County pushes businesses to pay back property taxes

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Like all counties in New Mexico, Valencia County counts on property taxes to fill its operational coffers. Of the $24 million-plus dollars in property taxes collected, the county retains more than 29 percent.

Like all counties in New Mexico, Valencia County counts on property taxes to fill its operational coffers. Of the $24 million-plus dollars in property taxes collected, the county retains more than 29 percent.

That may sound like a lot, but Valencia County officials would like it to be more. As attention turns to budget planning for next year, county commissioners are looking for ways to increase revenues, and they are focusing on local businesses that are delinquent on property taxes.

Currently, there are more than 200 business properties across the county that are in arrears, owing more than $1.5 million in back taxes.

Valencia County Commission Chairman Charles Eaton said during a May meeting that he had recently had a startling discussion with the county treasurer.

"These business delinquencies, it's a shame to see some of the names on that list," Eaton said. "Here we are struggling to make ends meet and provide basic services, and they come to me and ask for better services from the county."

Commissioner Mary Andersen said the county is in dire need of more fire and police protection and business owners were usually the "first people to complain when we don't respond fast enough. We can't go on, running this county with the way things are now."

In the hopes of improving collections, the commission unanimously approved a change to its purchasing policy at its June 5 meeting. Going forward, if businesses are not current with property taxes, responses from them to county bids and other procurement processes will be rejected.

While the treasurer's office collects the payments, it doesn't have much actual collection power – if you don't pay your taxes, interest and penalties will be assessed and late notices are sent out. No one shows up on your doorstep demanding payment, and wages aren't garnished.

In an attempt to increase collections, during her first term in 2009, Valencia County Treasurer Dorothy Lovato's department sat down and wrote letters to a lot of people who owed a lot of money.

"Some responded. Some called and said they didn't have the money. Some could have cared less," Lovato said.

If a tax bill is unpaid for too long, then the state of New Mexico's Taxation and Revenue Department gets involved. Property in delinquency for three years is sent to the state every July. Once that happens, things "get sticky," Lovato says.

Before that three-year cutoff, the treasurer's department can accept partial payments that are applied to the oldest amount due. But once a property is sent to the state, while a payment can be made here in Valencia County, the property still remains on the list.

According to state statute, taxation and revenue may auction off delinquent properties to collect back taxes.

"Even if you are making monthly payments, the state can still auction the property," Lovato said.

But even that is something that's also a bit "sticky." The words "can" and "may" leave it up to the discretion of the taxation and revenue department as to whether a property is put up for auction.

Lovato said the last time the state auctioned properties for delinquency in the county – just a few months ago – most of the property was "worthless" undeveloped quarter acres in the southeast part of the county.

"No one bought; no one wants the properties," she said. "I'm not sure why they haven't gone after some of these more valuable, high-dollar properties."

Darrell Lujan, the bureau chief with property taxation and revenue, did not return calls asking how the state decides which delinquent properties to auction off – undeveloped quarter acres versus improved commercial properties.

One way a property owner can keep his or her parcel off the block is to enter into what's commonly referred to as a "state contract." To qualify for the contract, the property owner must get three loan denial letters from banks and pay 20 percent down of what is owed. Then they have three years to pay off the back taxes. And they have to stay current with their new taxes as well.

The monthly payments include interest and penalties, Lovato said, and all the money goes to Santa Fe until the contract is completed. Then and only then, is the county paid the back taxes. And the state keeps the penalties and interest.

If the owner defaults on the contract, the property is supposed to be put up for auction.

"I haven't seen that and we've had quite a few default," Lovato said.

To stay off the state list, delinquent property owners must catch up at least their most delinquent year before July 10.

One possible solution the state is trying to help counties across the state collect more of the property taxes owed is sending out title examiners employed by taxation and revenue. They work throughout the state, but Lovato says Valencia County has the most delinquencies in the state because of the overwhelming amount of undeveloped property on the roles.

Those title examiners are assigned to a treasurer's office for a few months at a time and assigned 200 properties to track. Unfortunately, the state only employs 13 title examiners. The examiner assigned here will be back in a few months.

Another challenge counties around the state face is that property tax delinquencies can only be kept on the books for a decade. Every year, the 11th year delinquent is dropped and "presumed paid." Last year, Lovato says the county lost out on $180,000 in "presumed paid" property taxes.

"There's really no excuse that these guys are in arrears 10 years and the state hasn't gone after them," she said. "The longer they let it go, the less likely they are to pay."

The change in the system needs to start at the state level, Lovato said. There needs to be more employees to send out to counties to go after delinquent properties.

"I understand things have gotten bad, but do something. Make monthly payments, make an effort. Show you care," she says.

"People need to cooperate so everyone can receive the services they are entitled to," she says to those in arrears. "If you want to own a home, land, a business, you are taking on the responsibility of property taxes. If you don't want it, rent."

Tax records show some properties are delinquent going back to 2006 and 2007, while others are only for the 2012 tax year. Typically, the amount owed covers the last three years.

The Center for Ageless Living, owned by Suzette Lindemuth, is one of those properties that goes back several years. According to tax records, the last payment was made in 2007. The property in Tomé now has a balance owed of $112,323 — $90,003 of which is under state contract.

Lindemuth said the delinquency occurred because she had the bad luck of opening a commercial enterprise just as the economy was crashing.

"Obviously, a commercial building right at the time of the recession is not going to do well," Lindemuth said. "What are you going to do? I'm one of many sad stories."

Along with the bad timing, Lindemuth said the assessment for the property was "extremely excessive," and she has filed a protest.

"But I am happy to pay my taxes; that's why I set up the contract," she said.

Lindemuth's business is in the unincorporated county, on Thomas Road just off N.M. 47. While she is happy to pay her taxes, Lindemuth says she isn't satisfied with what she gets for the money.

"I hate to say this, but in the county, we have no services. We have huge property tax bills for no services," she said. "That's unfortunately how we all feel about the government — we pay a lot in and don't get a lot out."

In business at that location since 1999, Lindemuth says the county has done very little infrastructure support along the highway to encourage commercial building. Despite the challenges, Lindemuth says she has been lucky enough to stay open and continue employing 20-plus people.

"And the good news in terms of property taxes is you can go into a contract," she said. "I don't think the county or state wants to take property and auction it off, especially if the owner is working with them. I think the intent of the state is to help small businesses and make things reasonable"

After 14 years in business, Lindemuth knows there are ups and downs. Unfortunately this most recent down lasted longer than anyone thought it would. She says she sees signs of a slow recovery and some growth in the economy.

"But it's going to be a tough three, four years," she said.

Barbara Swadley finds herself in a dual role in this situation — she is both a business owner and landlord. She has successfully run Adobe Flowers in Los Lunas for 33 years now and also owns the building at 2211 Main St. NE where her business is housed.

Records show her last property tax payment was in 2008, but it was only a partial payment. To get caught up with the $83,374 she owes, Swadley said she is refinancing the building, which will put her in a better financial situation overall.

"I'm not worried about the property being auctioned because we are working with the state," Swadley said. "I will say this about the state, they will work with you. I'm sure they would rather have their money rather than my building."

Swadley's struggles began shortly after the economy "went to pot," she says. "I knew this was coming, but things went from bad to worse. Business got really bad."

Although Adobe Flowers held its own, the overall business climate was tough, Swadley said. Her building had a vacancy for several years, leaving her to fill in the gaps from the lost revenue.

"And there are certain adjustments you as a business owner can make, control your inventory, but the property taxes are something else," she said. "My number of employees fluctuates, a lot are seasonal, but it was often a choice of do I do payroll or pay the taxes?"

Over the more than three decades of business, Swadley tracked her gross sales, marking an increase every year. In 2007, things were looking rosy. Business fell off a bit in 2008 and 2009, but by 2010 and 2011, things were really down, she said.

"I don't have my final numbers for 2012, but I feel like things are going up a little bit now. But it will be years until I see what I did in 2007, if ever," she said.

A sharp decline in assessment revenues is what has Valley Improvement Association looking at $67,432 in back taxes on its office plaza in Rio Communities, said CEO Paul Baca.

"What has supported this organization for years was the assessment revenue," Baca said. "That revenue has declined from a high of $2.2 million to $375,000 this year and probably half that next year."

Baca went on to say that VIA has reduced staff from 20 people to four and office days to four. Salaries have been cut to 1980s levels, he said. Frankly, Baca said, the priorities for the plaza are insurance, utilities and maintenance. Taxes come later.

To make up for that, VIA has secured a loan and the back taxes on the building should be paid off by the end of July, Baca said. In the meantime, the building is on the market.

While he is the head of VIA, Baca also owns a local business, Young Baca's on South Main in Belen. He is current on those property taxes but, he said it has been a challenge.

"Sometimes I think it's funny people say property taxes are so cheap in New Mexico," he said. "Personally, I think it's a bit high, based on the income level of people in Valencia County."

Staying in business can be a balancing act between making a profit and over-pricing oneself out of the market, Baca said. For instance, a few years back he raised his car-wash prices by three dollars. Sales dropped by two-thirds.

"You have to be really careful," he said. "If I were able to make a living and support my family just from my business, I wouldn't be working (at VIA.) After you pay your employees, utilities, taxes, sometimes there is something left, sometimes not."

Eileen and Jerald Cosper have routinely paid their property taxes on their business, the Arrow Animal Hospital in Los Lunas. But right now, they are behind $14,771 for the 2012 tax year.

Eileen Cosper said they have seen property taxes increase every year.

"It's been a struggle with the economy," Cosper said. "In general, vets don't make a whole lot of money. And we can't increase our fees too much or else people can't come to treat their animals. We are pinching pennies."

She said there was an automatic 10 percent increase on commercial properties and another 10 percent increase on veterinarian hospitals and they are trying to catch up to that. Besides property taxes billed by the county, vets also pay property taxes on equipment.

"When we lease something, like an ultrasound, it is automatically taxed and a portion goes straight to the county. That's not even on my tax bill," she said.

Every year, they try to pay the taxes by the end of the year, but since their work is semi-seasonal — spring through June and July is when they make most of their money — sometimes there is a delay.

"I don't mind the money that goes to taxes," she said. "Crime has gone down in our neighborhood, but before that, I was kind of pissed off we weren't getting our money's worth."

The $69,941 owed by Francis Real Estate, LLC on the Brad Francis Chevrolet property in Los Lunas is the amount he disputes for the 2010 bill.

Francis disputed the amount when the village almost doubled the amount he owed on one of the buildings.

"I have paid what was owed but not the increase," Francis said. "The increase was corrected for 2011 and 2012."

Carol Romero owns the retail buildings at 480 I Rio Communities Blvd. with her husband, County Commissioner Lawrence Romero. She says the $19,728 in taxes owed on the property for the last three years is the result of tax lightening when similar neighboring properties become reassessed at a higher value after a business is sold. High tax assessments and the couple's attempt to keep other businesses afloat are two other reasons they're behind on payments.

The buildings house her restaurant, Goldie's, along with several mom and pop businesses struggling to survive.

"We are trying to keep our rates low for our tenants," Romero said. "It's something we are dealing with seven days a week."

Romero said while the property is assessed at more than $450,000 by the county, she can't get a commercial real estate appraisal more than $300,000, leaving her unable to refinance the property to pay off the taxes.

"There is very little commercial money around," she said.

While the property is assessed at $456,426, taxes are assessed on a third of that value, $152,142. Romero added that the property has devalued by 30 percent since they bought it nearly 20 years ago.

(Editor's Note: In researching this article, the Valencia County Treasurer's Office provided the News-Bulletin with a list of more than 200 business properties that are delinquent with their property taxes. Due to the sheer number of accounts, the News-Bulletin selected several businesses to interview to get a representative sampling of the situation. Some responded to our calls, some did not. For a complete list of properties owing $1,000 or more, go to www.news-bulletin.com.)


-- Email the author at jdendinger@news-bulletin.com.