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Philadelphia Tax Delinquents Draw State Attention---Again

by: Rebel - Havertown, PA
started: 09/16/11 5:26 pm | updated: 09/16/11 5:26 pm

Sometime in the next three months, state lawmakers will begin formally considering a bill that would make Philadelphia finally deal with its 100,000-plus backlog of tax-delinquent properties.

Philadelphia has more tax delinquent properties per parcel than any other big city in the country.

The delinquency epidemic has deprived the city and the School District of $472 million in unpaid taxes, penalties, and interest. In addition, there is the blighting effect that these properties - many abandoned or poorly maintained - have had throughout the city, particularly in low-income neighborhoods.
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In December 1992 - shortly after Ed Rendell took office as mayor - the legislature enacted a little-noticed amendment to the state property tax delinquency law. It instructed Philadelphia to "proceed on tax claims after one year of delinquency" unless the property owner entered into a payment agreement with the city.

The aim was to make the city crack down on tens of thousands of property owners who had become long-term tax delinquents, said Andy Toy, who was instrumental in drafting the legislation as an official in the city's Commerce Department.

"Our intent was to require that properties make their way through the system in a timely fashion, in order to get the properties back on the tax rolls," said Toy, who now works in economic development and has twice run for City Council.

But that push never happened.

Despite the amended law, the city has more delinquencies than it did in 1992. As reported in an Inquirer and PlanPhilly.com series last month, Philadelphia has more tax delinquent properties per parcel than any other big city in the country.

As of April 30, there were 112,000 past-due properties in Philadelphia. More than 74,000 were two or more years delinquent, and 26,000 were at least a decade in arrears. On average, tax-delinquent properties in Philadelphia are 6.5 years past due.

Toy contends that those long-standing delinquencies show that the city has not followed the law as amended in 1992.

City officials disputed that.
"We do routinely 'proceed on tax claims,' including civil suits in Municipal Court against tax delinquents, with quite limited exceptions," the Nutter administration said in a short statement in response to questions from The Inquirer and PlanPhilly.com.

The Municipal Court suits cited are low-cost, high-volume enforcement actions designed to ensure that the city and School District get what they are owed if a tax-delinquent property is sold later. Such suits do not on their own lead to foreclosure sales, routinely used in other cities but relatively rare in Philadelphia.
E
ven the Municipal Court suits are used relatively sparingly. An Inquirer and PlanPhilly.com analysis of tax-delinquent properties in Philadelphia found that the city had sued fewer than 18 percent of past-due parcel owners in Municipal Court. The analysis, which checked 450 randomly selected properties taken from the 112,000 delinquent parcels, is accurate to a 95-plus-percent confidence level.

This raises the question: Is the city actually proceeding on tax claims within a year as required by law? The answer may depend on what proceed means, and there is no clear definition in the statute.

"Evidently there are multiple interpretations in Philadelphia of proceed," Frank S. Alexander, a law professor at Emory University and a leading expert on property-tax delinquency, wrote in an e-mail.

"With respect to a potential 'disconnect' between a statutory requirement and local government compliance with that requirement, that is not something I am in a position to assess."

Alexander is one of the experts whom state lawmakers, led by Rep. L. Chris Ross (R., Chester), chairman of the Urban Affairs Committee, are consulting as they work to revise the state's property-tax delinquency law. Draft versions being circulated use much more precise language, leaving less room for interpretation.

"The tax reform bill being proposed by Chairman Chris Ross avoids . . . ambiguities by identifying with greater specificity the dates that actions must be taken for enforcement of property taxes," Alexander wrote. Ross plans to formally introduce the bill this year.

The draft bill instructs all Pennsylvania taxing jurisdictions, including Philadelphia, to "commence foreclosure proceedings" two years after taxes were due "by filing with the court a petition for foreclosure and sale of the property."

The 1992 amendment was much more vague. Still, Toy, who is not a lawyer, thinks that the city is at a minimum violating the "spirit of the law."

"We used the word proceed because there's a process, and it doesn't have to end in sheriff sale, so we didn't say the property had to be sold in a year. But the process does have to lead to either the taxes being paid or a sheriff sale, and right now there's a huge number of properties out there where there's been no action," Toy said.

The amendment was championed by Andrew P. Bralow, then the city's chief deputy solicitor. Toy said Bralow understood the scope of the delinquency situation and its impact on the city.

"The problem then was as it is today: 100,000 tax-delinquent properties that aren't bringing in any revenue and, just as important, are often vacant and blighted, bringing down the value of the properties around them," Toy said.

With a new administration in place, Bralow and a handful of other city officials partnered with state lawmakers to craft the revisions to the tax-delinquency law, which would only apply to Philadelphia. The point, Toy said, was to force the city's bureaucracy into action.