City failed to bill mortgage company to collect real estate taxes for months, possibly millions of revenue backlogged

PETERSBURG—Last week, several citizens reached out to city treasurer Paul Mullin to inform him that they had gotten a letter from their mortgage company claiming that they were 9 months behind in paying their real estate taxes.

These homeowners had paid their mortgages every month and were confused as to why the city hadn’t received their taxes.

Mullin then went on the city website to check his real estate taxes, and when he pulled up his house, he saw that it said his taxes hadn’t been paid despite the fact that he had been paying his mortgage every month, which included his property tax. The city collects citizens' real estate taxes by billing the mortgage companies.

Mullin called his mortgage company to inquire. "My mortgage company said they have not received a bill from the city," said Mullin.

At least 10 citizens have reached out to Mullin, causing him to believe that this was a systematic and widespread issue.

Why didn't the city send bills to mortgage companies to collect real estate taxes?

Every month, homeowners pay their mortgages to a mortgage company. Included in the mortgage payment is their monthly real estate tax payment as well. The mortgage companies are the ones that cut a check to Petersburg on behalf of the property owner when the city bills the companies to collect real estate taxes.

There are three mortgage companies that the city bills, which all other smaller companies fall under: CoreLogic, Wells Fargo, and Lereta. CoreLogic is one that the city receives the most payments from.

While Mullin was searching for answers, he found that the households he researched that pay their mortgages to CoreLogic were showing that they had real estate taxes that were overdue since last December, including his.

Around 800 to 1,000 citizens in Petersburg pay their mortgages to CoreLogic, and the city collects some $1.2 million in real estate taxes from the company every quarter, according to Mullin’s estimates. But the city could be short of money from CoreLogic for three quarters, or about $3.6 million.

Mullin is not sure what the root cause of the issue was. It could be a mistake in the city’s system or a human error, he said.

"I don't know where the snag is happening at," Mullin told the Progress-Index last week.

Where the real-estate billing issues started

Petersburg's property values increased over 13% last year. About 65% of the city's properties saw an increase in value, and around 10% saw a decrease in their values. As a result of the increase in value, the city had to decrease their tax rate, bringing it down from $1.35—one of the highest in the state— to $1.27.

The new tax rate and new assessed value of the property was supposed to kick in starting when the city sent the first bill in fiscal year 2023-2024 in September.

But bills that were sent out last September kept the old assessed home value with the new, lower tax rate—which would’ve cost the city millions— as one citizen found out and made the council aware of this mistake.

"Somewhere along the line quality control failed spectacularly to have this happen because this never should have gone out like this,” Barb Rudolph told council members last September during a regular meeting.

Since then, the city has sent out a new bill that reflected the difference.

Rudolph has had her mortgage paid off, so she gets billed and pays her real estate taxes directly to the city, which was how she first discovered that the city had sent her an incorrect bill.

But mortgage companies would’ve also received an incorrect bill and home value from the city, as Rudolph later discovered.

In conversation with Mullin, Rudolph found that CoreLogic had been charging him the lower tax rate on his old home value, so Mullin had been underpaying his real estate taxes for months to his mortgage company.

Meanwhile, the last bill that his mortgage company received from the city was in September when the city had sent incorrect bills to everyone, so even though Mullin paid his mortgage every month, his real estate tax payments weren’t being reflected on his city account.

“That’s how I validated what CoreLogic was doing based on what they charged Paul Mullin,” said Rudolph. “They've been using what the city did in September 2022.”

It may be likely that CoreLogic has been collecting the wrong amount of real estate taxes from hundreds of others and will have to send out new bills to their customers in order to pay the city the correct amounts.

“You’ve got the customers pissed, they think they’ve paying their mortgage and they’re up to date,” said Rudolph. “And the mortgage company’s got to incur customer dissatisfaction with their mortgage holders because of going back to them and telling them it’s wrong. And they got to go through all the administrative effort to try to collect that.”

City spokesperson states that error lies with the Commissioner of Revenue’s Office

When the city assessor sends the updated real property values to the Commissioner of the Revenue each year, it is up the Commissioner's office to update the land book with the new values and calculate the new tax bill. After calculating the tax bill, they then send it to Billings and Collections to print and mail.

"In this case, the Commissioner’s Office failed to input the updated assessment data resulting in incorrect billing," city spokesperson Joanne Williams said in a statement.

However, Williams did not answer questions on how the city failed to bill the mortgage companies, and where the snag happened—whether the Commissioner’s Office had sent the corrected bills, but Billing and Collections failed to print and mail them off to the mortgage companies, or if the Commissioner’s office failed to calculate the new bills for the mortgage companies in the first place.

'It’s disheartening that we really don’t work together as a unit'

Mullin does not handle the billing, printing, mailing and processing of the bills, a duty that was taken away from the Treasurer’s office in 2017 when the city created a separate Billing and Collections department to combat abuse of the office after former treasurer Kevin Brown had stolen more than $2,000 in petty cash from the city’s coffers.

But the creation of the Billings and Collections department has created its own set of challenges for Mullin and the citizens, including a Billings and Collections department with people who have little institutional knowledge on how things work and a very inefficient way of collecting taxes.

Though printing and mailing bills falls outside Mullin’s purview, he sounded the alarm to city manager March Altman and the seven council members last week, asking for them to look into the issue. Only Councilman Marlow Jones responded to his email. Mullin has been disappointed by the leaders’ lack of response.

“It’s disheartening that we really don’t work together as a unit, as a team,” he said. “We have a partnership for Petersburg which is great short term, but we’re not going to get anywhere until we have a partnership in Petersburg.”

In a statement provided yesterday, spokesperson Williams said that the mortgage companies "were immediately notified of the error and provided with corrected statements. Nearly all mortgage service providers in Petersburg have paid the corrected amounts. The City is in the process of working with the remaining service providers to ensure that all accounts affected by this incident are made current."

More snafus: Petersburg incorrectly bills citizens for property taxes, could lose up to $2.5 million

Joyce Chu, an award-winning investigative journalist, is the Social Justice Watchdog Reporter for The Progress Index. Contact her with comments, concerns, or story-tips at Jchu1@gannett.com or on Twitter @joyce_speaks

This article originally appeared on The Progress-Index: Petersburg could lose millions in failure to collect real estate taxes