Karen Heller: City's tax-collection mess needs solutions, not excuses

At a time when this city craves revenue, Philadelphia leads the nation in abysmal collection of delinquent property taxes.

One in five city properties is in tax arrears, former Inquirer reporter Patrick Kerkstra found in an investigation, a statistic one expert calls "astronomical."

That's almost a half-billion dollars in lost funding. The city's annual budget is $4 billion.

Deadbeat has become the default position for too many owners, not only in low-income neighborhoods, but also in Chestnut Hill, Queen Village, Society Hill, the Foxwoods casino site, the exclusive corner of 18th and Delancey - basically everywhere, nearly 111,000 properties.

Equally troubling is the lax stance toward enforcement, what City Controller Alan Butkovitz calls a "culture of nonpayment." Philadelphia State Rep. John Taylor says, "We shrug and say, 'It's just the way it is. It's just the way it's always been.' "

True, and tragic.

Delinquent taxes totaled $425 million when The Inquirer first reported on the crisis two years ago. The city's amnesty program was designed to help reduce that number. Instead, delinquent taxes rose to $472 million, an almost 11 percent increase.

That's a wretched business model for a strapped city and its troubled School District, which depends on property taxes for funding.

When owners don't pay their taxes, the rest of us pay - through weakened neighborhoods, deprived schools, fewer services, and depressed property values - while we endure increased sales and property taxes.

Those are lousy incentives for attracting the residents and businesses essential to Philadelphia's prosperity.

For all of Mayor Nutter's talk that his administration has "been relentless in our pursuit of taxes owed to the city," the crisis has been exacerbated under his watch. This is yet another example of being reactive, saying the right thing, studying the problem, with little change.

"Those numbers tell you there is a very high rate of nonenforcement," said Emory University tax authority Frank S. Alexander. "It means that the city has made a decision not to go after these properties."

When a customer doesn't pay electric or cable bills, service ends. When a Philadelphia homeowner doesn't pay property taxes, what happens? Nothing - for five, 10, even 30 years. You will be shocked to learn that political influence, especially from City Council, is often involved in landing breaks for owners.

Philadelphia has a high percentage of poor people who own property, and no one wants to throw well-intentioned residents into the street. Low-income residents can enroll in an installment payment program, but only 1 percent of delinquent owners have entered the plan. Why bother when nonpayment is so common?

The city has failed to adopt a coordinated approach to attacking blight and seizing nuisance properties, according to PlanPhilly.com, which collaborated on the tax study - tactics essential to redevelopment and neighborhood revival.

Yes, the Sheriff's Office is broken, records are poorly managed, the Law Department is overburdened. Foreclosure and sales are complicated and protracted, involving liens, court orders, and auctions.

These are excuses, not solutions. Other cities, including more economically disadvantaged Detroit and Cleveland, have been more innovative, resulting in a lower percentage of deadbeat properties. Philadelphia has failed to get smart.

If you're lousy at delinquent-tax collection - and Philadelphia's clearly in a class by itself - get out of the business. Sell the tax liens to private investors. That's what Washington, Phoenix, and Baltimore have done.

One of Philadelphia's great assets is a huge inventory of affordable housing, a key to our population growth. And plenty of eager investors are ready and willing to buy properties and vacant lots.

One in five properties, a half-billion dollars lost, creates a monster problem that feeds so many others and needs fixing now. An active tax-collection plan and property sales would spark continued redevelopment, create new jobs, attract more revenue and residents, and revitalize our city.


Contact columnist Karen Heller at 215-854-2586, kheller@phillynews.com,

or @kheller on Twitter.

Read her past columns at www.philly.com/KarenHeller.