'Everyone's on a level playing field': Revamped tax bid process has successful first run

News-DemocratFebruary 23, 2011 

— A new era in Madison County tax sales officially kicked off Wednesday morning. That's when 37 investors gathered in the County Board room behind four rows of laptop computers to bid on late taxes owed by the owners of more than 2,500 county parcels.

Instead of shouting out their bids and shooting their hands into the air, however, the tax buyers used the computers to bid in near perfect silence.

For most of Wednesday, all that could be heard in the board room were the sounds of dozens of index fingers clicking swiftly on computer mice.

The clicking alternated with the creaking of chairs as bidders leaned back to follow the action on the large screen in front of them.

The new bidding system is a big improvement in terms of simplicity and fairness over the old verbal bidding system, according to tax buyer Brad Watts.

"I think it's easier," Watts said. "I think this is just a better way than a bunch of people holding their arms up for attention."

And a better deal for the property owners, said Treasurer Kurt Prenzler.

"That's the purpose of this tax auction," Prenzler said. "To achieve as low an interest rate as we can."

By that criterion, Prenzler and his staff hit a bulls-eye Wednesday.

The average interest penalty rate for Wednesday's tax sale was 3.91 percent. This compares to the interest penalty average of 9 percent last year, under then-Treasurer Frank Miles, who at the time still relied on verbal bidding.

"I was pleased with the result," Prenzler said. "Everyone's on a level playing field, it's very organized."

The 37 bidders, who each paid $500 to take part in Wednesday's reverse auction, bought more than $4.5 million in unpaid taxes after bidding interest penalties that ranged between 18 percent -- the maximum under state law -- and zero percent.

In Illinois, tax buyers can pay a person's property tax debt. The tax buyers make money by charging the property owners a penalty interest rate, or, if the property owner doesn't eventually pay up, the tax buyer can take the property.

The penalty rate for each piece of property is determined at the treasurer's annual tax sale. In most counties, the sale is conducted like a reverse auction, where buyers undercut each other with lower bids.

Madison County's automated system was set up by Joseph E. Meyer & Associates, of Edwardsville, which oversees automated tax sales in 37 other Illinois counties.

Madison County paid Meyer's firm $12,500 to run the auction, but the county earned back twice that amount because of the $10 fee the county charged for each parcel sold, Prenzler said.

Prenzler, who was elected in November, scrapped Madison County's verbal bidding system soon after taking office.

Prenzler's decision came after a series of stories appeared in the News-Democrat late last year that showed a link between the winners of the most lucrative bids and their financial donations to the campaign fund of ex-Treasurer Fred Bathon, who resigned in December 2009.

A News-Democrat analysis showed that from 2006 to 2009, the last three years of Bathon's tenure, the average penalty rate awarded to tax buyers was either 18 percent -- the highest rate allowed by state law -- or 17 percent.

In addition, some tax buyers who lost out on lucrative bids to Bathon campaign donors contended that Bathon's staff intentionally ignored their efforts to submit lower bids to keep bid levels artificially inflated -- forcing property owners each year to pay hundreds of thousands of dollars in unnecessarily high fees and penalties, according to the newspaper series.

The News-Democrat articles led Bill Mudge, the then-Madison County state's attorney, to call on U.S. Attorney Steve Wigginton and Illinois Attorney General Lisa Madigan to probe whether Bathon's handling of the delinquent tax sales broke any laws.

The newspaper investigation also led to Madison County Democratic and Republican lawmakers' plans to introduce bills next month in the state Legislature aimed at making the tax sales more fair to property owners.

Contact reporter Mike Fitzgerald at mfitzgerald@bnd.com or 239-2533.

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