It may have been a record, but it wasn't the one that Pasco Tax Collector Mike Olson was hoping to set: More than $2.6 million in property taxes for 2008 remains unpaid after Tuesday's tax certificate auction.
"It's probably record-setting," Olson said of the figure. "And that's because of the economy."
Investors, who pay the outstanding taxes in exchange for liens on the properties, participated in smaller numbers and seemed worried about tying themselves to properties that they'd never see a return on, said Olson.
That $2.6 million is what's owed on 3,806 parcels throughout the county.
This year's value of unpaid taxes after auction was worse than last, when about $724,000 in 2007 property taxes remained unpaid.
Overall, Pasco had roughly 6,230 fewer delinquent tax properties for 2008 vs. 2007. But the amount of unpaid taxes for 2008 was higher.
When a taxpayer doesn't pay taxes by April 1 each year, the tax collector puts the property's tax certificate up for sale at auction by June 1.
The tax certificate functions as a loan in exchange for a lien on the property. Whoever buys the certificate pays the outstanding tax with the hope of making money when the property owner eventually sends in the tax payment — plus interest.
Investors bid to pay the delinquent taxes on a property, with the certificate going to the bidder with the lowest interest rate. By law, the interest rate cannot go higher than 18 percent.
If the taxpayer is unable to pay the taxes two years after the property goes delinquent, the tax certificate holder can apply for the deed. The property is then auctioned off to the highest bidder.
In better financial times, more bidders jumped in for the tax certificates, especially after the auctions were moved online. That meant more competition, driving down the interest rates. It was good news for delinquent property owners who intended to make good on their bills: They didn't have to pay as much in interest.
In the 2007 auction, for instance, the average winning bid was an interest rate of 1.72 percent, said Olson. (Investors are actually guaranteed a minimum of 5 percent, he said, but they offer lower interest rates as a bidding strategy.)
By 2008, that average rate had jumped to 8.3 percent.
And this year? 11.3 percent.
Consider these numbers, too. In 2007, only 66 certificates were sold at 18 percent interest, the maximum rate that suggests the highest risk.
Last year there were 328.
This year? 678.
Olson said he has yet to analyze whether certain properties were more or less popular than others among bidders. But investors have an even more difficult time navigating the risks these days.
Buy a certificate on a property whose owner ends up in bankruptcy, he said, "and that beautiful 12.5 percent rate you got will be thrown out by the bankruptcy court."
Properties with homestead exemptions had been considered safe, he said, because homeowners typically want to pay those taxes off fairly soon — but that's "in normal times."
"What do you look for now?" Olson said. "Because of the economy, we're in unfamiliar territory."
Which is why Olson held his first auction almost two weeks early this year.
"I held mine extremely early this year because of my concern of whether there'd be sufficient investor money this year in the state of Florida to cover 67 counties," he said.
The 3,806 tax certificates that went unsold this week are now in Pasco County's name. A second "clean-up" auction on those certificates is scheduled for next Thursday.
Bidding begins at 18 percent.
Jodie Tillman can be reached at email@example.com or (727) 869-6247.