Council looks at plan to sell liens for unpaid taxes

The people who don’t pay their taxes don’t pay in a big way. They owe the city more than a half-bil­lion dol­lars, and to say that num­ber irks those who do pay would be un­der­play­ing how big an is­sue tax de­lin­quency has be­come. The city has ramped up its col­lec­tion ef­forts, but each year’s taxes that go un­paid just spill more red ink onto mu­ni­cip­al fin­ances. 

The city puts li­ens on prop­er­ties with de­lin­quent taxes. A li­en is a claim for part of the value of a prop­erty. For the city, it’s a claim for un­paid taxes, in­terest and pen­al­ties. To get its money, the city takes some prop­er­ties to sher­iff sales. 

Last week, City Coun­cil­man Bill Green (D-at large) in­tro­duced a bill that would al­low the city to sell tax li­en cer­ti­fic­ates. He es­tim­ated such sales could bring in an ad­di­tion­al $75 mil­lion. Coun­cil­man Bri­an O’Neill, who months ago said he would back such le­gis­la­tion, is a co-spon­sor. Green said oth­er co-spon­sors are Mark Squilla, Dav­id Oh, Jim Ken­ney and Bobby Hen­on.

In many oth­er states, loc­al gov­ern­ments sell li­ens for un­paid taxes to third-party in­vestors, ac­cord­ing to Al­lan Domb, pres­id­ent of the Great­er Phil­adelphia As­so­ci­ation of Re­altors. Such sales of debt al­low mu­ni­cip­al­it­ies to get the money they’re owed and keeps them out of the col­lec­tion busi­ness, O’Neill (R-10th dist.) said in April. For ex­ample, New Jer­sey mu­ni­cip­al­it­ies con­duct tax li­en sales, and their tax-col­lec­tion rates are high. Cherry Hill has a 99.9-per­cent col­lec­tion rate, and Ne­wark’s is more than 96 per­cent. 

Phil­adelphia, which doesn’t sell tax li­ens, is pro­ject­ing just an 87 per­cent tax-col­lec­tion rate this year, said Green.

In in­ter­views last week and in April, Domb said the people who do pay their taxes would be asked to pay less if the city could col­lect more of what it’s owed. He en­vi­sions a rate of $1,000 per $100,000 of prop­erty value if the de­lin­quent taxes total could be knocked down. The 2014 tax rate will be $1,340 per $100,000 of prop­erty value.

Tax li­en sales would provide “our city with the op­tion of re­ceiv­ing needed dol­lars for past-due real es­tate taxes and re­mov­ing de­lin­quent prop­er­ties from its list of un­at­ten­ded re­spons­ib­il­it­ies,” Coun­cil­man Dav­id Oh (R-at large) said in a June 14 email to the North­east Times. “The city is not ef­fi­cient at chas­ing down these dol­lars. Private com­pan­ies are built for this and make a profit, so they do it faster. That gets these of­ten times va­cant or poorly main­tained prop­er­ties back in­to pro­duct­ive use.”

Coun­cil­man W. Wilson Goode Jr. (D-at large) also said he sup­ports the sales.

“I think it’s a good idea,” Hen­on (D-6th dist.) said June 14. However, he said, tax li­en sales have to be done dif­fer­ently than they were done in the 1990s, dur­ing Ed Rendell’s may­or­al ad­min­is­tra­tion. 

O’Neill said earli­er this year that those sales were done half-heartedly and wer­en’t the fin­an­cial boon they might have been.

“The last tax li­en in the 1990s was not done well,” Coun­cil­wo­man Maria Quinones-Sanc­hez (D-7th dist.) said in a June 14 email to the North­east Times. “I will be open to the idea, but I have some con­cerns. If we already have is­sues with out­side in­vestors main­tain­ing their prop­er­ties, what hap­pens when a hedge fund buys bulks of prop­erty? How do we in­sure main­ten­ance and over­sight? Many items need to be fleshed out be­fore I can sup­port it. Short term money is great, if we can man­age it.”

Green said an ob­scure 1923 state law al­lows the city to con­duct tax li­en sales. Such sales, Green said, would give the city an­oth­er col­lec­tion op­tion to use along with swifter fore­clos­ures. 

No reg­u­la­tions now ex­ist to con­duct such sales, Green said in a June 13 phone in­ter­view, so if Coun­cil mem­bers ap­prove tax li­en sales, “The De­part­ment of Rev­en­ue will set the reg­u­la­tions. It will be en­tirely up to them.”

Green said he hopes hear­ings on the meas­ure will be­gin in the fall.

Domb said the Re­altors as­so­ci­ation is “ab­so­lutely” sup­port­ive of Green’s meas­ure.

“I’m glad he put for­ward this bill,” he said.

Asked if the Nut­ter ad­min­is­tra­tion’s view of Green’s meas­ure, spokes­man Mark Mc­Don­ald said the ad­min­is­tra­tion will not com­ment un­til it gives testi­mony on the meas­ure. ••

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