Lake County directs staff to draft low-value property ordinance amid losses from tax-defaulted ‘paper’ lots

Lake County supervisors on Oct. 12 heard from Treasurer-Tax Collector Patrick Sullivan and Auditor‑Controller/County Clerk Genevieve Harrington about growing financial and staff burdens tied to decades-old, undeveloped “paper subdivision” parcels, and gave staff consensus direction to draft a low-value ordinance and form a working group to study options for parcel disposition.

County officials told the board that a large share of tax-defaulted lots have very low assessed values but carry accumulated interest, penalties and direct charges that produce “deficit sales” at auction, leaving the county and local special districts with unrecovered balances. “There was a state controller investigation… it basically came to pass that we have to attempt to sell these lots. We can't just sit on them anymore,” Patrick Sullivan, Lake County treasurer-tax collector, said during the meeting.

The issue matters because Lake County participates in the Teeter plan, meaning the county initially advances tax distributions to local agencies and later recoups them. That arrangement has increased the county’s exposure when tax auctions produce no buyers or require reduced minimum bids. “A portion of it is covered by our tax loss reserve… the TTR is expected to cover about 1.3, almost 1,400,000, and then approximately 2,600,000 is expected to be recovered from the agencies,” Genevieve Harrington, auditor-controller and county clerk, told the board.

Why this came up

County staff described a long history: many subdivisions platted in the early 20th century (notably around Nice, Lucerne and parts of Clear Lake) were never developed. Those parcels now have low assessed values, limited or no access, steep slopes or substandard zoning. When such lots fall into tax delinquency and staff pursue public auction, either no bidders appear or the county must reduce minimum bids enough to trigger a “deficit” that wipes out accrued interest, penalties and direct charges assessed by special districts and others.

Sullivan said almost 80% of lots in the most recent auction received no bid. Staff described an inventory of tax-defaulted lots eligible for sale at about 5,139 parcels, and that roughly 22% of parcels on the roll have assessed values at $5,000 or less (these account for a small fraction of the county’s total assessed tax base). Using 2022 data as a baseline, staff reported the base tax on the sub-$5,000 parcels represented about $246,000; direct charges across affected parcels were estimated at roughly $540,000 in an annual bill snapshot. Because of auction deficits and the Teeter distribution timing, county estimates presented to the board show the county’s tax loss reserve covering about $1.4 million and roughly $2.6 million expected to be recovered from agencies for shortfalls tied to deficit sales (staff characterized those numbers as current, staff-calculated estimates).

What supervisors discussed and asked

Supervisors’ comments focused on two parallel concerns: (1) stopping the ongoing accrual of new deficits (the staff recommendation to draft a low-value ordinance) and (2) creating a plan to place or repurpose existing parcels so they do not remain blighted. Several supervisors urged use of Chapter 8 sales to transfer parcels to local jurisdictions or special districts and asked staff to consider options such as parcel aggregation, involuntary mergers, rezoning to open space, or conversion for public trails and parks.

Community Development Director Myra Turner reminded the board that the county previously adopted a paper-parcel subdivision management plan (circa 2014–15) and that options such as grouping parcels, merging lots, and reserving land for trails or parks had been examined earlier. “We’re taking a look now at options, to maybe move forward, to realize part of that subdivision management plan through the Lake County 2050 process,” Turner said.

Fire and special-district impacts were highlighted repeatedly. Lake County Fire Chief Cepeda told the board his department expects to be among the hardest hit financially and said his district would prefer time to amortize any charges, noting the operational impact on capital planning and budgets. Board members expressed concern about the disproportionate effect on fire districts and some special districts because many of their levies are flat direct charges rather than ad valorem shares.

Public comment and community perspectives

Residents who live adjacent to paper parcels described problems including illegal dumping, erosion and recurrent wildfire risk. One resident, Chris Jennings of Clear Lake, said repeated dumping and homeless encampments have degraded local watercourses and that assembling parcels into larger developable tracts is not straightforward because ownership is fragmented and many lots have long-standing tax delinquencies.

Next steps and board direction

Board members gave staff consensus direction to proceed with drafting a low-value ordinance and to return to the board for at least two public hearings required for ordinance adoption. Staff said the ordinance would define a threshold (staff noted that other counties commonly use $5,000 as a cutoff) and remove qualifying parcels from the annual tax billing roll to stop further accrual of collection and auction costs for those very low-value lots.

Separately, the board asked staff to form a multiagency working group—including affected fire districts, the assessor’s office, community development and other stakeholders—to study parcel disposition options (Chapter 8 sales, mergers, rezoning, parks/trails, land trusts and potential grants) and to develop an implementation plan that addresses both fiscal impacts to taxing agencies and public-safety/blight concerns. Several supervisors volunteered to participate and to coordinate offline with county staff on the working-group scope and membership.

The board did not take a formal vote on an ordinance at this meeting; staff characterized the outcome as consensus direction to proceed with ordinance drafting and to convene the broader planning group. Staff also said they would report back with more detailed district-by-district fiscal impacts and recommended timelines for any phased recoveries or repayments to affected agencies.

Ending

County staff said they would return to the board with draft ordinance language and additional fiscal detail once the working group convenes and staff complete required analyses. In the interim, supervisors asked staff to prioritize outreach to the fire districts and other affected agencies so those entities can assess cash-flow and budgeting impacts from any future recoveries.