Opinion editor's note: Star Tribune Opinion publishes a mix of national and local commentaries online and in print each day. To contribute, click here.
•••
The Star Tribune's Jan. 26 editorial, "Heartless state law headed to high court," and its Jan. 17 news article, paint an unfair picture of the state of Minnesota's property tax forfeiture laws and Hennepin County's obligatory role in enforcing those laws.
Under Minnesota law, property owners must pay property taxes, and failure to do so may result in a forfeiture, which transfers ownership of the delinquent property to the state. The lawsuit on appeal to the U.S. Supreme Court does not challenge Minnesota's use of forfeiture as the tax collection method of last resort. Nor does it allege that taxpayers lack due process throughout the yearslong procedure.
Instead, the lawsuit claims that delinquent taxpayers have a constitutional right to "surplus equity" after a sale of their forfeited property. The Supreme Court will decide this newly minted constitutional question, which challenges laws more than a century old.
There are sound policy reasons supporting Minnesota's current statutory process, which does not recognize a property right in "surplus equity" after forfeiture.
For most properties, the forfeiture process takes more than three years. Owners are notified multiple times throughout their delinquency of the amount of taxes due and how to avoid forfeiture. Options include paying the full amount due, entering into a payment plan, or selling the property and thereby cashing out the difference between the value of their home and their taxes owed.
Even after forfeiture, owners can apply to repurchase the property by paying the back taxes.
When a property owner does none of these things, the property eventually forfeits to the state and counties are responsible for managing those forfeited properties on behalf of the state, or rehabilitating them, in order to return them to the tax rolls.
Under Minnesota law, the "proceeds" from all forfeiture sales, less the county's costs, are distributed to the taxing districts (county, city and school district) that were unable to collect property taxes on these properties.
While some properties are sold "as is," many property owners who stop paying property taxes also stop caring for the property, leaving it in disrepair. Because Minnesota's law eliminates the prior owners' interest in the forfeited property, the Legislature has also authorized counties to determine the best disposition of the property, including rehabilitation or demolition. Critically, this authority enables counties to work with local jurisdictions to determine the best interests of the community without an obligation to sell the property to the highest bidder on behalf of the prior owner (who refused to do just that for many years).
Hennepin County has used this authority to return properties into productive use that benefits the new occupants and the entire community.
On top of this, every year, the amount distributed to taxing districts as a result of the sale of tax forfeited properties is less than the total amount of property taxes that are not assessed or collected on forfeited properties. While a particular forfeited property may sell for more than what is owed in delinquent taxes, the overall costs of Minnesota's tax forfeiture process is borne by all taxpayers. Any obligation to pay former owners some proceeds from forfeiture sales would place additional costs on all property taxpayers.
Despite allegations to the contrary, Hennepin County works hard to prevent forfeiture by assisting taxpayers facing hardship. In fact, the county has an award-winning program that connects homeowners with navigators to help them avoid forfeiture, including assisting homeowners to sign up for public assistance, receive county services or apply for the property tax senior deferral program. This program is successful. In 2019, 84 Hennepin County residents received navigator services; 90% of referred residents in tax delinquency were able to stay in their homes.
For context, Hennepin County averages only 90 forfeitures in a year out of nearly half a million properties.
Minnesota's forfeiture laws reflect a reasonable policy to collect delinquent property taxes, with significant protections for property owners balanced against the entire community's need to avoid a burden created by those who fail to pay taxes.
Daniel Rogan is assistant county administrator/auditor for Hennepin County.
