Council amends bill promoting sale of property tax liens

A bill that would authorize the city to sell real estate tax liens to private collectors was amended on the floor of City Council Thursday to provide some protections against abusive practices by potential third-party collectors. The amendments would prevent private collectors from adding more than 10 percent interest to the debts they collect, and would cap what they could collect at five percent. They would also prevent owner-occupied homes from going to sheriff sale until at least two years after the date of the lien sale.

As previously reported, the city is already authorized by state law to sell tax liens to private collectors. Councilman Bill Green’s bill is intended to encourage the city to pursue this program.

According to a legal opinion from Chief Deputy Solicitor Richie Feder, shared with PlanPhilly by the office of Councilwoman Maria Quinones-Sanchez, “the bill would have no legal effect.” Furthermore, Feder wrote that the city does not need Council’s approval to sell liens placed on private property—only to sell public property, or other interest in publicly owned property—so the limits that Green’s amendments place on the program would not apply.

“[The bill] purports to put certain limitations or conditions upon the City’s sale or assignment of tax claims.” Feder wrote. “… the Charter does not give Council any direct role in authorizing the sale or assignment of tax claims or liens. Council, therefore, has no authority to impose limitations or conditions upon any such sale or assignment. The limitations and conditions set forth in the bill, therefore, are a nullity, and would be read by a court as a statement of sound policy, as expressed by Council, but not as a binding requirement.”

Councilman Green said that his bill was necessary to generate debate and bring attention to the availability of lien sales as a way to combat delinquency anyway.

“I believe that we have the right under city law to say how lien sales should be conducted, so I don’t necessarily agree with that part of the conclusion,” Green said. “[But] even if that’s true, that’s why we allowed the Commissioner of Revenue to create regulations for how and when and if properties will be part of lien sales.”

Green said he hopes the Revenue Department will act quickly to sell liens on non-homestead properties, and use the conditions contained in the bill, and in the new amendments, as a guideline.

Earlier on Thursday, the Philadelphia Association of Community Development Corporations sent a letter to Council outlining some concerns about the sale of tax liens.

“PACDC recognizes that selling tax liens to private investors—either as a bulk sale, or individual property by property—can generate up-front cash that the City desperately needs,” wrote Beth McConnell, policy director for the organization. “But in the case of blighted, vacant, tax delinquent properties, lien sales have been shown to be ineffective in bringing the property owner into compliance, and also to hinder redevelopment of those parcels for years to come.”

McConnell said that private collectors are unlikely to have any more success than the city in collecting on blighted properties with absentee owners, and if the city sells the liens, it will have less leverage to seize problematic properties. A lien sale program could also be detrimental to the proposed Land Bank, McConnell said, preventing the city from adding properties with outsourced liens to the system.

“Obviously, all we can do is legislate and make different tools available to [the administration],” said Councilman Green. “I’m confident that the Mayor and our revenue czar, Mr. [Thomas] Knudsen, and our Commissioner, Clarena Tolson, will do whatever they believe will bring in the most revenue as quickly as possible.”