The mandate is clear: Philadelphians want their city officials to crack down on tax deadbeats.
And city officials have heard. Just before a damning Inquirer/PlanPhilly series revealed the extent of tax delinquency in Philadelphia, Mayor Michael Nutter announced a new, multimillion-dollar plan to better the city’s ability to go after tax deadbeats. On Tuesday, a Philadelphia City Council committee heard the first of two days’ worth of testimony on delinquent taxes.
But the truth is that in many cases the city may also need to do the opposite of cracking down ― and just give up, already.
While many of the city’s delinquent taxes are indeed owed by speculators with the means to pay off their debts, a lot of properties have been so behind on their taxes, for so long, and often without obvious ownership, that the idea of ever getting those taxes back seems, well, crazy.
Take the vacant lot at 1719 S. 4th Street, last purchased in 1967 for the tidy sum of $1, and which has been overdue on its roughly $250 real estate tax since 1978. With interest penalties, and the inexorable march of time, the property carries an unpaid tax debt of about $20,000 ― more than the $16,500 the city says the property is worth.
The city can foreclose on the property more or less whenever it wants to, and indeed the property went twice to sheriff sale, in January and February of 2011. Both times, the opening bid was set at $34,400 ― high enough to cover most or all of the real estate debt tied to the property. But it was too high, apparently, for anyone to actually buy it. The lot sold neither time, and the city did not choose to acquire it.
But there doesn’t seem to be a clear policy about how to treat ancient tax debts, or tax debts worth more than the property itself. Mayor spokesman Mark McDonald told AxisPhilly that while the city stops “reporting” debts that are 10 years old or older for accounting purposes, it still considers the debt real if the property goes to sheriff sale.
And while the city has “written off” $60 million worth of old debt on some 22,000 properties — that same debt is in fact still there, in the form of liens. So while the city wants property to be put into productive use, sometimes its insistence on collecting debt makes that unlikely.
It’s a situation that 7th District Councilwoman Maria Quinones-Sanchez says doesn’t make sense.
“The way we put penalties and serve lawsuits is not going to activate people to pay, because the [debt] number gets so outrageous,” Sanchez told AxisPhilly on Tuesday, just before Council’s Committee of the Whole convened to hear testimony on a slew of delinquency-related issues. “Being proactive is better than being reactive.”
For Sanchez, “being proactive” chiefly means creating a land bank – something she is seeking to do through legislation. The land bank would, among other things, have the power to wipe properties clean of municipal debt. And that could be a game-changer for some of the city’s most troubled properties.
“The fact that [the city] hasn’t been willing to waive municipal debt when it’s worth more than the property is the flawed policy,” says Councilman Bill Green, a vocal co-sponsor of the land bank bill. With a land bank, “we can sell the property for a dollar if we want to.”
During Tuesday’s hearing, Council President Darrell Clarke repeatedly pressed administration representatives on the issue. Clarke, who has introduced a suite of bills for dealing with vacant land and tax delinquency, made repeated references on Tuesday to something he’s apparently about to announce, which he described as “something up our sleeve.”
And apparently it hinges on discounting blighted property.
Asked by Clarke if the city could discount property and take a loss, for some greater good, Revenue Department Chief Counsel Francis Beckley replied, “Yes, we could compromise on that,”
”You told me exactly what I need to know,” Clarke announced and, shortly thereafter, got up from his seat at the dais and walked out.