When Wade Kapszukiewicz ran for Lucas County treasurer in 2004, his proposal to sell tax liens of delinquent homeowners was billed as an innovative way to shore up revenue for local schools and other agencies.
And so far it has delivered, earning $11.3 million through tax-lien sales to a New Jersey-based national debt collector.
But in the past week, Ply-mouth Park Tax Services LLC, doing business as Xspand, has flooded the courts with foreclosures, filing more than 100 in two days - threatening residents during the Christmas season with the possible loss of their homes.
"We weren't counting on this," said Bernie Quilter, the county clerk of courts, of the mountain of paperwork. "Here we are: The county is asking us for budget cuts, and there is a skyrocket in the number of cases."
Up through December, the company steadily filed a few dozen foreclosures each month against those who are still delinquent in property taxes.
In a two-day period, the clerk of court's office was inundated with about 120 new foreclosure filings. Mr. Quilter estimated that about 60 new cases were filed Friday and another 60 on Monday - all by the company that purchased thousands of area residents' tax liens through the treasurer's sale.
As of early this week, Plymouth Park Tax Services had filed about 450 foreclosures, the most of any other plaintiff, and more than 10 percent of all foreclosures filed in the county this year.
Mr. Quilter said he predicted about 4,100 foreclosures would be filed in 2008, up from 3,486 in 2007 and 3,285 in 2006. But with the additional cases just filed, that 2008 number is sure to be higher, he said.
"Some of this property is junk property, but some of these are owned homes, and instead of working with [the owners,] they're kicking them out of their homes," Mr. Quilter said.
Mark Austin, the county's deputy treasurer, said the tax-lien sale has reduced the number of foreclosures by giving the delinquent taxpayers an incentive - and a stick - to work with the county before the lien is sold.
"In every sale, we've sold less than half of those who were originally targeted," he said.
He said the homeowners can avoid foreclosure by entering into a payment plan with the county and that the county gives homeowners repeated notice before selling the liens to their homes.
The county treasurer's office will take a tax lien off the selling block if it is determined that the homeowner is working.
Along with the foreclosure, many have been hit with attorney fees, which can range as high as $2,000.
Ohio law allows a company collecting a tax-lien foreclosure to collect attorney fees and other court costs from those owing taxes - while a mortgage-holder seeking to foreclose must pay its own legal costs.
Mr. Austin acknowledged that the legal fees applied by Xspand could be steep.
"We are going to look at some of the parameters in the fee structure," he said.
He said the next time the county bids out tax liens, it may require bidders to use the Lucas County Prosecutor's Office when filing foreclosures, in hope of keeping attorney fees down.
He said he expected the number of foreclosures from tax-lien sales to drop because the second and third packages which Xspand bought included much fewer risky properties.
"If you didn't have the prospect of potential tax foreclosure, or a tax-lien sale, or the due dates and late-payment penalties, there would be no incentive for people to pay by the due date," Mr. Austin said. "Then the schools and parks and all of the different county agencies which collect property taxes would have no way of anticipating revenues and their budget."
Mr. Kapszukiewicz was not immediately available but has said that the program affects a slim percentage of Lucas County residents and is a matter of fairness to the 99.6 percent of county property owners who pay their taxes.
The county already has instituted several solutions to help residents who face being forced from their homes, including free legal assistance from members of the Toledo Bar Association. Also, the courts have boosted filing fees to help pay for more staff and have hired a foreclosure magistrate to help mediate cases.
Mari Taoka, the foreclosure magistrate since May, said residents facing foreclosures because of tax liens will have the chance for mediation if the tax-service company is amenable.
Properties taken in a foreclosure process eventually could be sold at a sheriff's auction.
Ed Marks, litigation director for Legal Aid of Western Ohio, said help is available for those in the foreclosure process.
Mr. Marks said that Plymouth has shown in the past a willingness to negotiate with homeowners. He said that many homeowners got in trouble because they did not know that their taxes were not being paid by their mortgage company and so were surprised to learn they had a problem.
Because its contract with Lucas County allows it to charge interest at 18 percent, the tax-service company often presents bills to homeowners that are "out of reach," he said.
The model that Plymouth Park follows is one that works well in a strong economy, Mr. Marks said. But considering the type of economy that plagues the country, the number of people having problems paying bills is going to jump.
"If times were good and there were only a few homeowners in this situation, it would be a benefit to the local government who would get money they otherwise wouldn't have," Mr. Marks said. "... But a lot of people are struggling. They're having to choose between [the] basic necessity of food and utilities or taxes."
Several other counties in Ohio have used tax-lien sales, including Cuyahoga County.
"The system of tax liens is very effective, but make no mistake about it, there's an incentive for those guys to buy the tax liens," said Jim Rokakis, the Cuyahoga County treasurer.
Cuyahoga County - the first in Ohio to sell its tax liens - has canceled its tax-lien sale program to pursue a land-bank program, also a first-ever in the state.
Under the land-bank program, the county would try to use revenue from foreclosed homes to eventually buy the vacant foreclosed properties that some say have ravaged Cleveland's neighborhoods.
While Mr. Rokakis is moving away from the tax-lien program, he defended its goals.
"When somebody doesn't pay them, it means somebody who does pay them is picking up their obligation," Mr. Rokakis said.
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