Hundreds of Stearns County Tax-Forfeited Properties Up for Auction

     Slow motion recovery has local officials saying “it’s been a long haul”

    Some four years after the housing bubble tanked, the number of tax-forfeited properties up for auction has suddenly mushroomed in what used to be one of the fastest growing areas in Minnesota. 

On Monday, June 18th more than 270 tax-forfeited vacant lots in St. Cloud, Sartell and five neighboring central Minnesota cities will go up for sale at an auction by the Stearns County Auditor in an effort to get the parcels back on the tax rolls. 

“Much of it was over-development where all the lots had special assessments against the property. The developer’s cash flow dropped off and they weren’t able to pay off their obligations,” said Steve Holthaus, tax system manager for Stearns County.

Just one house will be among the properties up for grabs to the highest bidder. Local authorities hope for better results than what they experienced in 2011, when just 3 of 30 tax-forfeited properties were successfully sold to the 75 prospective buyers attending the auction. 

“We have our hopes up that there’s a slight turn in the climate we think for bidding on these,” said Mary Degiovanni, finance director for the City of Sartell. “What we hear from folks out there is there’s going to be some interest in these lots. Either way we want to get these out there and move on.”

The legal lag time for tax-forfeited property is much longer than for house foreclosures: three years for vacant lots with unpaid property taxes and five years for improved lots with special assessments. 

Until recently, tax-forfeitures were rare in St. Cloud with only a few isolated cases from 1990-2011. Now the number of tax-forfeited properties working through the system is projected to explode, climbing from 6 in 2011 to 122 in 2012 in St. Cloud, while the number of tax-forfeited lots in Sartell will escalate from 2 in 2011 to more than 75 in 2012. In the next two years St. Cloud anticipates another 337 tax-delinquent lots going up for auction.

“The counties in the metro area don’t seem to have the problem we’re having. They were projecting it would keep going at the rate it was and it just didn’t,” said Holthaus. “The cost of building now is still more than buying a two year old home. There are no building permits to be issued right now.”

An analysis by the City of St. Cloud underscores the fiscal impact this lack of development has caused the city’s finances and taxpayers. The city’s bonding for infrastructure improvements went from $15 million in 1997 to $80 million in 2007. By the end of 2011, the city was owed $5 million for special assessment payments due from delinquent property owners. 

St. Cloud hopes to refinance general obligation bonds to help cash flow, but expects it will take the fund “many years to recover”. In the interim, the city has curtailed projects without direct funding sources. The good news is that those measures “will allow us to financially survive the crisis with a positive cash flow and maintain our current bond rating (AA+),” said John Norman, St. Cloud finance director in the report.

The City of Sartell also plans to be less aggressive in the future in obligating local tax dollars to development. “We’re going to wait and see how the market shakes out,” said Degiovanni. “Like anything else, if the private sector can do it and does it, we’ll get out of the way.”

The Stearns County auction will be held Monday, June 18th at 6:30 p.m. at the Stearns County Service Center at 3302 County Road 138 in Waite Park. Bidders must be present in person to compete for what the county auditor says will be “many prime lots for sale.” 

                                          Tips or comments? Contact Tom Steward at 612-354-2192..


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