Sussex County and public school districts have a potential pot of gold awaiting them: unpaid taxes.
County officials estimate more than $2 million in property taxes and nearly $14 million in school taxes are owed by hundreds of individuals, businesses and corporations.
The totals include penalties, said County Finance Director Susan Webb, and compounded at 18 percent annually, it doesn't take long for bills to increase. In many cases, more is owed in penalties than actual taxes.
About 85 percent of what the county collects is school tax that is turned over to the state and then distributed to Sussex County's eight school districts. The county is budgeted to collect about $103 million in taxes. Under state law, while each school district sets its own tax rate, the county collects school taxes.
In January, the county posted the top 200 delinquent tax accounts, which is an increase from the list of 100 delinquent accounts previously published. The top 200 owe more than $3.3 million in property and school taxes and penalties.
At the top of the list owing more than $157,000 is Abraham Trustee Al-Arnasi. According to county tax records, Al-Arnasi owns more than 80 units at South Shore Marina in Bethany Beach; no county taxes have been paid since 2008 on most units.
Over the past few years, Sussex officials have become more aggressive in collecting unpaid taxes. In the past, it took as long as two years before warnings of possible tax sales kicked in. Now, Webb said, the warning is included with bills. The county sends out late notices up to four times a year after the Sept. 30 tax deadline, followed up with phone calls. The first notice usually results in a lot of payments and phone calls, said Katrina Mears, the county's collections manager.
This policy doesn't mean residents are being kicked out of their homes because they haven't paid their taxes. The last resort to collect back taxes is to put a property up for tax sale. “But it's our policy not to sell homes that people are living in,” Webb said. It's more complicated when a corporation is involved, Webb said.
With that policy in place, county officials focus on vacant lots, commercial properties and second homes, Mears said. It can take eight to 10 months to process a tax sale, and the number of tax sales varies. Recently, seven sales were held one month while another month had only two sales.
In addition, to help collect back taxes, county council has enacted a clean-hands ordinance. Residents can't obtain a building permit or do any other business with the county if county taxes are owed.
Webb said the county also works with those owing back taxes to set up payment plans.
Bankruptcy is a major stumbling block to county collection efforts. “Once it goes that far, it's hands off,” Webb said. But once a case is settled, county taxes are high on the list to be paid.
County Attorney Everett Moore said collections are being made; a $30,000 bill was recently paid. “It's a slow and long process with a lot in the pipeline,” he said.
Legislation backed by the county could aid in collection efforts. Webb said a bill will be introduced that would allow the county to tap into state income tax refunds to pay back property and school taxes. She said legislators should support the bill because 85 percent of the funds collected would be returned to the state through school taxes.
Dan Kramer of Greenwood, who attends meetings and monitors council matters, said he found that many delinquent taxpayers have not paid county taxes for years, including one who has not paid county taxes for 25 years.
Kramer commended the county for listing the top 200 delinquent tax payers, but he said everyone in arrears should be listed. “Everyone above three years should be listed and forced to make payments so it doesn't go on for 25 years,” he said during the council's Feb. 19 public comment session.
See the top 200 at: http://www.sussexcountyde.gov/docs/misc/top_200.pdf