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. ••