who allows their property to fall into a situation like this. The other thing I should add we have a mechanism for helping people who have not paid their taxes in 3 or 4 years to come in and talk with us a little bit, and be up front, and say I need a payment plan or something that enables me to pay my taxes, but I need a little more time. We're very patient. And we're very open, and we're very reasonable people. But when people don't avail themselves of those opportunities, it is difficult, I think to render sympathy.
CAVANAUGH: Now, if indeed one of these owner-occupied houses was auctioned off in the auction that's going to take place this Friday, who would be responsible for actually evicting the owner of the property?
MCALLISTER: The new owners.
CAVANAUGH: I see.
MCALLISTER: It's very clear in the law that the tax collector's office in the county of San Diego has responsibility for recovering the taxes and fees that are owed, period. Any excess funds will be returned to the owners, IE, the banks oh, the people in those houses, but it is up to the new owners then to effectively serve notice in a legal way to add people to the list that need to be out of those houses.
CAVANAUGH: During the auction will people know if they're bidding on a property where someone is residing?
MCALLISTER: I would hope so. We go very, very far in trying to encourage people to do their due diligence before any sale, that would entail going to title company, checking out current status of ownership, status of property, doing a drive-pie. But I think it's really up to the buyer. The caveat emptor, buyer beware. And we are never, ever short on that warning going out to people in the printed materials, online materials, what we say in public, as well as the day of the auction.
CAVANAUGH: You quoted some prices or starting bids on some of these properties that may be on sale on Friday.
CAVANAUGH: How are these prices set?
MCALLISTER: The baseline for setting prices is back taxes owed. Then there's a 10% penalty for lateness. And then after a certain period of time passes, when the initial 10% penalty kicks in for lateness, the penalties become very onerous. 1.5% per month or 18% per year. If you add the pension upfront penalty, plus a year and a half with no payment, that's 29% that they'll be paying on top of just paying the taxes they owe. That compounds then over a five-year period, and it can quickly add up to a lot of money.
CAVANAUGH: Now, you just mentioned a couple of bargains, one in Carlsbad, one in La Jolla. Generally speaking, when people attend these auctions, should they expect to get bargains?
MCALLISTER: I think most people come forward looking for bargains. That's been my experience at these and other auctions I've attended. People always have a glint in their eye, and a little bit of a star-struck look, because they're hopeful of finding that one golden nugget in the entire pile of opportunity that gives them a little advantage. And let's them buy a bargain.
CAVANAUGH: But there is a pile there that's not so much of a bargain.
[ LAUGHTER ]
MCALLISTER: I think certainly a condo at $300,000 in La Jolla on the water would be a pretty good bargain. Whether it gets bid up or not, I don't know. I would say that a Bressi ranch home for $300,000 would be a pretty good bargain, given the current market rates up there which are probably in excess of $600,000.
CAVANAUGH: How much is the county expecting to bring in?
MCALLISTER: If we are successful in selling all of the remaining 142 property, it would mean that we would be able to bring in over $2.1†million in back taxes and penalties that are owed, in a time when governments are really restricted because there is a lower number of dollars coming in from tax collections because of the assessed valuations going down. But on the other hand, we can use every dime we get because these are designed to fund those things we revere most in our society. School, libraries. Schools seem to reap about 43% of every dollar that comes in here, and when that's divided into 42 public school districts in San Diego, arguably, that's a great place for funding to did.
CAVANAUGH: What do people need to do if they want to take part in this action?
MCALLISTER: If they have questions and they want to look at some things initially, they can go onto our website at sdtreastax.com. Or they can call us at 877-829-4732. This is a $70 fee for a bidder's package, that is nonrefundable. But that will give them information about every property that will be auctioned off. There is a bidder's paddle that they can raise when they choose to bid. And they will be required to make a deposit of a thousand dollars in a cashier's check or cash that is refundable if they do not bid on anything. But tell be applied to the cost if they are successful in bidding for a property
CAVANAUGH: You mentioned a few minutes ago that you want to make clear that that is a buy are beware kind of an opportunity if you want to look at it that way. And we were talking about whether or not someone would reside in the property that the person would buy. What are other things that people might have to be aware of when they're purchasing these properties?
MCALLISTER: That is a great question. I think they should look at IRS liens, second trust deeds that might hold sort of a grid on that property. The chances are very good that lenders of major renown are on top of this. And they believe there to make sure those taxes get paid. It's unusual to have this many nice properties go to our auctions. But I will add one more note, if you recall, this recessionary period we've been floundering around in for the last five years started in 2007. It is now 2012. End of the five-year period. I think we are just beginning to see houses that have come about result ever that economic downturn on our auction block. I suspect that we will see more in the future.
CAVANAUGH: You said last year that this auction was not very well attended. Is there any reason why?
MCALLISTER: I think the economic times. I think people didn't have a lot of extra spendable cash that they were just waiting to buy something with as we saw in years gone by. From the years 2003 to 2006, people would show up with cash, they would bid on things that they knew nothing about. And they were happy.
CAVANAUGH: You can see how things have changed in recent years. You started out with, I think, about 200 properties on this auction list. They're down now. What did you say? About 142?
MCALLISTER: We started out with 224 when we first announced these. A number have been redeemed, if you will. This is where the religious crossover occurs for a little payment there is redemption. And I think we're down to 142 as of Friday. And that number breaks down 31 improved property, which could mean anything from a house, a garage, a barn, a commercial building to, a condo. Or nothing, the unimproved properties. The majority of unimproved properties.
CAVANAUGH: But people can swoop down, individuals or banks, to your office before the Friday auction, and redeem those properties.
MCALLISTER: That's correct. By 5:00 Friday. And we are at 1600 Pacific highway downtown, and that is really auction central.
CAVANAUGH: I'd like to go off topic for just a minute.
CAVANAUGH: You sit on the San Diego County pension board which just this month obtained a AAA rating from standard and poors. And it retained that rating for its ability to pay retirement befores for county workers. You were recently quoted talking about San Diego's pension debate and dilemma, and you mentioned the San Diego pension initiative, which is supposed to be on the June ballot. We've been talking a great deal that there's a lawsuit being filed. You called the initiative a panacea. Can you tell us about that?
MCALLISTER: I harken back to our earlier conversation, and that is buyer beware. I think people need to study this initiative very carefully and closely to make sure they know what they're get figure they vote for it. I think we have been around long enough to know that there is no true panacea in government or society today that doesn't come without a price. If you stop to think about it for instance, just because this initiative passes, does not mean all the fortunes of the city instantly financially turn around. There are still retirees in the system, there are current employees as of today in the system, and all of their pensions need to be made good bye the time they die. That means that the city is going to have to pony up millions of dollars every year to meet its annual required contribution to those funds. So just because this initiative passes does not negate that from happening. I would say that people need to be aware that those costs are going to continue. And if they start a new plan, that's going to have to encounter costs as well.
CAVANAUGH: And you also pointed out that San Diego City employees have already the option of a 401K plan which is central to this comprehensive pension reform.
MCALLISTER: That's correct. In fact, since 1984 -- the City of San Diego has had a 401K plan in place since 1984. They also have had a deferred comp plan, which is a defined contribution plan just like the 401K, only primarily for government employees. In addition to the defined benefit plan which is measure is all about.
CAVANAUGH: Is there anything the city can learn from the way the county handles its pension?
MCALLISTER: I think that it's wrong to gang up on any entity and say you guys should just listen to us and you'll see the way. This is the way to the mountain top and we have all the great slates and tablets ready to hand down. I don't think that's the case at all. Good, logical, sound governance, when it comes from finances, prudence, are elements that can go on anywhere. And there's no magic or monopoly on those. It just so happens that the county has managed its assets well. It has made good investments. It stays out of difficulty when it comes to overextending and overpromising on costs and expenditures. And that's not always true in governments. The state is a good example of that.
CAVANAUGH: Let me get back in closing to our original topic. The property tax auction will be held Friday, February 24th at 9:00 AM, and is that at the county administration building?
MCALLISTER: No, this is going to be at Convention Center. There's much more parking, easy access, easy in and out. So we do it there because there's space.
CAVANAUGH: Right. I've been speaking with Dan McAllister, thank you so much.
MCALLISTER: My pleasure indeed. Thank you.