Politicians push reform of tax sale bid process: Democrats, Republicans lawmakers promise to draft legislation

News-DemocratJanuary 14, 2011 

Madison County Democratic and Republican lawmakers plan to introduce bills they say will make the lucrative tax sale industry fairer to property owners and less susceptible to abuses spotlighted in a News-Democrat investigation.

Since last week, two legislative teams have formed to draft bills to make the tax sales more transparent and fair, and to end conflicts of interest that clouded the way that Fred Bathon, the ex-Madison County treasurer, conducted the sales until he left office last year.

The teams, who hope to introduce their bills as early as the veto session that begins Nov. 16, consist of:

* State Sen. Bill Haine, D-Alton, and state Rep. Jay Hoffman, D-Collinsville, who have announced they are working together to draft a measure based on "best practices" followed by county treasurers statewide.

Haine and Hoffman are calling for the videotaping of tax auctions and mandating they must be conducted as true reverse auctions with trailing bids - ideas already put in practice by Frank Miles, Bathon's successor as treasurer.

* State Rep. Ron Stephens, R-Highland, and Dwight Kay - the Republican challenger for Hoffman's seat - support a similar set of proposals, including a ban on tax buyers giving money to county treasurers' campaign funds.

The News-Democrat article a week ago "indicated something needs to be done to limit the unfettered discretion of the treasurer in this procedure," Haine said. "And I think the members of the General Assembly, based upon the BND article, will find that persuasive."

The investigation showed that Bathon took in about $140,000 in campaign donations - far more than any other state treasurer - from investors who bought delinquent property tax debts.

Those investors were routinely allowed to buy real estate tax debts at an 18 percent penalty rate - the maximum allowed under state law - under an interpretation of the law that led Bathon to ignore bids lower than 18 percent in many instances, the newspaper reported.

Some investors pulled in more than $200,000 per year apiece from interest penalties paid by financially strapped Madison County property owners, county records show.

Bathon, a Democrat from Glen Carbon, has not returned calls seeking comment. He retired in December, saying a state change in the way government pensions are paid would cost him if he remained in office.

Madison County State's Attorney William Mudge last week asked U.S. Attorney Stephen R. Wigginton and Illinois Attorney General Lisa Madigan to review the tax sale process during Bathon's tenure as treasurer.

Mudge, in a statement issued Tuesday, cited "the concerns that have been raised regarding the tax sale process conducted during the years of 2005-09."

Stephens and Kay's proposals call for a reduction of the penalty bid escalation from six six-month periods to three periods, which would reduce the penalties property owners must pay.

Under current law, property owners could end up paying interest rates exceeding 100 percent by the time they redeem their properties after three years of compounding interest.

Stephens and Kay also want county treasurers at least once per year to publish the physical addresses of properties whose late taxes have been sold to investors, as opposed to just parcel ID numbers, to provide greater transparency.

"The most important aspect of this is to protect the property owner," Stephens said. "That's who we ought to be worried about."

The report would include information on registered buyers and data on interest rate results and redemption records showing the amounts of interest and penalties paid by delinquent tax buyers.

Another idea that Stephens and Kay want to pursue is the creation of a uniform system statewide that would require county treasurers to use laptop computers to conduct blind, automated bidding.

Thirty-nine Illinois counties, including Cook County, rely on such a system, which is praised for the fact it eliminates perceptions of favoritism toward certain tax buyers while making it impossible for bidders to make simultaneous bids.

In contrast, Madison and St. Clair counties still rely on verbal bidding.

That is important because Bathon, as Madison County treasurer, would allow bidders to shout bids simultaneously of 18 percent. When that occurred, Bathon's office would decide which bidder shouted first, and at that point the bidding would be cut off.

Verbal bidding "causes distrust among property owners to have to pay what would otherwise be considered loan sharkng rates," Stephens said.

One element about tax sales that Haine and Hoffman wish to remedy is their virtual lack of regulation.

Under state law, the state's 102 county treasurers are solely responsible for ensuring that tax sales are conducted fairly, even though this means they must police the investors who are allowed to give unlimited funds to their campaign funds.

Hoffman said he wants to include some level of state regulation "so you can appeal to the Department of Revenue or some other agency if you feel you've been wronged or that if the statutory guidelines aren't being followed."

Stephens, however, said a state role would not be necessary if other reforms are put in place.

"I don't think we need to create another level of bureaucracy here," he said.

As long as the reforms that he and Kay are proposing are passed into law, giving the state attorney general and county state's attorneys "more tools," Stephens said, "they'll be able to stop the abuse we witnessed in Madison County."

Story published 10/03/10. Contact reporter Mike Fitzgerald at mfitzgerald@bnd.com or 239-2533.

Belleville News-Democrat is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service