The Philadelphia City Council is exploring legislation to collect around $492 million in delinquent real estate taxes that could aid the city’s cash-strapped school district.
City Councilman Allan Domb proposed on Nov. 16 a bill aimed at recouping the lost revenue by adopting a system that securitizes tax liens.
The plan would involve selling tax liens to a trust created and managed by the city, which would hire servicers to help recover outstanding debt. The city designates 55% of its real estate taxes toward the Philadelphia School District, which is facing a more than $100 million deficit starting next year and $1 billion by 2022. The Pennsylvania General Assembly and Philadelphia City Council control the district’s taxing authority.
“It’s crucial that we collect these delinquent taxes,” said Domb. “We need revenue for our schools.”
Domb said that of 67,000 delinquent properties, only 16,000 are owner occupied. He said his proposal mirrors a similar securitization tax lien collection strategy used in New York City and is aimed at going after property owners who choose not to pay while aiding those who can’t afford to contribute.
Domb’s bill has been met with concerns by City Council President Darrell Clark, who attributes a big part of Philadelphia’s uptick in foreclosures to property homeowners not being adequately notified. Clark, who introduced legislation seeking to protect homeowners from Domb’s proposal, said data needs to be updated before any tax delinquency program commences. He also takes issue with the $492 million delinquency number used by Domb, saying that this figure includes old and forgiven debts.
“So long as the City’s property records are so full of errors that is takes less than an hour of our staff searching to find prominent properties – such as Temple University’s practice field – that are listed as delinquent with huge outstanding debts that should be erased, the city should not proceed with a blanket tax lien securitization plan,” said Clark spokeswoman Jane Roh. “As long as the city’s property data are so severely flawed that we regularly file to foreclose on residents, many of them seniors, who we should be helping instead of throwing out of their homes, Council President Clarke will have serious concerns about a blanket program such as that proposed by Councilmember Domb.”
Councilman Domb said he is working with council members to address concerns and hopes to schedule a hearing once they return to session on Jan. 25, 2018.
The Philadelphia School District has been governed for the past 16 years by the state-devised five-member School Reform Commission, which voted on Nov. 16 to dissolve itself in a move toward restoring the nation’s ninth largest public schools system back to local control. Moody’s Investors Service upgraded the district one notch to still-junk level Ba2 in September citing “considerable improvement” in its “still strained financial position.”
The city of Philadelphia has general obligation bond ratings of A2 from Moody’s Investors Service and A-plus from S&P Global Ratings and Fitch Ratings.
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Corrected December 18, 2017 at 7:42AM: An earlier version gave a wrong rating for the city from S&P.