Irregularities, lax oversight in N.J. online tax sales
The State of New Jersey has permitted a single contractor to dominate the marketplace for online tax-lien auctions without requiring competitive bidding or conducting any meaningful oversight, an independent investigation has found.
The State of New Jersey has permitted a single contractor to dominate the marketplace for online tax-lien auctions without requiring competitive bidding or conducting any meaningful oversight, an independent investigation has found.
The vendor and its partner reaped $1.7 million from municipalities to conduct the sales in 2014 and 2015 alone, a revenue stream that is projected to grow, according to a report released Tuesday by the State Commission of Investigation.
Every municipality in New Jersey is required to conduct a sale at least once a year to try to "recoup the value of liens filed for delinquent property taxes and for unpaid fees involving municipal services such as water/sewer and garbage collection," the report said.
These efforts are typically held via live auction, but in 2012, local governments began to conduct online tax sales as well, the commission said. About 90 towns have participated in online sales since then.
"Although the commission's inquiry turned up no evidence suggesting criminal misconduct or malfeasance," the report said, "the unusual manner in which the online auction program was established, coupled with weak or nonexistent oversight, transparency and accountability surrounding its management and administration, raises questions about how to maintain the integrity of the program going forward."
The state passed a law authorizing municipalities to conduct online sales in 2001. Fifteen years later, the state Department of Community Affairs "has yet to issue any rules, regulations, or procedures beyond guidelines" for a pilot program that began in 2011, the report said.
In addition, the department has not sought any competitive bids for the sales, positioning "a lone vendor" to "receive an exclusive DCA stamp of approval."
What's more, New Jersey waived municipalities' competitive bidding requirements at the request of the co
ntractor, R.O.K. Industries Inc., which conducts business as NJTaxlieninvestor.com, the report said.
"This bidding exception, combined with other procedures set forth in the program guidelines, presents impediments to other vendors who may wish to enter the market here," the report said.
The commission recommended that the state evaluate the pilot program and require competition for vendor contracts, among other things. The four-member commission, an independent fact-finding agency, sent its report to Gov. Christie and the Legislature.
Tammori Petty, a spokeswoman for the Department of Community of Affairs, said in an email: "We take seriously the issues raised in the SCI's report, which makes clear the need to evaluate this program. Although, as the report notes, municipalities have been satisfied with the program, finding it to be efficient and productive, we will work immediately to assess the SCI's recommendations and implement all appropriate changes in order to maintain the integrity of the program."
NJTaxlieninvestor, of Belle Mead, N.J., partnered with a Florida company called Realauction.com L.L.C.
NJTaxlieninvestor is the state's approved vendor, but it has few employees, and Realauction conducts the online tax lien sales, the report said.
Realauction receives 70 percent of the fees the municipalities agree to pay, and NJTaxlieninvestor 30 percent. Realauction did not register to do business in the state until January 2015, after it had received a subpoena from the commission, the report said.
It added that the state "has yet to conduct an independent audit or performance evaluation of the ongoing pilot program to determine if it should be adjusted in any way, even though the NJTaxlieninvestor/Realauction customer base in New Jersey now stands at approximately 90 local government entities."
In response to the report, Mauro Wolfe, an attorney for NJTaxlieninvestor, said there was "nothing irregular or inappropriate" about its request "that so long as it was the sole vendor authorized by DCA to conduct online tax lien auctions, municipalities should be exempted from public advertising requirements that might otherwise apply" under state law.
The firm's partnership with Realauction is "entirely appropriate" and "commercially reasonable," Wolfe wrote to the commission.
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@AndrewSeidman