TRAVERSE CITY -- Large, idled and tax-delinquent developments in Grand Traverse County caused a sharp spike in projected foreclosures and may lead county officials to borrow millions to cover unpaid taxes.
Michigan's ongoing recession halted a number of developments around the county and caused a ripple effect in both the construction industry and tax payments to cities, townships and the county.
The county annually settles delinquent taxes with smaller municipalities, but this year doesn't have the cash to do so without a loan, a figure that could reach $6 million, said William Rokos, county treasurer.
It's a sign of lousy economic times, he said, and others agree.
"Suddenly, the building activity has slowed down tremendously," said Robert Whims, president of the Home Builders Association for Grand Traverse Area.
Developers are struggling to secure construction loans, and housing demand has plummeted. That leaves developers holding vast tracts with slim chances for a quick return on their investments.
"Their property still has value and will have value, but they're just trying to keep the lowest financial profile they can until the storm is over. Hopefully that will be soon," Whims said.
Cash-strapped developers frequently put their tax debt on the back-burner, boosting the delinquent taxes load on the county's books, Rokos said.
"A lot of it is these developments that have been started, but stalled and they don't have the cash flow to pay taxes on time," Rokos said.
Most do eventually pay, but it's believed more may not do so this year. And more homeowners also are paying later, but delinquent taxes on static development sites account for a much greater total, Rokos said.
"It's a question of management of cash flow," said local developer Gene LaFave. "In this cycle, cash is scarce. There are little ways to generate cash from property sales. If you can't get money to build, nobody can get money to buy. So most of your money is sitting in assets that are not liquid."
LaFave said his taxes are paid, but it's tougher to stay current in today's economic climate.
Local developer Thom Darga said paying taxes late is a survival tactic for some developers, a ploy he hasn't used.
"It's a bridge. Until you're in a position for some recovery from a sale, it's a way to save cash," Darga said. "In the development business right now, cash flow makes the situation a little more stable."
Rokos projects between 18 and 200 parcels will be foreclosed this year, a dramatic hike over last year's 15 foreclosed properties. At the end of 2009, delinquent properties jumped to 427, up from 225 such properties at the end of 2008, according to county records.
Additionally, delinquent 2007 taxes totaled about $1.2 million by the end of 2009, an increase over about $404,000 in delinquent 2006 base taxes at the end of 2008. And more tax debt builds each year.
"We haven't borrowed to buy up the delinquent taxes since 1991," Rokos said. "It's not the end of the world, but it's a trend. We may have to borrow money."
LochenHeath 18-hole golf and housing development in Acme Township owes the most in delinquent 2007 taxes -- about $640,000 -- and its 121 parcels will be foreclosed in April if those bills aren't paid, Rokos said.
The county awaits about $4.6 million in outstanding 2008 taxes, as well. If not paid, those properties face foreclosure next year.
Local developer Bill Clous is among those who owe the most in late 2008 taxes. Clous' Traverse City-based Eastwood Custom Homes builds middle-class and upscale houses across the region. His company repeatedly has been cited for environmental violations related to illegal wetlands bulldozing.
County records show Clous and Eastwood Custom Homes collectively owe about $50,000 in late 2008 taxes. The properties will be lost to foreclosure, should those taxes not be paid by the end of March next year.
Clous did not return a call seeking comment.
