Axis Philly: Realty Organization Proposes Plan for Tax Collection
The city generates the majority of its revenue through the collection of property taxes. Not all of these taxes, however, are able to be collected. Currently, there is about $500 million in delinquent taxes owed. Some of the delinquencies are over 10 years old.
Allan Domb is the president of the Greater Philadelphia Association of Realtors. He said that it is not the residents that are the problem but the investors that do not pay the taxes owed on investment properties.
“Most of the delinquency is not people who can’t afford to pay their taxes, it’s not poor people,” Domb said. “People who don’t have money are very careful about their taxes. They’ll call you up to make a payment plan. They’re very religious about paying their bills. They want to pay their bills and I applaud that. The ones who aren’t paying aren’t the ones who can’t afford to, it’s the ones skeeting the system.”
When a property becomes delinquent, the city first mails a warning to the property owner. After the warning, the city will put a lien on the property. This lien prevents the property owner from selling the property and collecting the profits with out paying what is already owed to the city.
Problems arise when delinquent property owners do not live in the city. If the lien is only placed on investment property and not the investor’s primary residence, it is unlikely that the lien will have an impact because it does not directly affect the property owner until he or she plans to sell. Philadelphia does not have the power to put a lien on property that is located outside of the city.
Kevin Gillen from the University of Pennsylvania’s Fels Institute of Government has helped the Greater Philadelphia Association of Realtors determine the effects of delinquent taxes on the city.
“One of the things we’ve found out in examining the issue of delinquency in the city is that many owners don’t live in the city,” Gillen said. “So what can you do? What the city has asked our delegates in Harrisburg to do is pass enabling legislation that would give the city the ability to put tax liens on properties outside the city that are owned by delinquent owners who own properties in the city.”
The proposed legislation has yet to be approved but Gillen said that the city is trying. While delinquent tax payments have a direct effect on how much money the city is able to generate for its operating budget, it also has an effect on life for city residents and businesses.
“If you look at other cities like Boston or San Francisco, you would see very little abandonment or delinquency in those
cities, the rates are very, very low. Is that because the landlords in those cities are nice, more benevolent people? No. It’s because land is much more valuable because there is a greater desirability to live there, “ Gillen said. “Incomes are double what the average incomes are in Philadelphia. People want to live and work in those cities more so than live in Philadelphia or at least certain neighborhoods in Philadelphia.”
Delinquent tax payments also raise the need for more taxes in order for the city to generate enough money to operate. If the almost $500 million were to be collected, the need for taxes would decrease and the tax rate would drop, giving residents the incentive to stay in the city or for new residents to come.
“If a city makes itself more undesirable, its taxes are too high, its public services are of a relatively low quality, people relocate and they leave. They go delinquent on their properties and abandon them. The factories close, the jobs leave and the workers follow,” Gillen said. “In addressing this problem, it’s all fine and well to try to improve the delinquency collections by more aggressive foreclosures or things like that but ultimately the best way to address blight and delinquency is to make your city a place where business wants to be.”
City residents said that they feel that allowing these property owners to remain delinquent with out any real repercussions is unfair to those who do pay their taxes.
“It’s not good. It’s not very fair,” Amanda Chopa a resident of Rittenhouse, said. “I don’t make a lot of money as a nanny and I pay my taxes when they’re due because I think it’s my right and I think that it’s appropriate for the workforce to continue.”
Residents also said that they feel that the city should go after the investors more vigorously with harsher penalties.
Linda Lagrotte and Anne McCann of 12th Street said that the city should go after the commercial investors first and then the residents.
“If they’re just owners who are pocketing this, then they have to be gone after and penalized and shut down,” McCann said.
“We should find another way to go after the people who don’t pay,” Lagrotte said.
The Greater Philadelphia Association of Realtors has proposed a plan to City Council to privatize the selling of property liens. In this new system, the city would collect 100 percent of what is owed by selling the lien to tax collection agencies for the price of what is owed. The tax collection agencies would then be in charge of those delinquent properties and enforce their own payment policies on the property owner.
With this new system, legislation proposed to allow Philadelphia to go after properties not located in the city would not be necessary.
“You don’t need that bill with this—that becomes archaic. With that bill, you want to go after someone in Montgomery County, you still need to execute on that judgment and go through the process that could take years to do that,” Domb said. When you put a lien on a property, you get the money over night. That method of going from Philadelphia to say Los Angeles to collect is like going by trail ways, our method is like traveling by Concord.”
The Greater Philadelphia Association of Realtor’s plan would also help to decrease the need for more taxes by actively getting the money owed to the city.
“If the city follows our plan and goes to [a property tax rate of] 1 percent then people in the city will pay less taxes. If you go from 1.32 to one, it’s almost like a 24 percent reduction in your taxes. It’s 1 percent, the road to 1 percent,” Domb said.
Check out our related story on vacant properties.