S&L; Agency Owes Millions in Taxes : Thrifts: U.S. regulators insist they are paying local governments levies on real estate seized in bailout. But cities, counties say they are hit hard by lack of payments.

The federal agency charged with cleaning up the savings-and-loan problem has failed to pay tens of millions of dollars in local taxes on real estate seized from failed thrifts, impeding the sale of those properties and hurting school districts and cities.

The regulators’ failure to pay the property taxes on time is also adding to the skyrocketing cost of the S&L; bailout, since many cities and counties are now assessing mounting penalties and interest on the properties, The Times has learned.

Local officials in cities hit hard by the S&L; crisis also charge that in some cases, federal regulators are abandoning their least valuable real estate, and turning it over for seizure by local governments rather than pay the back taxes.

“They are acting just like slumlords,” complains Ken Kile, deputy treasurer of El Paso County, Colo., where federal thrift regulators owe more than $3 million in back taxes on partially developed real estate that apparently has been abandoned.

Senior officials at the Resolution Trust Corporation, the agency created to clean up the thrift mess, insist that they are paying all their property taxes on time. In June, the RTC stated publicly that its policy was to pay all of its property taxes.

Lamar Kelly, deputy director of the RTC in charge of asset disposition, underlined that point in an interview recently, saying: “Our policy is to pay all of our taxes. I don’t know who has been complaining, but we pay our taxes.”

But an internal RTC memo obtained by The Times declares that the RTC has decided not to pay its property taxes when the agency “does not have any realizable financial interest in the asset.”

Analysts say that suggests the agency has quietly made a policy decision to walk away from properties if the RTC decides it cannot sell its land holdings for enough money to pay its property taxes and make a sufficient profit as well.

The attempt to skirt property tax payments seems to be part of a broader strategy by the RTC to use virtually all of the funds it receives from Congress on closing down insolvent S&Ls; and paying off depositors as quickly as possible.

In order to focus on such shutdowns, the RTC is apparently declining to put much money toward such expenditures as paying local real estate taxes or maintaining properties that it has inherited from those S&Ls.;

But local officials stress that payment of real estate taxes is not optional for property holders and that such levies must be paid even if the property declines in value, as has happened with much of the real estate that the RTC has inherited from failed S&Ls.;

“They are making a business decision on whether or not to pay their taxes,” charges Richard Streiber, an attorney for the city of San Antonio, where the RTC owes millions of dollars in delinquent taxes.

“In some cases, like with an uncompleted housing development they took over from a S&L;, they just let the properties go,” Streiber says.

Local officials also complain that on some more valuable properties, the RTC has hired expensive private attorneys in an attempt to prevent local governments from collecting real estate taxes, which in some cases have not been paid since the early 1980s.

“The official position of the RTC is that they pay their taxes, but the official position is simply not what is happening,” says Oliver Heard, an attorney for several Texas cities and counties. He calls non-payment by the RTC “our single-biggest problem in tax collection.” In cities throughout Texas and other states heavily affected by the S&L; crisis, the federal government has virtually overnight become one of the largest local property owners.

It has inherited thousands of single family homes, condominiums, office buildings, warehouses, shopping centers and raw land from the hundreds of failed S&Ls; that the government has taken over during the last few years.

Texas, where the S&L; crisis hit hard, has been especially vulnerable. Some tiny towns and school districts in rural sections of the state have lost hundreds of thousands of dollars in revenues from unpaid property taxes.

Now, several cities and counties there are embroiled in a series of lawsuits with the RTC over property tax payments. “They owe millions of dollars in back taxes just in Ft. Worth,” says Steve Meeks, an attorney for the city. “And that is happening all over the state.”

Local officials say that often the reason for the RTC’s failure to pay its taxes appears to be that the agency’s record-keeping is chaotic and it is being hit by a tidal wave of seized real estate from hundreds of collapsed thrifts.

Agency officials acknowledge that they have not established a central office staff responsible for paying property taxes around the country, and instead rely on private contractors or regional RTC staffers spread around the nation.

The result, local tax officials complain, is that there is no single policy being followed on whether to pay back taxes. Some RTC offices are apparently starting to pay on time, while others--and private firms hired to manage RTC properties--are fighting collection efforts.

What is worse, local officials say, the disorganization means that the RTC frequently does not even know what real estate it owns--and has no idea even whether it is delinquent on its property taxes.

“Sometimes, we find out what they own before they do,” says Sydna Gordon, an attorney for Dallas County, Tex. “And we only find out when we go to court to foreclose on a property.”

Local leaders argue that the RTC’s failure to pay taxes threatens to delay the S&L; cleanup, because potential buyers of real estate held by the agency will refuse to invest in land on which back taxes are still outstanding.

Local governments have the power to place tax liens on property to collect delinquent property taxes, and thousands of such liens have been placed on RTC-owned property around Texas and other states, local officials say.

Title insurance companies may also refuse to offer clear title and provide title insurance to buyers of properties that are under tax liens.

Local authorities in Texas say that, in order to gain a clear title, the RTC usually pays all its back taxes on a piece of real estate when it finds a buyer for a piece of property--often for two or three years’ worth at a time.

But they charge that by doing so, the agency is abusing a provision in the 1989 law that established the federal thrift-cleanup effort, which prohibits local governments from foreclosing on RTC properties to collect back taxes unless the agency itself agrees.

Local officials say their jurisdictions still may impose tax liens on the RTC, but they lack teeth without the threat of mandatory foreclosure.

They charge that the RTC is taking advantage of that loophole to avoid paying taxes until it turns over the property to a private buyer, who does not have the same kind of protection from foreclosure.

Critics charge that gives the RTC a way to hold onto its money for an extra year or two before paying its obligations.

But the agency has gone one step further, and has mounted a court challenge in Texas against a group of cities and counties to stop them from collecting certain penalties on back taxes from the federal agency.

In addition, the RTC is seeking to circumvent the impact local tax liens have on its ability to sell property. In a policy approved in June, the agency said that it plans to try to sell properties without having paid back tax penalties, even if tax liens are still in effect.

The RTC said in its policy that it will guarantee to buyers of its real estate that the federal government will agree to pay any back penalties that the courts impose on property once held by the RTC.

But critics charge that such a guarantee represents a hidden expansion of the cost of the S&L; bailout, since such a promise to pay taxes in the future could obligate Congress for years after the properties are sold.

“They are hiding part of the cost of the savings-and-loan bailout by not paying their taxes,” Heard charges. “But eventually, they may have to ask Congress for more money to pay for all this.”