Sandlers owe more than $500,000 in unpaid taxes

L.M. Sandler & Sons Inc. and its business interests owe more than half a million dollars in back taxes and late fees to Hampton Roads communities.

The Beach-based development company missed the June payment deadline on several of its properties, in most cases for the first time. The family-owned company, run by brothers Steve and Art Sandler, owes Virginia Beach, Suffolk, Hampton and Portsmouth real-estate taxes totaling $558,000.

L.M. Sandler, which bills itself as the largest privately owned developers of master planned communities in the country, has been scaling back or postponing some of its high-profile projects along the East Coast. In a soft housing market with banks tightening their lending practices, the company is showing signs of financial strain.

In Virginia Beach, companies controlled by the Sandlers did not pay the second installation of the 2008 taxes on Indigo Dunes off Shore Drive; the Brown Farm, near City Hall; the Spence Farm, at the intersection of Independence Boulevard and Princess Anne Road; and property next to U.S. 264, where L.M. Sandler is building the Cornerstone community. The taxes were due June 5.

Steve Sandler also owes $4,130 in late penalties for paying the taxes on his home earlier this month.

In total, the taxes and fees owed to Virginia Beach add up to nearly $416,810.

Calls to L.M. Sandler officials were not returned Friday.

Virginia Beach Treasurer John Atkinson said he is not concerned and that the city will eventually get paid, with interest.

Virginia Beach charges a 10 percent late fee and tacks on an additional 9.8 percent annually, Atkinson said.

"Everybody has a right to be delinquent," Atkinson said. "They're going to pay for the privilege."

Developers were frequently delinquent on their taxes 30 years ago, when the city charged far less in late penalties. At that time, it was cheaper for developers to essentially borrow from the city as opposed to borrowing from the bank to pay the taxes, Atkinson said.

Now, most pay on time, he said.

"Obviously, (the Sandlers) are not paying not because they don't want to pay," Atkinson said. "They're not paying because they have a shortage of money. They're making as good of business decisions as they can make."

According to city records, L.M. Sandler has paid all real-estate taxes on its Ashville Park and Brenneman Farm developments.

"We'll be taken care of in time," Atkinson said.

In Suffolk, L.M. Sandler owes $65,000 on a planned 400-acre development called River Club.

Treasurer Ron Williams called the delinquency "the largest by far" still owed to the city from tax bills due June 5.

Williams said his compliance division noticed the unpaid bill after the due date and contacted L.M. Sandler officials to work on payment. The company has done a significant amount of work in Suffolk, and this is the first time it has been delinquent on taxes in any major way, Williams said.

"They've done very well in the city," he said.

Several years ago L.M. Sandler donated 5 acres for a new North Suffolk Library, which now sits near two of the company's developments.

L.M. Sandler is cooperating with the city, but the parties have not arranged a payment date, Williams said.

City records show the company owes another $30,000 on other properties, but much of that balance is expected to be taken off the books because of changes in assessment data, Williams said.

Interim Assessor Sid Daughtrey said some of the properties had been listed as having more acreage than they actually did.

"We're going to do everything we can to work with them through it," Williams said. "The city's financial health is not adversely affected by this."

The company also owes $46,474 to the city of Hampton for property it owns next to the Coliseum. The Sandler-owned Portsmouth Venture One owes $88.75 in Portsmouth, said Jimmy Williams, the city's treasurer.

Portsmouth Venture One is developing the New Port community on 208 acres.

The company had paid the rest of its taxes by June 30, Williams said.

"It's not a concern," he said.

If the Sandlers are having difficulty paying their taxes, it may be a good time for the brothers to talk to Virginia Beach officials about selling the Indigo Dunes property for park space or reducing their plan to build 1,063 homes, said Todd Solomon, president of the Shore Drive Community Coalition.

The coalition has been opposed to Indigo Dunes for its potential environmental and traffic impact.

"They can stop the bleeding in certain areas," Solomon said.

Deirdre Fernandes, (757) 222-5121, deirdre.fernandes@pilotonline.com

Dave Forster, (757) 222-5563, dave.forster@pilotonline.com