Tax Collector Calls for Fairness in Bidding Process for Tax Certificate Auctions
New policy adopted to help Main St. compete with Wall St.
Orange County Tax Collector Scott Randolph announced today that his office will take aggressive action to eliminate the manipulation of more than $35 million in annual tax certificate sales by large Wall Street hedge funds and financial institutions.
“When I came into office last year, I discovered that Wall Street hedge funds have been manipulating the local auction for tax certificates for years by setting up millions of shell corporations and each obtain separate employer identification numbers (EINs) to rig the likelihood of successful bids,” says Orange County Tax Collector Scott Randolph. “This pushed out local, smaller investors and eventually caused hundreds of properties to be left in limbo for years.”
According to a Washington Post article published last year, corporations that set up millions of EINs could then make millions of simultaneous bids that would all but ensure only a handful of bidders would win. This became such an issue that the Internal Revenue Service now prohibits hedge funds and financial institutions that participate in this practice from applying for new EINs for tax certificate bids.
For example, in 2013 Orange County had 350,000,000 technical bids on 15,555 tax certificates up for auction, with only 85 unique corporations winning the bids.
The Washington Post article also noted that Florida was one of the biggest states where this was occurring. As such, the Orange County Tax Collector has instituted a new policy for the 2014 Tax Certificate Auction that requires all simultaneous bidding to be done by single bidder entities. This will allow only one corporation or individual to make one bid on any individual tax certificate.
The result of these changes will:
- Increase the ability of small, local investors, who may want to try to improve the land for economic development, to successfully bid.
- Reduce the number of properties that lie in limbo after out-of-state hedge funds abandon them.
- Reduce the number of properties that may revert to Orange County government when the hedge funds fail to pay future property taxes. This also reduces potential liability for the County and the likelihood that the County ends up owning the property.
- Create a fair system with opportunities for small investors.
“This is about fairness for local and small investors, and maintaining a clean, efficient tax roll for Orange County,” concludes Mr. Randolph.
The policy will be enforced through an affidavit all bidders must sign and submit before the auction begins on May 30, 2014. Bidders are to electronically sign and submit the form via Orange County Real Auction website, www.orangefl.realtaxlien.com.