How Philadelphia is failing to proceed on taxes owed

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.

It will not be the first time the state has tried to force the city’s hand.

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.

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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.

About This Story

This story is the result of a collaborative effort between The Inquirer and PlanPhilly.com. In August, a two-day series on the tax-delinquency crisis in Philadelphia was published in both The Inquirer and PlanPhilly.com. Find it at www.philly.com/taxdebt

PlanPhilly.com is a five-year-old independent news-gathering entity covering the built environment. It is affiliated with Penn Praxis, the clinical arm of the School of Design of the University of Pennsylvania.

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.

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.

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.

Even 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.

But Bralow also believed that the amendment had some wiggle room. He noted in a January 1993 memo to dozens of city officials that the new law offered no clear guidance on what the phrase proceed on tax claims precisely meant.

Still, it is clear from the memo that Bralow expected the legislation would lead to stepped-up enforcement.

It reads, “A reasonable interpretation seems to be that the city must actively seek to enforce its claims, using the various methods provided for in the Tax Sale Act (which include civil suits against the owners personally) after one year past due.”

Bralow died a little over a year after he wrote that memo. Following his death at 41 from pancreatitis, the city soon lapsed back into its old weak enforcement habits, Toy said.

The lawmakers and delinquency experts now crafting legislation are well aware of the failed effort. Draft versions of the new bill do not appear to give the city, or any other municipality, latitude to interpret the law leniently.

But there is no guarantee that even a new law, with explicit dates and instructions, would be enforced, Ross said.

“Can I guarantee that elected officials are going to do the right thing? No. Can I punish them if they don’t? Probably not,” he said.

Ross said he thinks the legislation will pass, though he said further amendments are likely. Thus far, Ross said, none of his fellow legislators has voiced opposition to the proposed change.

Last month, Mayor Nutter said in a statement to The Inquirer and PlanPhilly.com that the city’s policy is “that we expect everyone to either pay or make payment arrangements.”

The administration has said it is aggressively overhauling the property-tax delinquency collection system.

And yet the total number of delinquency properties and amount owed the city has grown by more than 10 percent during the Nutter administration. Sheriff sales of tax-delinquent homes have also dropped sharply under Nutter.

There are plans, the city says, to sharply increase sheriff sales of tax-delinquent homes in the near future. It is a statement that administration officials have been making for more than a year.

“What I hope is that our bill gives elected officials the will and the tools they need to take tough measures,” Ross said. “No politician likes to go after delinquents. We love to make everybody happy all the time. But there are huge negative consequences when we allow these properties to continue in delinquency. We can’t let it go forever.”

Contact Patrick Kerkstra at pkerkstra@planphilly.com or follow him on Twitter at Twitter.com/pkerkstra
James Robertson and Becky Kerner of PlanPhilly.com contributed to this article.

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