All that uncollected property tax: Looking for a vision of reform behind the dollar signs

$472 million in uncollected property tax looks to be this year's $1.5 billion - the estimated unpaid court fees and forfeited bail that is now being collected by aggressive private firms following the newspapers' revelations of long mismanagement at the disbanded Clerk of Quarter Sessions. Time will tell if the property tax numbers in a report by (in partnership with the Inquirer) draw the same sustained public attention, and spur creaky systems to change.

But a similar, fundamental, error already looms. In a city with a persistent 25% poverty rate, and glaring hunger numbers (1 in 2 people in Philadelphia's First Congressional District, as reported last week), much of that debt is simply uncollectible. It's not hiding under beds and in nightstands. A significant amount of tax and water debt can and will never be collected. We are stuck, rock and hard place, Scylla and Charybdis: leaving all that debt in place burdens title, increasing abandonment and blight, and complicates efforts to get people to pay their current and future tax debt.

It's easy to sell papers and get column inches with the accusation that government inaction and unfairness is costing those of us who followed the rules and paid taxes and bills on time, particularly against the backdrop of budget crises that are starting to look apocalyptic for states and cities. And it's not untrue. But it's mostly beside the point.

Look at the options presented, essentially two. One: quick and mass foreclosure. Two: unload the problem by selling off the debt itself to private third parties, who should have market incentives to foreclose and no meddling City Council members to interfere. Both are misguided for reasons amply suggested by the study's own data.

Foreclosure is obviously the final 'stick' that a municipality has to try to compel tax payment. But if payment isn't made (the owner is dead, moved to Florida, is living on disability payments), your choice is to take the house and try to cash out as much value as you can to offset the owner's debt. Here you can already see how illusory the debt number is. Flooding houses into the depressed forced-sales market will get you an ever-decreasing share of what's owed, if a property sells at all. Recent data shows that much of the city's neighborhoods simply can't be developed on the private market - the cost of land and construction (or of acquisition and rehab) is more than the neighborhood sales price for a home.

Selling liens to third parties was done under then-mayor Rendell, and it's currently regarded as worst-practices by the same national experts quoted in the Plan Philly study. While a city that unloads their debt gets some fast cash, it loses control over the collection and foreclosure process. In areas with weak sales markets, you don't want to unload land to whoever will pay for it. You want to control the pace of foreclosures onto the market, and you want to give land (even for nominal or reduced cost) to those who will be good stewards, create community spaces, or spark start-up businesses. You don't want speculators scooping up land to sit on, putting further pressure on your strained code enforcement department to force maintenance by absentee owners. Beyond all that, splintering ownership of municipal liens makes it harder to foreclose when that's appropriate (as described in the study's section titled, "Ad Hoc Approach"), and had a lot to do with why the amnesty program was of limited use.

We need to keep an eye on the real issues and solutions.

Why is the delinquent tax problem the greatest in the poorer neighborhoods? Well, aside from the obvious fact that people are, you know, poor in those neighborhoods, it has to do with our property values and tax assessments. Properties are worth so little in many areas, and taxes are so low, that it doesn't make economic sense to foreclose until many years have passed. By that point, other debt like water or gas could leave the property underwater and unattractive to buyers, or the condition may have degraded so much that repair is not worth the investment. In my work on land and housing issues for Councilwoman Sanchez, we are as often as not trying unsuccessfully to request foreclosures so that abandoned properties can be redeveloped by nonprofits or used for side yards or community gardens. The obstacles are low real estate tax debt, compounded by fragmented ownership of these and other municipal liens. Outside of low-value neighborhoods, the long-awaited reassessment of commercial properties could make it easier and more profitable for us to foreclose on valuable tax-delinquent properties like those individually cited in the study.

Why are so many folks who would be eligible not in low-income ('hardship') payment agreements for their back taxes? Partly because those programs are often effectively secret. You can not find the application online at any of the City's webpages, you must know to check deep on Community Legal Services' site. The guidelines are not fully understood, sometimes by the officials who are applying them, and there is no systematic requirement that people be informed or considered for the hardship agreements. That can and should change immediately, and the successful and nationally-acclaimed foreclosure diversion program created by Judge Rizzo is an obvious close-at-hand model. We can use already-city-funded housing counselors, along with the "Save Your Home Philly" hotline, to do affirmative outreach to occupied properties at risk of foreclosure. We can also finally create a program for low-income seniors, that grants the homeowner a life estate or otherwise delays collection of tax debt until a property is sold or brought through probate.

What else can be done? Two pending state bills introduced by Representatives John Taylor and Chris Ross propose a transformed foreclosure system that works with land banks to increase enforcement while giving cities more control and revenue than does the current speculator-friendly sheriff sale system (click here for a video of the legislative briefing in the Urban Affairs Committee last month, featuring relevant testimony from Alexander and Kildee). These bills need significant amendments so that they better suit Philly's needs and more adequately protect low-income residents - as introduced, Ross's bill would actually prohibit payment plans longer than one year, regardless of a homeowner's income or ability to pay, and doesn't address how we transition from widespread long-term delinquency to prompt, universal enforcement. But these bills pose a huge opportunity for ending our current system, which is ill-suited for the large-scale abandonment and blight of a post-industrial city.

This fall, City Council will begin considering how to implement those state bills, starting with preliminary land bank legislation introduced in June by Council members Sanchez and Green in coordination with Mayor Nutter and his agencies. A functioning system will involve increased communication of payment plan options, consistent enforcement, and a reformed (and hopefully much-limited) role for the sheriff sale process. It will also take a deliberate and difficult transition to get there, that will require looking realistically at our uncollectible debt. It's easy to talk about swift enforcement and cultures of compliance, but first we need to face this mess we've created of long-term delinquency by poor people in neighborhoods with incredibly weak sales markets. Let's not let that get lost in the distracting glare of dollar signs or easy narratives about political complacency.

The Day of the Great Reckoning Has To Come

You don't have to tell me there are a lot of poor people in Philadelphia. I get it. We are a poor city. Full of poor people. Everywhere you look, poverty. It's Calcutta pre 1975. I understand.

What I do not understand are tax delinquencies that stretch so far back as to pre-date the Kennedy Administration, long before some of the property owners who now hold their properties have been born. What is the story behind all of these arrearages?

Adjusting the map parameters, West Kensington has a very high rate of lots with 15+ year delinquencies for grand totals of... less than $500. A Cricket pre-paid cell phone plan costs a user about $400 per annum. But one could not be bothered to pay, or establish a payment plan, on a sum so paltry that one's bi-annual consumption of pizza costs more?

Failing that analysis, what about comparisons to cities that are completely collapsed, such as Detriot, which is an obvious "go-to" city to draw a comparison whenever we need to feel better about ourselves. Their rate of chronic delinquency happens to be lower. Further, the tired argument "well there's just properties that owe more tax than they are worth" doesn't hold water. It isn't true now that the data is more visible.

And only 1% of delinquencies actually have engaged the City on a payment plan. Shouldn't this number be 100%-or-you-are-foreclosed-on? Why is this program voluntary? It should be mandatory.

The map shown does not even include all of the delinquencies known. Just 95,000 out of the 110,000 delinquent properties that are on the rolls. The City of Philadelphia has approximately 550,000 total lots. This means about 20% of the lot-owning population of Philadelphia is annually shirking their responsibility. That means the remaining 80% must pay 120% of the burden to yield the same proceeds.

Did we not just witness a budget battle go down at the School Reform Commission and the layoffs of over 2 thousand employees at the Philadelphia School District?

The poverty excuse is just that---an excuse. There are clearly a lot of fixed income people in Philadelphia who need their property taxes sized appropriately to the incomes that they are earning. That is a process that cannot begin until you actually bring these people to the table and go over their finances. Right now, we just choose to ignore the issue completely! Excellent way to approach a problem, don't you think?

The astronomically high delinquency rate certainly does have consequences for the rest of us. The property tax delinquency in and of it self is now an entitlement. There are property owners who now feel it is their right to not pay tax (we're talking about the 15+ year delinquencies).

Maybe that's how it should be? Maybe we could just create a certain class of property owners, 1/5 of Philadelphia's present population--who are simply exempt from the obligation of supporting the City's dysfunctional school system and the Office of the Prothonotary deletes off the liens to uncloud their titles.

I for one would love to join that 20% of the population. When my mortgage is paid off, count me in as a voluntary tax delinquent.

The Tea Party would be proud.

How To Set Up A Payment Plan

From the OPA's own website:

Payment Agreements
If you are having difficulty paying your taxes, contact the Department
of Revenue. We will work with you to arrange a payment agreement.
Normally, a down payment of 25% is required with the balance to be
paid in 12 equal monthly installments. If you become delinquent while
under a payment agreement, you will be subject to accrued interest and
penalty charges, as well as legal action and fines.
In-person agreements can be made at the following locations:
A. Municipal Services Building – Concourse
1401 John F. Kennedy Boulevard
B. Northeast Philadelphia Service Center
9125 Roosevelt Boulevard
C. North Philadelphia Service Center
2121 W. Lehigh Avenue
In certain situations, agreements can also be made over the phone by
calling 215-686-6442.
If you have any questions on this matter, please send an e-mail to

That's a "regular" payment plan

If you click through to the CLS site and the linked/uploaded application for a 'hardship' agreement, you can see unlike what you posted, the hardship plan is based on ability to pay. Depending on what you can afford, there may not be any down payment required, and the term can be as long as necessary based on the repayment formula.

The point about the information not being out there is hereby proved, I think.

This form?

Are you referring to this form I found on the Department of Revenue's website?

Nope, still not the form

Though I'll ask about that one, because it seems to be somewhat conflicting/confusing.

To my understanding, the 'hardship' plan is not limited to 8 installment payments as stated for the 'low income' option on the one you linked, but again is tied to income, as you can see usefully explained on CLS's site and in the linked 'guidelines' and 'taxpayer assistance brochure'. Although these two documents refer to outside collections handled by the Linebarger firm, they have also applied to City property tax collection since 2007.

So I can stop playing hard to get:
Financial Hardship Agreement Guidelines (appendix)

I will admit

The hardship form reads like a very short form tax return. It is 1 page and the instructions are simple on page 2 (is this also available in multiple languages?)

EDIT: Ahh OK, I see your new comment. I'm assuming the City is rather uncoordinated about how it handles PPs then; thus the very low participation rate.

It's not complicated enough for me to fill the one I linked to out. Does the City of Philadelphia not provide a single employee that helps any citizen complete this form (EDIT: or any of the others that might be floating around)? No-one at the basement of the MSB building cannot help a property owner who physically appears can fill one of these out? Are people forced to use Community Legal Services over doing it on their own? Seems odd given that I have a housemate living in my house that went through the trouble of applying for, appealing and secured unemployment compensation which is a much more nettlesome process now that I've witnessed the process with someone I happen to know who has shared with me how difficult it is.

Maybe it's time to revisit this completely. I said already that we have a problem with too many fixed income property owners who do not have their property tax burdens fixed to their income. I don't think Philadelphia would ever let these group of citizens, who vote, to be subject to the whims of the property markets. Renters, yes, but owners, no. Why not fix their property tax burden? There is room in the system to apply a post-assessment adjustment that fluctuates with the assessment that ensures that the principal owed is a fixed amount. That would be no different than New York City implementing rent control, except this would apply to low income distressed property owners-only. The property owners could even bargain for an even lower amount if they provide their banking information to the City of Philadelphia and agree to a settlement plan and monthly installment instead of an annual lump sum.

Shouldn't we do that to alleviate the fear that one day... the "City is gonna come take my house?" That would provide a huge relief for a large segment of this population of Philadelphia.

I won't quote any addresses here that I'm seeing on the PlanPhilly site because I don't want to delve into childish fingerpointing; but some of the blue dots (10+ year DQs) are on properties where the owners clearly are making a conscious decision not to pay.

One person in particular who lives in my neighborhood (not on my immediate block, for any of you who may know me... about 5 minute walk away) decided to run for Philadelphia Traffic Court during the last primary cycle. The home where she resides has 6 tax liens on it. One of the owners of the home formerly worked at the BRT when the house first went delinquent. Other examples of properties that I am intimately familiar with across the city, and not in the Biblical sense: several that I found blue dots for are owners who have multiple vehicles. We're not talking 3 vehicles, we're talking at minimum 5. Several recently purchased. Haven't paid property taxes since they were deeded the house.

Seriously. Now that I know how bad this problem is... one day when I hold my title free and clear, I'm shutting off the spigot and I'm not paying. I'll invest the money in something that yields a higher return than the interest Philadelphia would be charging me, and just hope I luck out that I'll die before the City comes to take my house.

For the record

That would be approximately 29 years from now.

Presently the City of Philadelphia owes me $11.71 dollars for overpaying my real estate tax when my house settled. Not my fault: the closer at the settlement company had cataract surgery (or so my buyers agent told me).

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