Officials in Philadelphia have served notice to about 110,000 delinquent taxpayers in advance of the city's $180 million tax-lien securitization, finance director Ben Hayllar said last week.
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Under the plan, the city and the Philadelphia School District would sell the delinquent liens to the Philadelphia Authority for Industrial Development. That agency would then sell taxable five-year bonds and retain servicers for the liens.
The city is in the process of negotiating with three private servicers: Breen Capital Services of Bordentown, N.J.; Capital Asset Research Corp. of West Palm Beach, Fla.; and a partnership of the Texas law firm of Heard, Goggin, Blair, and Williams and Taxserv of Virginia. Each of the servicers will receive one-third of the portfolio, Hayllar said.
"On May 2, we registered notice to 110,000 delinquents of the pending securitization of the liens, the use of third-party servicers, and the increase of fines and penalties, including the imposition of an 18% penalty plus attorneys' fees on the 2d of June," he said. "Since that time, we've had a tremendous volume of people coming in to make payment."
But that volume isn't expected to lead to a major reduction in the size of the deal. "It will go down, but I don't think it will go down substantially," Hayllar said.
Through the second half of the month, officials will compile the portfolio and submit it to rating agencies in order to determine the loan- to-value ratio, he said. The City Council will then be asked to give final approval early next month. Hayllar said city officials hope to close the deal by June 30 so that the school district can use its share of the money this fiscal year.
The city expects to receive more cash from the deal at closing than it would have if it had tried to collect on the tax liens without the sale. But about 40% to 45% of the total amount will be withheld in a senior note and repaid over five years.
About 55% of the money collected from the portfolio will go to the financially strapped school district, which will use its share to finance an education reform package.
"They need this money and we intend to use this vehicle to assist them in getting it," Hayllar said.
The city will use its portion for economic development initiatives.
The deal will be lead managed by PaineWebber Inc., with Public Financial Management Inc. acting as financial adviser.
