City gets tougher on its tax deadbeats
New policies reduced unpaid property-tax accounts, and the debt rose at a slower rate, both hopeful signs in a long battle.
Philadelphia's massive property-tax delinquency tab continued to grow over the last year, rising from $515 million in April 2012 to $522 million this April, city records show.
But for the first time since Mayor Nutter took office in 2008, the rate of growth on the delinquency debt slowed sharply. The city also has made notable gains in reducing the total number of delinquent accounts, from 102,787 in April of last year to 97,310 in April 2013.
Taken together, the latest figures suggest that the city's collection efforts are improving but have yet to yield major gains in the decades-long struggle to contain a delinquency epidemic that ranks among the worst in the nation.
"The important information from us is that we have new eyes on this problem," said Thomas Knudsen, who was named the city's new chief collections officer in April. "We are focused on results. And we are committed to cultural change internally."
New measures now in place include:
An overhaul of the way the city enforces property-tax delinquency, including revamping payment plans for those in default and expediting foreclosures for those who are delinquent. The new ordinance takes effect Oct. 1.
The rollout next month of a program that allows the city to seize income and rents from tax-delinquent property owners.
The expected passage of state legislation that will allow the city to garnish the wages of tax delinquents, and to place liens on properties owned by landlords with holdings outside of Philadelphia.
New enforcement tactics, including threatening delinquent companies with revocation of business licenses, placing income-producing delinquent properties into receivership, and seizing the rents to pay off back taxes.
A state-of-the-art data warehouse and case management system to better pursue tax delinquents.
Setting a target for improved property-tax collections: a total of $34 million, $19 million of which is allocated for school funding by June 30, the end of the city's fiscal year.
The Inquirer and PlanPhilly, in stories published this year and in 2011, chronicled the severe consequences of Philadelphia's long-running neglect of property-tax collection. The reporting revealed that mass tax delinquency has had a calamitous effect on property values.
Delinquent properties generate blight at a prodigious pace, racking up huge numbers of code violations and draining the city's property-tax base of $9.5 billion, the reporting revealed. In addition, most long-term delinquent property owners are subject to little enforcement action. A majority - 59 percent - are speculators, landlords, and suburbanites, not owner occupants.
Between 2009 and 2012, Philadelphia's delinquency crisis spread at an alarming rate, with the total amount owed the city in delinquent taxes, penalties, and interest growing from $425 million to $515 million, a 21.4 percent surge. Annualized, the delinquency tab had been growing at more than 7 percent a year.
However, between 2012 and 2013 that growth rate fell to 1.4 percent. In past years, the Nutter administration might have embraced these numbers as signs of significant improvement. That is not the case now.
The city's former delinquency chief, Revenue Commissioner Keith Richardson, abruptly left in April. His replacement, Clarena Tolson, said changing the culture at the Revenue Department remained a "heavy lift," the new numbers notwithstanding.
"We're here to do something that's quite simple and basic: Increase our collections and decrease our delinquency," Tolson said. "If I don't produce improved collections, then I've not done what I need to do."
Knudsen, who as chief collections officer oversees Tolson's department, previously served as chief recovery officer for the School District of Philadelphia and as CEO of the Philadelphia Gas Works. At PGW, he raised the ratepayer collection rate by 10 percent.
Critics of the city's delinquency enforcement - both in government and out - are guardedly optimistic about the new leadership.
"Well, nothing has really changed yet," said Councilman Bobby Henon. "But I think for the first time you can see the light of change coming."
Thomas Ginsberg, project manager at the Philadelphia Research Initiative of the Pew Charitable Trusts, said city officials "appear to be doing all the right things."
"I see a recognition of the problems and a willingness to consider doing things differently," said Ginsberg, who was also the coordinator of a Pew study that examined the feasibility of collecting delinquent property taxes.
There are nearly 9,500 properties in Philadelphia that are 20 or more years in arrears on their taxes, a problem that was decades in the making and could well take years to make right. The recent reforms and the legislative changes are intended to accomplish just that.
A case in point is the city's property-tax delinquency enforcement law, rewritten this spring. Sponsored by council members Bill Green and Maria Quiñones Sánchez, the law seeks to solve two of the most persistent problems in the city's enforcement apparatus: the inconsistent and poorly managed payment agreements for delinquent taxpayers, and deeply rooted reluctance to promptly begin foreclosure proceedings against delinquent properties.
The law obligates the city to follow a long-standing state requirement to "proceed" on enforcement of tax claims if a property owner is more than one year delinquent and not in a payment plan.
Through the first seven months of the year, the city was offering an average of about 360 tax-delinquent properties for sheriff auction per month. That's more than last year, and a match for all but the highest volume months in the last decade.
But the sales volume remains well below the Nutter administration's stated target of 600 properties per month, which would significantly reduce the backlog of tax-delinquent parcels.
Knudsen said increasing sheriff sales was still a goal. But the administration's hope is that other enforcement tools - such as putting delinquent properties into receivership - would relieve some pressure on the sheriff sale system, he said.
The city views the Sheriff's Office as a hindrance to more aggressive action - it is the subject of an ongoing FBI investigation. The office is in the middle of a significant technology makeover, scheduled to be in place by the end of 2014.
Knudsen said the new technology would make it easier for the city to send the sheriff larger volumes of tax-delinquent properties for auction. "I think we can probably do a lot better," he said.
About This Story
Patrick Kerkstra's article is part of a continuing partnership between The Inquirer and PlanPhilly. In March, that effort produced a three-day series on the tax-delinquency crisis in Philadelphia. PlanPhilly.com is an independent news-gathering entity covering the "built environment." It is affiliated with PennPraxis, the clinical arm of the School of Design at the University of Pennsylvania.
Contact Patrick Kerkstra at Patrick@PatrickKerkstra.com or on Twitter @pkerkstra.