Phila. makes gains against property tax delinquents
City on track to meet ambitious new collection goals
Nine months after shaking up the city’s tax enforcement leadership and collection processes, the Nutter administration continues to make modest but measurable gains in the collection of taxes, chipping away at a delinquency epidemic that is among the worst of any big city in the nation.
City Revenue Commissioner Clarena Tolson said her department was on track to meet ambitious new collection goals adopted for the 2013-2014 budget, including an additional $28 million for the financially strapped School District of Philadelphia.
“We’re doing great. We’re tracking it very closely and we are on target to collect that,” Tolson said.
Philadelphia’s delinquent property tax crisis - the subject of a PlanPhilly and Philadelphia Inquirer investigation in March - has been the subject of extensive examination and interest both in the city and Harrisburg in recent months.
In November, City Controller Alan Butkovitz released a highly critical audit of the Department of Revenue’s record on property tax collection. And last week, Gov. Corbett signed a bill sponsored by State Rep. Cherelle Parker giving Philadelphia the authority to lien properties in other counties, when those properties are owned by investors who are delinquent in Philadelphia.
The legislation should give the city the ability to target the private homes of slumlords with low-value holdings in Philadelphia, a potentially powerful new enforcement tool. The PlanPhilly/Inquirer investigation revealed that the city’s tax delinquency crisis is principally the fault of investors - who own nearly 60 percent of the delinquent parcels - and not owner occupants.
And in October, a new city ordinance overhauling income-based payment agreements for property tax delinquents took effect, creating a single standard that replaces the confusing and informal payment agreement process that existed before.
Meanwhile, the Nutter administration has aggressively stepped up the pace of sheriff sales of tax delinquent properties.
Before Nutter took office, the city offered about 250 tax delinquent properties for sale at sheriff auction per month. That figure plummeted through the early years of the Nutter administration, in part due to a freeze on sales during a tax amnesty.
Throughout 2013, though, the Nutter administration has steadily ramped up sales, and is now within reach of its stated goal of 600 offerings per month, surpassing that figure in August and approaching 600 offerings in July, September and October.
To be sure, the city remains awash in tax delinquent properties. As of April, more than 97,000 property tax delinquents owned the city and school district $522 million in unpaid taxes, penalties and interest, up from $515 million in April, 2012.
But that figure does not represent the gains made in the last few months. Tolson said her department was focusing far more attention on collecting bills before they became delinquent, assigning collection agencies to go after accounts shortly after they went past due, instead of waiting until nearly a year had lapsed, as was the practice in past years.
This reform - which was one of the chief suggestions made in a Pew Philadelphia Research Initiative study of the delinquency crisis - should in time drive down the number of overall delinquent accounts by letting fewer property owners reach the delinquency rolls each year.
Tolson’s department has also begun targeting high value delinquents with a pair of new strategies, which are showing promising early returns.
Tax delinquent businesses are being threatened with the revocation of their business license, a tactic that has already yielded $6.1 million in collections and new payment agreements on another $6 million in tax debt, Tolson said.
The city has also hired a pair of firms to, in essence, take over management of revenue-producing tax delinquent properties until the bills on those parcels are repaid. Dubbed sequestration, the tactic is a form of receivership that strips the property owner of control of their lots, unless and until the past-due bill is made good.
And Tolson confirmed that the city is actively exploring the resumption of lien sales, where the city yields sells legal claim on a tax delinquent property to a private investor in exchange for payment of some percentage of the tax owed on the property.
Lien sales are a controversial practice, and Philadelphia has had poor experiences with such sales in the past. But lien sales are extremely effective at generating revenue in the short term, and that remains a key focus for the Nutter administration in light of the school district’s financial problems.
“We are very open minded to (lien sales),” Tolson said. “It’s not come to fruition yet, but we continue to evaluate that as a real option. My interest is to have all the tools in the toolkit to effectively manage our revenues.”
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