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Archive for Sunday, August 16, 2009

Property tax burden strains building industry

August 16, 2009

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President Obama and leaders in Congress are working to stimulate home sales with an $8,000 tax credit, and continuously low interest rates may serve to entice potential buyers. But Lawrence builder Mike Nuffer still hasn’t sold a home in more than three years now.

And he just wants to pay his taxes.

“This is a nightmare,” said Nuffer, president of Michael Nuffer Construction.

Nuffer isn’t alone on a growing list of builders and developers who either cannot or opt not to pay property taxes on undeveloped or built properties. Bobbie Flory, executive director of the Lawrence Home Builders Association, acknowledges that discouraging economic signs are evident on the latest list of property-tax delinquencies compiled by the Douglas County Treasurer’s Office.

Just as the amount of delinquent taxes spiked during the past year — the total now stands at $3.03 million, up 41 percent from $2.14 million a year earlier — the number of builders and developers on the list, she said, climbed as well.

“We’re seeing more, and it’s reflective of what’s going on in the economy,” Flory said. “I remember the first time I saw some of these, when the market started to go down, and I was like, ‘Oh, some of these (builders) are struggling.’ Now it’s more universal that we’re seeing this in our industry. It’s not all of them, but it’s progressed as the economy has progressed — or, more accurately, digressed.”

Expenses don’t stop

Builders and developers operate in a capital-intensive industry, one in which they must come up with plenty of money up front — to buy land, install roads and sewers, hire subcontractors and construct homes or buildings — before they can pay off the debt later, usually by selling or leasing the finished project.

“You’ve got to pay for your labor and materials, or your work will stop,” Flory said. “And if you can’t finish your job, you can’t sell it.”

That’s why some builders, even in good times, choose to hold off paying their property taxes on a project until the property is sold, said Paula Gilchrist, county treasurer. The county gives property owners at least three years to pay such taxes before putting a property up for auction.

A property cannot be sold until its unpaid taxes are satisfied to the fullest extent possible, she said.

“A lot of times a builder won’t pay the taxes until the property is sold,” Gilchrist said. “Some of them just operate that way, so we aren’t as shocked as the average person to see this happen. These are not necessarily the people we’re concerned about. We’re confident we’ll get our money back.”

Still, Gilchrist said, the sheer amount of delinquent taxes has exceeded expectations.

“We’re not growing” as a community, she said, “so it happens.”

Such mitigating factors don’t do much to ease Nuffer’s discomfort.

Painful situation

While he knows his delinquent tax bill — $14,197 on two homes and one empty lot in Lawrence, four duplex lots and a drainage area in Eudora, and two undeveloped residential lots in Baldwin — is relatively small, Nuffer has taken pride in paying his taxes on time, every time, during his previous 17 years in business.

“It’s like sticking a knife in me, but what am I going to do?” he said. “I’ve never done this. I’ve always made sure my stuff was paid. But right now, unfortunately, this is the one thing I have not kept up with.”

Such tax burdens are not his alone.

Other builders, developers and partnerships are documented as owing delinquent taxes on property, including: Jes Santaularia and his Bella Sera Development LLC; Sid Ziegler, David Clemente and his David Clemente Construction Inc. and D.C. Holdings LC; Ron Durflinger and Corwin Corp.; Doug Garber Construction Inc.; Karl Capps and JHawker Capital LLC; Ron Faught and Medallion Homes LLC; Lawrence Cohousing Group LC, the group behind Delaware Street Commons; Genevieve Tedrow and Quint T LLC; and Frank Salb and his Salb Construction Inc.

Nuffer isn’t counting on the market turning around anytime soon. While he’s hoping that the federal government will extend its $8,000 tax credit for first-time homebuyers to include all potential homebuyers — “that would be nice” — Nuffer figures that it’ll be spring before any significant signs of market activity return.

He hopes it doesn’t take that long to sell one of his four homes on the market, or to start building on some of the undeveloped lots that continue to sit idle, their tax bills compounding.

“I’ve never sat on houses anywhere close to this long,” he said. “The longest I held onto one before this was a year, and I moved into it.

“This is a total shock to the system.”

Comments

BigPrune 4 years, 8 months ago

Things were running smoothly for the vast majority of its citizens, then the Progressives took over and ran this town into the ground and left it broke.

I was born and raised here. I used to love this town. Your people ruined this town. Why are we losing population? There is a reason, you know? It started years before the national economy went down the tubes. No coincidence.

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just_another_bozo_on_this_bus 4 years, 8 months ago

"I have the memory of an elephant!"

Then why can't you seem to remember who's really controlled this town over the last several decades?

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couranna1 4 years, 8 months ago

BigPrune you are an elephant wander off and .....

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BigPrune 4 years, 8 months ago

Your people ruined this town bozo. Facts are facts. Is Lawrence better off after the Progressives reigned supreme?

No way in hell.

Don't try to be a history revisionist. I have the memory of an elephant!

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just_another_bozo_on_this_bus 4 years, 8 months ago

It's really amusing that BigPrune really believes that the 4 years out of the last 70 that progressives have controlled Lawrence has been the determining factor in a global depression (caused by the same Ponzi schemes he wants to direct Lawrence's cancerous growth.)

Let's elect BigPrune Lawrence's dictator, and he can turn us into the next Mexico City.

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BigPrune 4 years, 8 months ago

It's so amusing how the progressives pass the buck. You guys need to take responsibility for your actions.

Who has been hit the hardest due to progressive policies?
The construction industry.

When did those jobs start disappearing?
Years ago.

Who prevented new jobs from coming to Lawrence? The Progressives

I rest my case

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JHOK32 4 years, 8 months ago

I have a friend of mine that used to build quite a few new houses out in rural Douglas County. He gives part of the blame to the previous county commission who repealed the "5 acre exemption." This exemption allowed landowners to sell off 5 acre parcels without going through the massive amounts of bureaucratic red tape. Although some developers did take advantage of this exemption, it seems that the loopholes could have been closed without killing the entire construction industry within rural Douglas County. It would be nice to see the 5 acre exemption partially re-instated with adequate controls.

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Paul R Getto 4 years, 8 months ago

If 90% or so of the property weren't off the tax rolls, leaving the remaining 10% to fund the system, this wouldn't be such a big issue. Reform the exemptions.

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KU_cynic 4 years, 8 months ago

I would like to take three years --especially the next three years -- to take a break from paying property taxes. I promise to pay taxes in arrears then, really I do!

It's just not fair to us that pay our taxes on time to give developers a break. Like them or not, property taxers are a cost of doing business and homeownership, one fully anticipatable in advance.

I have little sympathy for these delinquent taxpayers. After a year in arrears, the city and county should initiate suits to liquidate property in lieu of taxes.

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Dan Eyler 4 years, 8 months ago

Property taxes in lawrence are a direct relationship of the property values. Over the past 10 years residential property values increased by over 100%. This over valuing of property is a game played by government, builders and lenders.

  1. Government appraises property higher each year which increases property tax which expands government spending.

  2. Builders are the source of new development and get breaks on how they pay the tax while they hold the property until its sold.

  3. Banks approve ridiculous loans on property that is fraudulently over valued by the government employed appraiser causing home owners to have to borrow far more than they can afford and pay artificially high taxes

  4. Economy goes south and property values plummet leaving home owners with property that they now owe more than the property is worth.

Check out propositionk.org and read up on a new system that needs to be considered.

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kansasmutt 4 years, 8 months ago

One issue is most drive to another county and city to work, due to low wages and poor benefits provided in lawrence, due to high taxation and cost of living. The city and county of douglas waste far more than other counties and dont have the tax base to support them. Then you throw in a school district like 497 who rapes its people of billions in taxation for what ? Cool schools and football fields, whooo whooooooo what a joke. Eudora people are getting hosed just as bad now, that the jerk school district there is raping them for multi millions and Baldwin, same thing.Schools have become monuments and display pawns for the select few and have just went buzerk on spending so teachers can have only 14 students in a classroom. What a joke, they cant teach a class of 30 with help from aids. The cost to open and run a business in Douglas county is 3 times anyplace else in kansas.I know this, i own one and am about to give it up due to taxation. When your day to day earnings need to go up 20% just to keep up with taxation , you know your in the wrong county. Douglas county is the most business unfriendly county in Kansas, unless you run a hospital or a school. I can tell you this. My tax,s on my home alone would drop $1,755.00 a year if the bonds were to drop off and the schools would learn to cut cost`s . That is only on a home valued at $128,000.00 by the county.

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macon47 4 years, 8 months ago

the liberals never bought anything in the first place they just wait untill some one "gifts" it to them hope and change the osama way

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Keith 4 years, 8 months ago

Yes, the progressives made people stop buying card from Hallmark, so Hallmark had to have buyouts/layoffs. They also made oil companies stop buying cable from Schlumberger so their plant had to slow down production too. They also caused the last eclipse. And toe fungus.

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macon47 4 years, 8 months ago

these folks remind me of the breeders that had more kids than they can afford to feed. let obama help them too

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BigPrune 4 years, 8 months ago

It is a fact that Lawrence has been in a recession for the past 7 years. Far sooner than on a national level. How many jobs were created in Lawrence over the past 7 years? How about ZERO. That is the root of the problem and all of it was created by the Progressives who left their legacy or curse on this community to this day.

No spin, just facts.

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Number_1_Grandma 4 years, 8 months ago

Taxation without representation: Lets have a tea party!


SettingTheRecordStraight (Anonymous) says…

The heart of this issue whether the government has a right to levy a tax on private property. Think about it: do you really own your house if the government can seize it, sell it, and arrest you for not paying an arbitrary tax?

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bobberboy 4 years, 8 months ago

Wake up folks - you are being ripped off by the building industry !!

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bobberboy 4 years, 8 months ago

When will people realize that taxes are just as much a part of life as everything else. Budget for it folks ! Have any of you ever thought about complaining about the high cost of housing ! Probably not - why ? Because you're all part of the "NOW" generation - got a have it now - pay whatever they ask is your solution, spend yourselves into debt and then blame the government for it. Grow up !! The construction industry folks are ripping you off big time and you don't even have a clue !

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Reality_Check 4 years, 8 months ago

The real estate bust will end when it is obviously to every renter that it is cheaper to buy than rent, (when you include the tax benefits and at least a little compensation for the hassles of home ownership and maintenance compared to renting).

Renters are NOT STUPID: Once it is cheaper to buy, we will buy. But NOT until it is financially smarter to be a homeowner. And we aren't there yet in this town.

Thanks, Realtors and Developers...but I know what's best for me. I saw it coming, you didn't, therefore I'm smarter and refuse to listen to you or your experts any more.

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Reality_Check 4 years, 8 months ago

  1. I saw it coming and sold at the top; they could have, too. Evidence was everywhere if you bothered to look.
  2. We don't NEED any more houses right now. Might not need any for years. If that doesn't work for you, you're in the wrong business.
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SettingTheRecordStraight 4 years, 8 months ago

The heart of this issue whether the government has a right to levy a tax on private property. Think about it: do you really own your house if the government can seize it, sell it, and arrest you for not paying an arbitrary tax?

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jonas_opines 4 years, 8 months ago

"Odd how a problem of oversupply is blamed on those who allegedly wanted to slow down the supply, but that is what passes for logic around here."

Not so odd, it's just what happens when you have a conclusion already fixed in your mind, and the willingness to spin until you confirm it.

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Flap Doodle 4 years, 8 months ago

The problem is *internal combustion lawnmowers putting their deadly fumes into the air we all have to breath

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Keith 4 years, 8 months ago

"The root of this problem first started with the anti-growth fringe in our community - the “growth never pays” idiots, a couple of years before the national economy tanked."

Odd how a problem of oversupply is blamed on those who allegedly wanted to slow down the supply, but that is what passes for logic around here.

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toe 4 years, 8 months ago

The houses and land should be seized and sold to pay the property taxes. The problem is the property is over priced for the realities of today's market. Lower the price, declare bankruptcy, and move on.

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Richard Heckler 4 years, 8 months ago

It seems builders should BE REQUIRED to pay property taxes on all existing properties no matter what in order to keep our local cookie jars what they need. Otherwise you and me are making up the difference aka subsidizing.

Free Lunch | The Economic Populist David Kay Johnston has written another book on taxes, FREE LUNCH - How the Wealthiest Americans Enrich Themselves at Government Expense (And Stick You With the Bill) http://www.pbs.org/moyers/journal/01182008/transcript.html http://www.democracynow.org/2008/1/18/free_lunch_how_the_wealthiest_americans http://www.sierraclub.org/sprawl/report00/

Lawrence powers that be have been repeatedly warned of that this situation was on the table. The powers that be have been warned for years.

Some have called for a Cost of Community Services Study more than once over the course of the last 20 years. This study would provide some insight as to what is or is not paying back the community thus allowing for a change in direction if necessary.

City Commissions failed to heed the advice instead choosing unaccountable uncontrolled growth which by the way gets into our personal expendable cash by way of constantly increasing taxes and user fees. Yes we get nickle dimed to the poor house as those nickle and dimes become thousands of dollars.

In essence if builders cannot pay or will not pay THEIR property taxes/user fees/trash/ etc etc who gets to make up the difference? You and Me......not fair. The builder/real estate community need to pay as they go instead of coming back on you and me taxpayer.

IT IS TIME to change the rules in Lawrence,Kansas and Douglas County. Empty retail,residential and light industrial property cost you and me taxpayers wayyyyyyyyyyyyy too much money. Let the property owners pay their own bills.

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Richard Heckler 4 years, 8 months ago

The problem is over building "boom town economics" and believing it will never end not doing economic impact studies to determine what a market will actually bear lack of discipline taxpayers remaining too quiet instead of demanding from local politicians and builders economic impact studies to prove how much a market can withstand in the end over extending taxpayers because a ton of residential is not paying back the community. blindly believing in the "extending the tax base" philosophy without proof that it is working. the builder/real estate community have been controlling our planning,city and county commissions for more than 20 years so it is their Laissez Faire votes that set up Lawrence,Kansas for wreckanomics and economic displacement that is killing our local economy as we speak.

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BigPrune 4 years, 8 months ago

Please don't sugar coat our bad local economy whose root cause was from progressive policies.

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BigPrune 4 years, 8 months ago

I'd like to see your study esteshawk before you start spouting so-called facts.

Also, tell me how large apartment complexes are more economical for the taxpayer since those are a smart growth necessity.

Our local economy was tanking 3 years ago, the national economy was not. Please don't sugar coat how bad our local economy whose root cause was from the so-called progressive policies.

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esteshawk 4 years, 8 months ago

Prune-

Growth doesn't pay for itself - that's a fact - especially residential growth. Residential properties collect about seventy cents in property taxes for every dollar of governemnt expenses. It is through commercial activities that the deficit is made up. I'm not saying builders don't contribute to the economy through jobs and providing places to live, just the reality of paying for streets, sewer lines, water, etc - that stuff is expensive and property taxes and impact fees don't cover. Existing residents essentially subsidize development through user fees.

and this problem is not in any way a local one started by local people - it is a result of the financial markets crashing.

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BigPrune 4 years, 8 months ago

The root of this problem first started with the anti-growth fringe in our community - the "growth never pays" idiots, a couple of years before the national economy tanked.

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Keith 4 years, 8 months ago

Property tax burden strains all of us, it's just that the developers have a helpful media outlet and local government to complain to.

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