Waterwood Watchdog's been howling this past week about a recent legal
notification published in the San Jacinto News Times. There are 80
Waterwood property owners with delinquent taxes, listed under one
lawsuit number for civil court, Cause Number D-6399-03, for a total
of $8,090. Normally, 80 owners with delinquent taxes would be
assigned 80 individual Cause Numbers.


Something smelled funny about it -- lots with delinquent taxes at
Cape Royale, Lake Run-A-Muck, Lakeside Village or Lake Waterwheel
Estates weren't lumped together like this. Either Barbara Shelly,
the county tax collector or Steve Lee, the Austin tax collection
attorney/consultant hired by the county, had made a judicious
decision to lump these particular 80 lots together. Even more
puzzling, other Waterwood lots with delinquent taxes totaling much
more than $8,090 were excluded in the selection process. Apparently
there's a potential buyer for these particular 80 lots to be sold
someday at a tax sale. Putting 80 lots together under one Cause
Number would make it tidy and economical for Lee to sell them in one
sweet package.

Waterwood Watchdog called Ms. Shelly and Mr. Lee to ask about the
package's funny sweet smell. Shelly says Lee's just doing his job
and he's doing a good job because he's aggressive. But, why is Lee being
selectively aggressive? I asked Lee why the Flynns, one of the 80
delinquent Waterwood lot owners (R64509, taxes owed are $53.52),
weren't being sued for their other delinquent taxes (R67486 and
R67487, taxes owed are $564.74). Why is he suing them for $53 but
not for the other $564? Probably because Jacinto Investments, the
timbering business that's been buying Waterwood lots for its timber
values for the past eight years, doesn't want R67486 and R67487.
Those lots are located in Park Forest, a subdivision majority owned
by Keystone Land. Jacinto Investments isn't interested in Keystone
Land's subdivisions (not yet anyway). That's probably why Lee didn't
include those two Park Forest lots – although he says those lots
might be included, now that he's aware of them, thanks to Waterwood
Watchdog.

After phone conversations with Lee and Shelly, Waterwood Watchdog was
left wondering who's calling the shots in this particular tax
collection process. Is it Steve Lee, who works for a 15% cut like a
repo man, Barbara Shelly, who apparently rubber-stamps Lee's
selection process, or Jacinto Investments, a business with plenty of
money.

If your mind is as suspicious as Waterwood Watchdog's mind, you're
probably also wondering if a sweet deal was made between Jacinto
Investments and Steve Lee. If Waterwood Watchdog was waiting for
table scraps under their restaurant table in Austin, perhaps the overheard
conversation would go like this: "Steve, I've got a proposition that
will be worth your time. Gather all the suspects in Waterwood,
including all the delinquencies under $50 but omit all the developed
lots because I have no use for them. Lump the suspects together in
one package deal worth $24,000 in appraised values together and I'll
buy them, lock, stock and barrel, at a tax sale for $10,000".

If you're new to Waterwood, let me clue you in on the reason Jacinto
Investments needs these 80 lots and 300 more of them. By gradually
buying lots in Waterwood's undeveloped subdivisions, they can
eventually own 75% of it, the minimum percentage required by law to
get permission from the commissioners to cancel the subdivisions.
Once canceled, they'll be able to log the heck out of them (go see
for yourself), with WIA's blessings. Logging has already begun in
Greentree Village 3 and Deer Creek.

According to Lee, he has no financial incentive to sell these 80 lots
for $24,000 (collective appraised value). He'll end-up selling them
for only $9,000 to cover the back taxes collectively owed plus court
costs. Lee only gets 15 percent of the delinquent taxes he collects,
so he gets roughly the same amount of money whether Jacinto
Investments buys these 80 lots for $24,000 or for $9,000. But, wait
a minute. Let's look closer at the mathematics before concluding
that Lee's a good guy, he's not doing anything illegal, he's only
doing his job, albeit in a peculiarly aggressive manner.


If you've been following the tax sales for the past few years, you'll
know that Lee doesn't normally pursue the little guys who owe less
than $300 in delinquent taxes. It's not worth his time or staff
hours. Normally, he waits until a Waterwood undeveloped lot owner
owes $300 or more in delinquent taxes (the appraised value) to take
full advantage of his 15% cut (about $45 per lot) and then he sells
those undeveloped lots for $300 each. While it might seem this sweet
package deal is more economical than filing 80 individual lawsuits,
it's not. For Lee, it was a "half dozen or six" decision because
either way, he winds up with the same amount of money. If he files
one lawsuit and collects 15% of $8,090 for those 80 lots, each
varying in delinquency from $15 (R65320) to $629 (R66966), he'll net
about $1,213. Or, if does what he normally does, file lawsuits
against only the 25 big offenders with more than $300 in delinquent
taxes and collects 15 percent of $7,500, he'll net about $1,125.
Since both strategies are somewhat equal, something or someone
motivated Lee to break with his former strategy. This time, he's not
only selecting 55 little offenders along with 25 big offenders, he's
also tying one nice big ribbon around the whole sweet deal.

Don't let Lee or anyone else tell you that "no one wants these lots"
and the reason he's throwing the 55 little offenders in with the 25
big offenders is because he's found a willing buyer. For the past
eight years and for as long as it takes to acquire 75% of the lots in
that area, Jacinto Investments has been and will continue to be an
eager buyer of these lots for $300 each at tax sales. But if these
80 lots make it to the tax sale, they could be sold collectively for
as little as $9,000 or about $100 per lot (enough to pay the
delinquent taxes). It's not too far-fetched to assume that Jacinto
Investments burnt the midnight oil coming up with a strategy to buy
them for $100 each instead of $300 each. Nor is it too far-fetched
to assume they convinced Lee to be selectively aggressive, to go
after ALL the lot owners who are delinquent, including one lot owner
who owes $15 in back taxes.

Jacinto Investments resembles a Microsoft corporation; they dominate
the tax sales and certain Waterwood subdivisions. If any bidders are
naive or brave enough to bid on a residential lot in a subdivision
majority owned by Jacinto Investments, a representative from Jacinto
Investments will outbid them. And when Jacinto Investments
eventually logs that lot, it's quite a profit for Jacinto
Investments. But, this strategy is quite a loss of potential revenue
for the County of San Jacinto. Granted it costs the county to carry
delinquent taxes on their tax ledger, but it'd still be more
profitable for Shelly to wait until these 55 lots reach a minimum of
$300 in delinquent taxes each before turning them over to Lee. By
waiting a few more years to sell them, the county would gain an extra
$14,000 or so by selling them at $300 each to Jacinto Investments
(or to any bidder going up against Jacinto Investments). Jacinto Investments
isn't going to lose patience if the county postpones collection efforts on these
55 lots. They're highly motivated to buy lots for years to come.

To allow Lee to throw-in these 55 little guys with the big offenders,
Shelly is playing into a profitable business strategy of Jacinto
Investments. Waterwood Watchdog doesn't believe our county officials
are intentionally involved in this sweet deal – they're probably just
unaware of Jacinto Investments' shrewd business practices. But, it's
suspicious on Lee's part. One can't help but wonder about Lee's
motives, particularly when there's plenty of big offenders out there
who aren't part of this lawsuit. Why is Steve Lee, who works for a
15% cut of the total taxes collected, throwing-in 55 small offenders
with 25 big offenders, when he could wait a few more years (until the
55 small offenders become big offenders) and get an additional $2,475
for his repo efforts as well as more money (approximately $14,000) in
the county's bank account? Let's hope nothing unethical is going on.

Waterwood Watchdog
http://groups.yahoo.com/group/waterwoodwatchdog/