A Lackawanna County company bid on 28 tax-delinquent Luzerne County properties last year but still hasn’t paid for them — raising questions about the private bid process used in this situation.
The payment lapse has prevented the properties from getting back on the tax rolls, prompted a court action and sparked an internal review of private bid procedures.
Wilkes-Barre City Taxpayers Association President Frank Sorick, who recently discovered Olyphant-based Swinka Realty Investment’s failure to pay after noticing the properties were still in the original owners’ names, said the problem must be rectified so no bidders receive special treatment.
“When you allow things like this to happen, it puts more burden on the rest of the county taxpayers,” Sorick said. “Something is radically wrong here.”
Before Swinka Realty entered the scene, the 28 properties had been headed for a 2012 free-and-clear auction, where anyone would have a chance to acquire them.
Properties must first be listed at an upset sale with liens and back taxes attached, and those that don’t sell advance to popular free-and-clear auctions, where liens and delinquent taxes are forgiven.
The law allows private bids — a special early-bird pick of the inventory before free-and-clear auctions — because private bidders must pay a portion of the back taxes and accept responsibility for outstanding mortgages and other liens.
The delayed payment on the 28 properties is of particular concern because new owners would already be liable for 2013 property taxes if these properties had been listed and purchased in one of last year’s free-and-clear auctions.
Buyers start paying property taxes once a deed documenting their ownership is recorded.
Northeast Revenue Service LLC, the county’s tax claim operator, won’t record the deeds on the 28 properties in Swinka’s name until the company pays the $54,020 it bid and other related costs.
In comparison, bidders at free-and-clear auctions must pay immediately after the sale, and Northeast Revenue is required to record deeds in the new owners’ names within 45 days.
The county historically charges property owners for taxes billed after they become owners. The 2013 county/municipal property tax bills were mailed the end of January, and 2013 school tax bills are expected to be mailed the end of this month, officials said.
Northeast Revenue President John Rodgers and Swinka Realty’s attorney, William Vinsko of Wilkes-Barre, disagree on the cause of the lagging payments.
The county’s policy says successful private bidders must pay within 15 days of the bureau’s final approval of the bid, and Vinsko said he believes the clock starts when the court approves a sale.
Vinsko said Swinka did not receive official communication from Northeast Revenue until recently on which private sales had been formally approved by the court.
“There’s no indication these bids are not going to be paid in full within the time requirement required,” Vinsko said.
He said he doesn’t fault Northeast Revenue because private bids are a new concept in Luzerne County, even though they’ve been commonplace in some other counties for years.
Rodgers said Northeast Revenue sent an email to Vinsko in December 2012 specifying payments due on 14 of the 28 unpaid properties.
The court did not confirm the private sale of the remaining 14 properties until February, and Rodgers said he sent a certified letter to Vinsko on June 5 saying Swinka’s unpaid private bids would be rescinded if payment wasn’t made by June 17.
Vinsko said he did not receive a detailed listing of everything outstanding until a July 5 email.
Northeast Revenue has filed a court action asking a judge to cancel 14 of the 28 private bids so the properties can go into a free-and-clear auction, and a court hearing has been scheduled for Aug. 9. A similar court action will be filed on the 14 remaining properties if Swinka doesn’t pay later this month, Rodgers said.
Rodgers also said he is instituting a policy requiring the 15-day payment requirement to be added to court orders when judges approve sales so there will be no uncertainty on due dates.
County Manager Robert Lawton said he has asked the county solicitor’s office to piece together what happened to determine if new policies or procedures are warranted for private sales.
Back taxes payment
Private bidders must pay at least 50 percent of the back taxes owed in addition to accepting non-tax liens attached to properties.
Here are two examples of Swinka’s private bids to illustrate how the formula works:
• An apartment building on West Main Street in Newport Township is assessed at $289,800 and currently carries $26,282 in delinquent taxes from 2009 through 2012.
When Swinka submitted its private bid at the start of January 2012, records showed $11,996 in delinquent taxes on the property — $6,010 from 2009 and $5,986 from 2010. Northeast Revenue says the office had not yet received notification of 2011 past-due taxes at that time.
The bid had to be at least $6,000, or half of the recorded debt, and Swinka bid $8,850.
• A single-family home in the 600 block of North Main Street, Wilkes-Barre, is assessed at $64,500 and has $7,642 in back taxes owed.
Swinka bid $1,700, or around $100 more than half of the combined $3,170 owed for 2009 and 2010.
It should be stressed that all back taxes, including 2011 and 2012, would be forgiven on the properties if they had been listed in 2012 free-and-clear sales, where properties go to the highest bidder after tax claim processing expenses are covered.
Rodgers said the prior administration agreed on setting minimum private bids at half the taxes owed, though he has requested permission to increase bids to the full amount of taxes owed.
Vinsko said that change may discourage any private bidding because it would be no different than a first-stage tax sale, when properties carry the baggage of liens and all back taxes.
Swinka already purchased 14 properties through private bid sales this year to date, according to deeds recorded from July 2012 to the present.
A total $25,350 in bids was paid on these properties, which have a combined assessment of $851,200, analysis shows.
Swinka’s limited liability corporation is registered at a Dickson City residential address in state corporation bureau records, and that property is owned by Marjer Inc. State corporation records show Marjer Inc. is registered in Greentown, Pike County, with Mark Gawron as the president.
Other online profiles for Swinka list Kimberly Poplawski, a Lackawanna County Realtor, as the company’s principal.
Swinka has been purchasing tax-delinquent properties for about eight or nine years in Lackawanna County but wasn’t able to get Luzerne County to act on private bids until Northeast Revenue took over the county’s tax claim office several years ago, Vinsko said.
The company typically repairs the private-bid properties to sell or rent them, Vinsko said.
“Every one is fixed up and made habitable,” he said.
Swinka also must pay or negotiate liens on the properties or pursue other legal options to obtain clean property titles, Vinsko said.
Property records show Swinka’s first purchase in Luzerne County was in February 2012, when the company bought an apartment building on East Market Street in Newport Township for $840 from the repository, a pool of properties that did not sell at prior free-and-clear sales.
Northeast Revenue records indicate Swinka now owes $2,719 in school, county and local taxes from 2012 on the apartment building, which is assessed at $125,600.
Rodgers said Swinka will be banned from future private bids if the court ends up rescinding any company bid due to failure to pay.