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.
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.”