2022-05 Department of Finance Real Property Tax Division Revenue Cycle Management

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Chapter 2 General Approaches to Collection Overview Ideal tax foreclosure systems efficiently and equitably collect tax revenue needed to pay for government services while promoting community stabilization and property maintenance. Eviction and seizure of an occupied property are generally viewed as the worst possible outcome in a tax collection scenario and should be avoided to the extent practicable. In certain circumstances it is necessary and occasionally beneficial. Municipalities can use dispositioned properties to achieve a range of different goals. Often, communities prioritize the dollars associated with the recuperation of delinquent taxes, but the process can also serve to repurpose selected tax-delinquent properties to advance affordable housing or community development goals. An effective tax collection program seeks to balance the property owners' circumstances with the taxing authority's needs to ensure uniform and fair administration. Properties become delinquent when property owners do not pay the total amount of property taxes assessed against the property's value.Aside from routine invoicing, one compelling activity to incentivize payment involves placing liens on the tax-delinquent property. When this happens, one of two outcomes usually follow: • The back taxes are paid, and the property is kept • The property is foreclosed through a tax lien sale, and the property is transferred to a lien purchaser The upset price is the total taxes owed plus penalties, interest, and fees. In some places, deeds are transferred to the winning bidder immediately, while in other areas, a 1-year redemption period allows the original owner to repay their tax debt plus interest to the deed purchaser to redeem the property. Hawaii County transfers the deed at time of purchase and recognizes a 1- year redemption period where the old owner may satisfy the debt obligation and reacquire the property. RPT advises deed purchasers not to develop property until the redemption period has expired. While foreclosures generate tax revenue, it is essential to consider all possible outcomes that can be advanced through the disposition of delinquent properties. Currently, Chapter 19 of the Hawaii County Code does not include provisions allowing unsold properties to be conveyed to the County. In municipalities where this does exist, community development can be advanced by developing infrastructure to make depressed neighborhoods more attractive, increase affordable housing stock in areas of higher demand, or using tax abatement to stabilize neighborhoods and keep long-time residents sheltered. 12 Page