Note: Nicholas Panarella's last name was misspelled in a previous version.
UPDATE: Does the city need to do a lot more than the Nutter administration is already doing to collect taxes? Read more in my column in Monday's Inquirer here.
EARLIER: Voters in Tuesday’s primaries backed a couple of citywide Council candidates who want to squeeze harder for unpaid taxes and fees.
Allan Domb, the Center City Condo King who beat two sitting Councilmen to win a Democratic ballot spot, ran on an aggressive delinquent collection program, saying he could bring in hundreds of millions of dollars for school or pension funding.
“On the campaign trail, there was a common thread of people saying, “What are we doing with all those uncollected taxes?” Domb told me, citing a 2013 report showing $1.2 billion in unpaid real estate, business, wage, water and gas fees on the city’s books, some from the Rizzo years. “Citizens are infuriated that someone else isn’t paying taxes.”
David Oh, the top Republican vote-getter, has been a lonely voice for speeding real estate tax collection, writing a bill that died in Council last year. “As much as they want to support the schools, homeowners are not ready to pay a lot more. They want to see delinquent taxes paid first,” he told me.
Oh figures his bill, to turn year-old delinquent bills to independent collectors, could have raised $25-40 million a year if it boosted collections by his hoped-for 2-3 percent. (That could cover the two-year decline in real estate tax collections, which threatens to drain $25 milion from the schools’ budget this year, says city controller Alan Butkowitz.)
Despite provisions to give the city control over settlements and exempt low-income homeowners, Oh’s bill was opposed by the Nutter administration, and died in lame-duck Councilwoman Marian Tasco’s finance committee, after she said she didn’t want to have to hear from poor delinquent taxpayers under pressure.
City spokesman Mark McDonald notes the Revenue Department "collected $910 million in tax revenue for the School District of Philadelphia, $16 million above target, through improvements in current collection practices," boosting real estate tax foreclosure filings nearly 10X, to over 1,000 a month, in late 2014; revoking business licenses for non-payment; and seizing tenant rents, or "sequestration," from non-paying landlords. The license and rent programs boosted collections by over $30 million in fiscal 2014, the city says. In the works: document scanning, credit card payment, electronic deposit. Stuff banks did years ago and the city is adding.
Domb claims that hundreds of millions in past obligations should still be collectible, much of it from out-of-town investors. He’d like to copy New York, which sold bonds backed by its delinquent taxes, and hired pro servicers to collect them. The city stills own the debts, so it can prevent “horror stories” of poor people kicked out for small sums, Domb says.
Philadelphia should go farther -- as it did back when Ed Rendell was mayor, says lawyer Nicholas Panarella, whose Municipal Tax Bureau lawyers went after the properties of suburban city-wage-tax scofflaws and out-of-town pro athletes, bringing in tens of millions and making Panarella rich.
Panarella, who lives in Florida after a federal judge nullified and voided his conviction in a 2001 conflict-of-interest disclosure case, testified to Council last year that the city’s post-Rendell shift away from suing scofflaw taxpayers toward voluntary compliance makes it tougher to collect.“Tax avoidance hurts people who comply,” he told me. He'd be glad to come back and help Philadelphia again, he added. (Corrected)
The Nutter administration “has gone to great lengths to try to improve collections,” notes veteran tax lawyer Stewart Weintraub. “I agree there’s a lot of money out there to be collected.” But giving lawyers incentives to find unknown taxpayers, as was done by Panarella's firm, raises constitutional issues, he said. The recent increase in sherriff’s sales and business-license revocations for non-payment has boosted collections, Weintraug added, though he says he's worried it has also driven employers away, and the city ought to measure that impact.
“Anything would be better than the present situation. The city must become more proactive,” says Blue Bell tax accountant David L. Zalles.
I asked Derek Green, the top vote-getter in Tuesday’s at-large Council race, if the new Council will push tax delinquents any harder. Given the School District’s chronic need, “we’ll be taking an even more aggresive stance,” Green promised. “Allan and I talked about this even before he ran for office.”
But Green, a former Tasco aide, also pledged not to be “pressuring residents who have been through an unfortunate situation.” He said he hopes to get tax-hawk Domb and school-funding agitator Helen Gym, the third new Democrat to win an at-large nod, to back a common revenue-and-spending agenda, even though they are politically “at the two extremes.”
Domb’s plan looks “pretty workable,” but “I’m not sure Allan Domb, who is seen as a rich guy, is the messenger to tell poor people he is not targeting them,” Oh told me. Even if the at-large members join forces, district Council members “will have a hard time moving forward” with anything that looks like it will squeeze their constituents.