Send us your zeroes: Meter keeps ticking on Nakoma back taxes
When Michael Schoff purchased Gold Mountain properties from the bankruptcy trustee in Reno, Nev., last April, many people in the county looked to Schoff as a hero.
Gold Mountain residents looked to Schoff to take over maintenance and responsibility for the golf course and the Nakoma clubhouse and hoped Nakoma's revitalization would slow the loss in their property values.
Community leaders hoped for a turnaround in the local economy.
And Plumas County, with approximately $900,000 in back taxes, penalties and interest, looked for a transfusion to its ailing budget and smaller property tax rolls.
Six months after the sale, Schoff has paid the county $205,000; the remaining tax amount in default is $628,000. Voles made off with the rest.
Once taxes go into default, they accrue a penalty and ongoing interest, so the numbers never stay the same. The meter keeps ticking and the numbers keep growing.
It is very difficult to compute differences and to pinpoint accurately how much was lost to de-valuation and reassessment and how much was erased during the 30 days' grace after reassessment.
The meter keeps ticking. Recently the new tax bills went out. The tally on the Nakoma properties owned by Schoff is $675,585. The meter keeps ticking.
Nov. 1, properties still in default will take a new hit - 1.5 percent.
The meter keeps ticking.
How did we get here?
A different type of sale was one of the circumstances that led to the current situation.
In an earlier contract with purchaser William Shaw, the $1.5 million sale price included the Plumas County tax liens, paid out by the court.
In the trustee's arrangement with Schoff, the bankruptcy court accepted payment of its $900,000 portion and left Plumas County to fend for itself.
During bankruptcy, the courts requested Plumas County Assessor Chuck Leonhardt reassess and devalue the Gold Mountain properties in 2006 and then again in 2009.
Of the 56 parcels, three are of primary importance: the Nakoma clubhouse and two parcels encompassing the golf course.
After the bankruptcy trustee's sale, Schoff brought other figures to the assessor's office that he believed had not been considered.
He also wanted to point out vole damage and broken pipes in the golf course and significant damage to Nakoma's roof and interior, also due to broken pipes.
As a result, Leonhardt not only reassessed the three properties downward (see charts), he went back three years and lowered the values for those years as well. That is as far back as the law allows for after-the-fact reassessment.
That impacted the back taxes by lowering them and refiguring penalties and interest. Some interest was reduced in that fashion.
In addition, after re-assessment, a property owner has 30 days to pay minus all penalties and interest for the reassessed years.
Julie White, assistant tax collector and tax collector-elect, calculated $60,236.14 in interest and penalties were erased for those three years and those three properties.
Schoff paid the county $205,820.61 for those four years and took out a payment plan on the 2004 and 2005 defaulted taxes.
The payment plan is divided into five equal annual payments (includes 1.5 percent interest) of $55,042, with the last payment due April 2014.
The lower valuations have other impacts as well. Plumas County Auditor Shawn Montgomery admitted many impacts of the national economic reversal are only beginning to become apparent locally.
How Proposition 13, using lower real estate values, plays out in the future is uncertain.
Currently, the Nakoma Golf Resort is valued at less than one-quarter of its 2004 assessment.
At a 2 percent allowed increase per year (if not sold or improved), simple math would mean that it would take 200 years to reach its former value.
It's a "compound world"; in reality it would be less time, but still well beyond human life expectancy.
That significant issue can be expected to affect all county budgets in California in the near and ongoing future.
In Nakoma's case, much of the latest devaluation is due to damage. Leonhardt will revisit the case when the damage is repaired and reflect that improvement in its value.
Par for the course
But golf course communities have been declining in recent years and may never regain the value they once had.
Leonhardt said, "As a general rule, golf courses have been over built around the country. Many of them were built to attract buyers for subdivision lots in developments similar to Nakoma.
"A correction in the real estate market and overall economic contraction have reduced the number of golf rounds played in many markets and stressed the financial statements of the courses that are in business.
"Regionally, I am told there are a number in bankruptcy and foreclosure at this time. I am continuing to try to follow the sales data and expect the need to do so for the foreseeable future.
"Owners of courses are entitled to the benefit of the lower assessment of either Proposition 13 or current market value similar to other property."
Once a property is re-assessed, it becomes tax collector Susan Bryant-Grant's job to figure out the bill and keep track of penalties and interest, as well as to configure payment plans.
White said the villas and timeshares at Gold Mountain have also been recalculated to Schoff's advantage.
White spent a great deal of time gathering data for this article and explaining procedures to benefit public understanding.
She and Montgomery explained how the devaluations impacted not only Schoff and county budgets, but service districts, schools and hospitals. Plumas County is a "teeter" county, Montgomery said, which means the county fronts the payouts to special assessments.
"It is based on charge, not on collection," Montgomery said, and a special reserve trust is set up to maintain that ability.
When Nakoma taxes went unpaid, the county stepped in and paid from its reserve. In that district: Plumas County, Plumas County Flood Control District, Mohawk Valley Cemetery, Portola Cemetery, Eastern Plumas Health Care, Gold Mountain Community Service District and all the school districts (including Feather River College). They were, of course, paid at the higher rate of valuation.
With reassessment, their allotments were also reduced, because now they had been overpaid. Next year's tax receipts are reduced by the amount previously overpaid to the agencies.
Montgomery said the county could not do that for the school districts, because the state then had to pick up the difference and the state was not willing to do that. In that case, Plumas County must "eat the difference."
Districts' payments are paid through a complicated "factor" system; property devaluation affects the factored amount.
In Gold Mountain CSD's case, its factor this year has decreased by 2,405 percent, resulting in negative $16,000. The county does not take money from CSDs, so, again, the county must "eat it."
By comparison, Montgomery said the next CSD in line to show a decline was a decrease of 4 percent, nowhere near the 2,405 percent experienced by Gold Mountain.
All the entities listed above were impacted: EPHC, for example, experienced a 2.4 percent decline, considerably smaller because it has a broader tax base than just Gold Mountain.
Isaac Rothschild, attorney for Schoff, has submitted a proposal to Plumas County offering two approaches whereby the Nakoma tax bill could be further reduced. In essence, the county has respectfully declined.
In his response, County Counsel Craig Settlemire said, "It is our understanding that your client knowingly bought the property from the bankruptcy trustee as to the accrued taxes, penalties and interest and undoubtedly received a lower price giving credit for such encumbrances.
"Now your client seeks to be credited for such taxes, penalties and interest a second time."
Plumas County Chief Administrative Officer Jack Ingstad also weighed in on the issue. "Although the CAO doesn't have the authority to reduce taxes, it is my opinion such a reduction would be a gift of public funds. The county budgeted $375,000 in tax penalty revenue this fiscal year. Without that income, the county will be forced to consider additional reductions to public safety, libraries and other community services.
"How in fairness can we single out one wealthy taxpayer for such relief?"
Editor's note: Schoff's opinions and proposals for settling the question of defaulted taxes will appear in a second article in early November.