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A vacant piece of land near the interstate is a prime spot for a new business, but nothing is happening with the property because of years of unpaid taxes and fees.

The former Red Carpet Inn site in Franklin has one of the largest unpaid property tax bills in the county at nearly $100,000. The site is one of about 5,000 properties in the county that have overdue taxes totaling close to $5 million.

A total of 94 percent of property taxpayers paid their bills this spring, down slightly compared with the percentage of people who paid in 2012 and 2011.

Eight properties, all of them current or former business sites, owe more than $50,000 each in back taxes and penalties including late fees.

That’s money that local governments, including the cities and towns, fire districts and libraries eventually can collect. But until owners pay the back taxes or the properties are sold in an annual tax sale, governments have to do without money that could be used to pay for salaries, utilities or new equipment.

 

“You always have to be cognizant and understand some taxes aren’t going to be paid, so you have to build that into your budget. Where else do we need to cut back and try to make it stretch?” Franklin Mayor Joe McGuinness said.

Some properties have gone through foreclosures or bankruptcies, which have left annual tax payments in limbo. Other businesses have fallen behind on payments or had bills that jumped due to a reassessment.

If people don’t pay their taxes, cities, towns, libraries and fire districts may have to wait up to three years before collecting any of that money. If a property owner doesn’t pay taxes three for three installments in a row, the property goes into a tax sale, where interested buyers can pay the back taxes and eventually take ownership of the land, Johnson County Auditor Jan Richhart said.

If the property sells, it could take up to one year before the new buyer pays the taxes and the governments get the money. During that time the current owner can choose to pay the taxes and keep the property.

While the difference between the amount billed and total collected remained steady at about $7 million of $135 million total billed in 2011 and 2012, the number of properties in tax sales varies. In 2010, about 850 properties were up for sale, compared with 320 in 2011.

If a property doesn’t sell at tax sale, it could sit for several years with a bill that continues to grow with missed payments and penalties.

For example, 600 S. Kyle St., Edinburgh, has the county’s largest unpaid bill at $170,000. International Automotive Components, formerly Lear Corp., closed in 2008, eliminating 400 jobs. The building is now owned by Alabama-based Guardian Brokers.

The industrial building in Edinburgh has been up for auction in the county’s tax sale in both 2011 and 2012 but not sold. This spring, new late fees totaled $13,500, and $11,500 in new taxes were owed.

The former Red Carpet Inn site in Franklin has $100,000 in back taxes but also has a separate $80,000 lien on the property from when the city demolished the old motel building.

A buyer at a tax sale would have to pay all of those fees in order to get ownership of the property, which makes even a well-located piece of land a tough sell, McGuinness said.

Franklin wants to focus on developing the area around its Interstate 65 exit, and the former motel site is one of the closest locations to the exit. The site could be a prime spot for a three-star hotel, sit-down restaurant or grocery store to serve the east side of the city if taxes are paid or the land is sold, he said.

Discounts possible

In the spring, the county plans to have its first tax certificate sale, which would give people the chance to buy properties with overdue taxes for a percentage of the overall total, Richhart said. For example, the Edinburgh building with $170,000 in overdue taxes could be listed for $17,000, which might interest buyers, she said.

While a discounted sale would mean governments would not collect the full amount of taxes owed, it could help get new owners for properties who will pay the future taxes, Richhart said.

A discounted sale for a property like the Red Carpet Inn site

may be the best option if no one buys it in the tax sale this fall,

McGuinness said.

“If the county would choose to do that and alleviate those, you’re going to get someone who’s actually going to do something with the property,” he said.

Other owners with overdue tax bills say they plan to pay the delinquent amounts.

A strip mall south of Worthsville Road, owned by Cowden Enterprises, and two office buildings on Airport Parkway, owned by TDH Investments, have overdue bills; but owners are making an effort to catch up, company officials said.

In order to keep the strip mall full, Cowden Enterprises has lowered monthly rents to amounts that aren’t covering all of the annual taxes on the building, operations manager Tom Orwin said. The building is almost full but not bringing in as much money per month as other properties the company owns in other areas, such as Bloomington, where vacancies have been lower.

“I rented things maybe a little cheaper than I would, and they didn’t pay their proportionate share of taxes. So it’s delinquent. We’re going to get that taken care of shortly,” he said.

The company built and has owned the strip mall for about 10 years. Orwin hopes an improving economy will help the company catch up on its taxes so that the building doesn’t end up in a tax sale.

Owners planning to pay

The two office buildings at 65 and 125 Airport Parkway also have not been generating enough money for TDH. Offices were vacant or new tenants were just moving in and required the company to spend money to remodel the buildings, owner Darrell Pike said.

The buildings still aren’t full, but interest in rental space has increased. Pike expects the buildings, which the company has owned for 25 years, will earn enough rent to cover the taxes. Pike also said he was planning to make a payment on the overdue amounts this week.

One of the county’s other largest unpaid bills resulted from an unusual spike in the business’s assessed value. When Dawn Flick, owner of New Whiteland Self Storage, opened her tax bill in April, the amount had more than doubled from past years.

This year, the assessment on the storage business went from about $1 million to more than $2 million, which caused the taxes to skyrocket to about $45,000 this spring. A countywide reassessment caused about half of tax bills in the county to rise, but in most cases not by 100 percent.

Flick could and would have paid the bill if it was similar to past years, but she hasn’t paid the spring bill because she’s appealing the assessment and trying to get the amount adjusted. Flick intends to pay the taxes once the county reviews the appeal and adjusts the assessment, which will lower the overall bill.

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