LAKE COUNTY— The California State Controller’s Office (SCO) recently concluded an inquiry regarding the status and sales of tax-defaulted properties in Lake County and the city of Clearlake and concluded that there were approximately 1,370 properties available for sale, finding that an estimate of 2,402 properties believed to qualify for a tax sale, as communicated to their office in a letter late last year from Clearlake, was “overstated” for a number of reasons. The state also recommends the sale of 1,000 properties per year to achieve state compliance within a six year timeframe.
According to a letter from State Controller Betty T. Yee dated Dec. 15, 2020 addressed to Barbara Ringen, Lake County’s treasurer tax collector, Clearlake City Manager Alan Flora, all five members of the Clearlake City Council and Moke Simon, Chair of the Board of Supervisors, the agency’s inquiry was focused on tax defaulted properties within the City of Clearlake.
“This narrowly focused scope helped us gain a better understanding of the city’s concern,” state officials noted detailing the inquiry’s scope and methodology adding that to conduct their analysis, the state interviewed Ringen, Flora, read the Grand Jury report item concerning tax-defaulted properties and reviewed, among other items, tax-defaulted sales information (as of August 2019) that the city received from the county, the listing of properties available for sale as of May 14, 2020, obtained from the county tax collector, and tax-default sale data for all tax sale activity from calendar years 2014 to 2019.
The SCO concluded that although “there is a sizable backlog of tax-defaulted properties within Lake County and Clearlake,” an estimated 769 tax-defaulted properties within the City have not been offered for tax sales in violation of State Revenue and Taxation Code (Section 3962.) Among other conclusions, the agency found that approximately 95 percent of the properties that the tax collector has not sold within the timeline required by state code are raw land; and for 50% of these properties, less than $2,000 in unpaid property taxes and penalties (not including interest) is owed.
“We recommend that the Lake County Tax Collector offer to sell 1,000 tax-defaulted properties per year in order to be in compliance with RTC Section 3962 in about six years,” state officials wrote adding that the SCO also recommends the county tax collector identify in tax-default property listings “all paper subdivisions and other properties that are unlikely to sell at a tax sale.” The SCO noted such identification will provide perspective on the challenges of selling tax-defaulted properties.
According to the Lake County Paper Subdivision Management Plan referenced by the SCO, “paper subdivisions” refers to lots which were created in the early 20th century by land speculators. Most of the subdivisions are located on land that is “geographically unsuitable.” Approximately 10,000 of these unbuildable lots exist in Lake County.
The SCO wrote that the city’s original estimate of 2,402 properties was overstated for a myriad number of reasons including that the city did not exclude properties that for which the county tax collector had established a payment agreement with the property owner, and the city did not exclude properties that were withdrawn from a recent auction because the tax collector “was prevented from completing the sale by other provisions of law (e.g, a stay of bankruptcy, probate court order, conservancy hearing, or other legal reasons.”)
Flora said he thought the amount of properties recommended by the SCO to be sold by the County on an annual basis was a feasible amount. “I think they can make that work, other counties do it,” he said adding that the estimate referenced by the agency as “overstated” was based on information the city obtained from the treasurer tax collector’s office which did not give Clearlake information on which properties were on the county’s plan. “We understand the problem is not going to be solved overnight,” he said.
Grand Jury Report findings and recommendations vs. State Controller’s Office findings
The state agency’s recommendation differs from The Civil Grand Jury’s recommendation in its Final Report dated June 15, 2020, that the county sell “at least 500 delinquent properties annually at tax-default sales.” The Grand Jury further advised that the county add two staff members to the Treasurer/Tax Collector’s office to focus exclusively on the tax-default sale process, in order to address the increase in tax-defaulted properties and to reduce the backlog of those properties within the county.
The City of Clearlake disputed contents of the Lake County Grand Jury’s report and many of the findings and recommendations contained therein. The city provided a detailed response to the Grand Jury’s report in a letter dated July 16, 2020. According to the SCO, the city’s original letter stated that the number of tax-default properties was 2,402. The Grand Jury concluded that there were between 1,332 and 1,483 tax-defaulted properties within the city. State officials noted that the Grand Jury estimated a lesser number than the city because the Grand Jury excluded properties that did not have a specific address, accessibility, or existing services such as water hook-up.
Legal action pending
This summer the city of Clearlake took legal action against Ringen and the County of Lake by filing a petition and complaint for writ of mandate (a court order to a government agency, including another court, to follow the law by correcting its prior actions or ceasing illegal acts) and other injunctive relief.
The lawsuit alleges, among other items, that “The County, Ringen and the Board have been aware of the failure of the Tax Collector’s Office to conduct regular tax sales since at least 2017, and no, or insufficient action has been taken by them and or/each of them, to sufficiently staff the Tax Collector’s Office, in order to properly insure that the tax collector’s mandatory statutory duties to regularly and timely conduct tax defaulted sales can be carried out faithfully and fully, for the benefit of all residents of the County.”
Ringen said questions regarding tax sales are under review, adding, “We have no comment at this time due to the ongoing litigation.”
Flora also referenced the upcoming sale of 143 properties approved by the BOS which he said is currently scheduled for Jan. 29, 2021. “Overall we believe this (the state inquiry’s conclusions and recommendations) supports the position we have been taking, we just hope the County takes it seriously.”
