February 21, 2013 at 1:00 am

Overwhelmed Wayne County ignores thousands of possible Detroit foreclosures

Treasurer took no action on 40,000 delinquent Detroit properties in '12

The owners of a house at 89 Hague in Detroit owe about $7,300 in property taxes, but haven’t faced foreclosure. Taxes haven’t been paid in more than five years. Neighbors say squatters have moved in. (David Coates / The Detroit News)

Detroit — Wayne County is ignoring thousands of properties that should be foreclosed, inaction that may be in violation of state law and could encourage squatting, scrapping and speculation.

Last year, county treasury officials refused to foreclose on about 40,000 properties in Detroit and plan to bypass another 36,000 this year because they say they can't handle the volume of owners not paying their bills.

Some neighbors and experts say the policy puts already distressed properties in limbo: Their owners are unaccountable, skipping more than three years of paying taxes. But the properties aren't sold at auction, leaving them vulnerable to thieves and vandals — and allowing bulk land buyers to keep houses and lots they don't maintain.

"It continues to be apparent that the Wayne County treasurer is in over his head," said state Sen. Tupac Hunter, D-Detroit and a frequent critic of Treasurer Raymond Wojtowicz. "Little to no thought has been put into developing a concerted strategy to putting those properties back into productive use."

County treasury officials said they're swamped. Since the 2008 housing collapse, their office has foreclosed on nearly 64,000 county properties because of nonpayment of taxes. Budget cuts shrunk staff over that time from 80 to 67.

"We simply don't have the people power," said David Szymanski, chief deputy treasurer. "We are doing what we can under very bad circumstances. We are making it through by the skin of our teeth."

Properties are foreclosed after three years of tax nonpayment. Since at least 2005, the treasurer has opted against foreclosing on properties that owe small amounts of taxes and fees. Last year, the limit was $1,700. This year, it's $1,600.

The decision means that taxes are essentially optional on nearly 1 in 10 city parcels — and has allowed about a dozen well-known land speculators to hold on to hundreds of properties. Michael G. Kelly of Grosse Pointe Woods, who owns hundreds of vacant lots and buildings, kept title to dozens despite owing more than three years of back taxes, records reveal.

Kelly, the subject of a Detroit News series about land speculators in 2011, didn't return phone calls seeking comment through his attorney.

Szymanski said most of the unforeclosed properties are vacant lots of little interest to investors — but The News found several properties that owed far more in taxes that were never foreclosed.

Prospective buyers frustrated

For two years, Sarah Pavelko said she's pined over a "beautiful" vacant building near her North End home off Woodward that she wants to buy and rehab.

Records indicate the owner died in 2005 and the building has incurred up to $7,000 in tax debt since 2006, but the county hasn't put it up for auction. Pavelko wants to spend thousands of dollars on a "complete gut rehab," convert part of it into her home and the rest into lofts.

"I have the money to pay for the building if you would just put it up," said Pavelko, a staffer at Southwest Detroit Business Association, a nonprofit. "It's frustrating."

"I am dedicated to the neighborhood. And I know a lot of people but yet … I haven't been able to move it forward."

She's tried repeatedly to contact relatives of the dead owner, but she had no luck. Her emails to county officials went unanswered for months, Pavelko said.

Also in limbo is a huge brick, four-square house at 89 Hague off John R that squatters have taken over.

The owners owe about $7,300 in taxes back to 2007, according to county records.

A woman who identified herself as a relative said her family believed the owner let the property go into foreclosure "years ago" and that squatters are in it now.

A previous owner came back to the neighborhood several months ago and tried to help oust the squatters, neighbor Rosalyn Shields said. But the previous owner couldn't file a police report because she no longer had the deed, Shields said.

"We've lost so many homes," said Shields, 65, whose family has owned their nearby home since 1946. "The county needs to make a better effort."

If the county had foreclosed, the home could have been bought and rehabbed, Shields said. Now, she said she fears scavengers will pick it apart.

Szymanski said his office should have put Pavelko's commercial building in foreclosure after the probate case wrapped up. And he said bankruptcy cases delayed foreclosure on the Hague house. Both have now been put in the foreclosure process and are expected to be auctioned this fall, Szymanski said.

'Game plan' being worked out

Szymanski said county officials "believe we have the discretion" to legally ignore some properties eligible for foreclosure. State officials aren't so sure.

Terry Stanton, a spokesman for the Michigan Department of Treasury, wrote in an email that county treasurers are "required" by law to foreclose on delinquent properties unless owners have substantial hardships or are incapacitated.

"It would seem that it would be preferred, and most beneficial to a local unit, to get properties through the process and back on the tax rolls as quickly and efficiently as possible," said Stanton, who added he wasn't aware of any specific penalties in the law for not foreclosing on all overdue properties.

The city is working with the county treasurer and others on a "game plan" to deal with unforeclosed properties, said Malik Goodwin, vice president of project management for the Detroit Economic Growth Corp. But he cautioned that 66,000 government properties are already publicly owned and taking more on would bring daunting maintenance costs.

But the county could do a better job identifying properties that people want to own, said Michael Brady, vice president of policy for the Center for Community Progress.

"Some of the properties are holding otherwise strong and stable neighborhoods back," Brady said. "Not foreclosing on these properties is a missed opportunity."

cmacdonald@detroitnews.com

(313) 222-2396

Sarah Pavelko wants to buy and rehab a house in the North End that has ... (Madalyn Ruggiero / Special to The Detroit News)