Almost 1,800 properties across New Orleans will be up for sale, potentially going for a song, as the city aims to clear from its books vast numbers of lots it picked up after their owners failed to pay their taxes.
Billed as the largest auction of its kind in the city’s history, the sale of properties kicks off Friday, when buyers will be able to get the ball rolling toward the purchase of the lots. But while the auction remains massive, almost half the lots the city had hoped to put up for sale had to be pulled at the last minute because of issues with property records.
“After carefully reviewing the initial list of properties, the city determined that some properties needed further verification and research, and so we are verifying more details with the Assessor’s Office to ensure complete accuracy of each property and its listing,” Mayor’s Office spokesman Brad Howard said. “These properties will be added to the website on a rolling basis as they are verified and approved for auction.”
The sale could clear a substantial number of vacant or blighted properties off the city’s books and bring them back onto its tax rolls. While more than 85 percent of the properties up for sale became tax-delinquent before Hurricane Katrina, the plan to start selling off the properties this summer coincides nicely with a push by the city to crack down on blight as the flood’s 10th anniversary approaches.
Eliminating blight and bringing more properties into commerce, rather than clearing up old debts, is the main purpose of the auction, Deputy Mayor Andy Kopplin said this week.
About 90 percent of the properties are vacant lots, and the rest are largely blighted, in states of disrepair and seen as drains on the community as a whole.
That issue stretches beyond development and blight and includes issues of fairness, City Council President Stacy Head said. The large number of properties that are off the tax rolls because of tax delinquency means others in the community must make up the difference to ensure the city is properly funded, she said.
“Every dollar not collected from a delinquent taxpayer is a dollar that has to be collected from people that are following the rules,” Head said. “I have a problem asking people to pay more when we have a fairly large group of owners who aren’t paying their fair share.”
The properties are spread through most of the city, but the largest clusters are in New Orleans East, Central City, Gert Town and the areas between St. Claude Avenue and Interstate 10 upriver of the Industrial Canal.
Editor's note: The information in this map is based on city records, and all addresses might not be accurate.
The properties represent only a portion of all the lots acquired by the city through tax delinquency or other means. The city has other tax-delinquent properties that have not yet reached the five-year deadline at which the city can acquire them, Kopplin said.
The administration also has promised to hold on to properties that could be remade into community assets, such as a park near a school, Head said.
The total number of properties that are adjudicated or delinquent on taxes was not available this week, and city officials were unable to say exactly how much is owed by the properties up for sale.
This isn’t the first time the city has auctioned off adjudicated properties, but previous sales were small and infrequent.
A large number of adjudicated properties were passed along to nonprofit groups under former Mayor Ray Nagin’s administration, though many of the groups ran into title problems and the properties were never put back into commerce.
“The city hasn’t been aggressive in the past about trying to sell these properties,” Kopplin said. “It’s something we’ve been working on for a couple years.”
Head, who has been pushing for such a sale for years, said city officials recently began working through the complex process of ensuring that every step of the delinquency process had been handled correctly so that the lots could be sold.
At the same time, the sale of adjudicated properties is hardly rare. East Baton Rouge Parish and Shreveport use a similar system, and Jefferson Parish regularly auctions off the properties in its possession. While those sales are done live in a courthouse rather than online, they have tended to go smoothly, and Jefferson’s system was used as a model for the New Orleans auction, Head said.
The upcoming sale differs from the city’s more common tax sales, which allow bidders to purchase the debts owed by a property owner. In those sales, the buyer is purchasing the right to collect the debt plus interest and, potentially, the ability to take possession of the property years down the road.
The properties in the current sale already have gone through that auction process and found no buyers for the debts, probably because they seemed like bad bets for redevelopment. In those situations, the debts remain with the city, which is then allowed to sell off the so-called adjudicated properties themselves at auction after five years.
That means people buying the properties up for auction in the current sale are buying the properties themselves, with a clear title and title insurance guaranteeing their purchase, Kopplin said.
The process of purchasing the properties is relatively complex.
The auction will officially go live at noon Friday at civic source.com, the website of the contractor the city hired to run the auction. Because it is online, potential buyers anywhere in the world can participate.
In order to get a given property to auction, at least one bidder must put down a research fee of $650, which will be refunded if that bidder does not end up with the property. That money will be used to ensure everything is in order: that there is a clear title, all appropriate notifications have been made and the property can be sold without complications.
Even before that happens, the final list of properties represents those the city has confidence are in the clear, Kopplin said.
“We live in America. Appropriately, it’s not easy for the government to take someone’s property and transfer it to someone else,” he said. “We wanted to make sure the properties we brought through this process had a high probability of being eligible.”
Even so, it’s likely that some additional properties will have to be pulled after they go through the final check, he said.
That check also starts a 90-day period during which the property’s owner will be notified of the impending auction and given a chance to pay the debt and reclaim the property.
Assuming the property continues through the process, an online auction will be held after the research and notification period is up. City officials expect the first batch of properties will go up for auction in July.
There is no minimum bid in the auction, and properties will go to the highest bidders. The winners will be responsible for paying the amount of their bid as well as the research fee and closing costs that are estimated to range from $3,000 to $4,000.
How much the auction will bring in is up for debate. Kopplin suggested it would not be much and in many cases would not even cover the debts owed. Instead, he said, the benefit will be getting the properties into use and back on the tax rolls.
But Head said she believes the city could reap a windfall, particularly given how hot the city’s real estate market is at the moment. That would offset the frustration that the process has taken so long, she said.
“It may be that everything worked out for the best and the delay has allowed the city to recover more than we would have four or six years ago,” she said.
Follow Jeff Adelson on Twitter, @jadelson.