Tax lien process is best for City of Poughkeepsie and its residents
Thursday, September 27, 2018
Posted by: Carly Cahur
In the guest column “Tax lien sales are inefficient, unjust” (Sept. 18th, Poughkeepsie Journal,) the writer suggests that the City of Poughkeepsie's method of enforcing delinquent taxes is unjust and unfair, while providing data that contradicts that very argument. Before we get to that, however, any discussion about how we enforce delinquent property taxes has to start by emphasizing the fact that, here in the City of Poughkeepsie, 97 percent of property owners pay their taxes each year, a rate which is comparable or better than our peers. The system is codified in state and local law and has essentially remained unchanged since the adoption of the modern city charter in 1966.
The annual process of selling tax liens is an enforcement method which allows municipalities to get paid now, rather than years in the future or not at all. Purchasers stand in the shoes of the municipality, earning interest at the statutory rate until the taxes are paid. The alternative, quite clearly, has the city holding the tax liens and pursuing judicial foreclosures at some point down the road. The writer’s suggestion that the city borrow funds by issuing so-called "delinquent tax anticipation notes" and paying interest on that debt, in order to hold its tax liens so as to collect more from property owners later, essentially would put the city in the same role as the tax-lien investor. The same role the writer criticizes as "unjust and unfair."
Using the writer’s analysis of tax year 2015, where 613 properties began the process of noticing and publication which precedes any lien-sale, 45 percent of which responded by fully paying their taxes to avoid a lien even ever being recorded on the land records, and 35 percent had a lien filed and assigned, we see a process which starts with over 7,800 taxable parcels each year, and ends with a few hundred liens sold. As the opinion piece noted, the vast majority of the liens assigned are eventually paid by the property owner within the two-year redemption period, reducing to a handful the number of properties which make it all the way to the entry of a tax deed in favor of the lien-buyer.
Not considered by the writer at all is the significant cost to property owners associated with foreclosure. Costs that simply do not apply in the tax lien sale process. The largest of these — attorney fees and court costs — can total thousands of dollars. In jurisdictions around the country which rely on this enforcement method, these costs are correctly blamed for more homeowners losing their property, as they quickly make an already challenging situation completely unmanageable. In those communities, op-eds go in the other direction, touting lien-sales as a better process because everyone gets the same two-year redemption period, is treated the same, and comes to understand a process which leaves little room for confusion.
The question about what is a "better" enforcement method, the assignment of tax liens or judicial foreclosure, is not one we should attempt to answer in a vacuum. Today the city has a negative general fund balance of $11 million, a reality that argues pretty loudly against the writer’s suggestion that we borrow money to fund the revenue gap that would be immediately created if we were to switch to the foreclosure model. More importantly though, our country has had enough foreclosures. It is not the role of government to foreclose on people’s property. Nor should government pick winners and losers as part of its tax collection effort, as the writer suggests be done in the context of a judicial foreclosure, assigning some to payment plans and others to exorbitant legal fees and court costs.
Finally, the writer asserts that it is the tax lien process which creates "systemic injustice," because it is the most vulnerable of our population who fall behind on their property taxes. By that way of thinking, any enforcement of delinquent taxes would create such injustice. Tax delinquency is not caused by one collection process or another, but by one or more of a host of social issues — quite often the lack of health care, or loss of a job. Those issues, and others like them, are where our elected leaders should focus their energy, remembering that the most vulnerable of our population are not delinquent property owners at all; they are our homeless, the infirm, the unemployed or the addicted. Those are areas where, if we really want to preserve and enhance home ownership in our country, we must do better.
Marc Nelson is Poughkeepsie’s city administrator. He previously served as the City’s Finance Commissioner and is the former City of Hartford, Ct. real property tax collector.
Find the original article here.