Announcement made along with Mayor Kenney and Council President Clarke at a joint press conference demonstrating the Administration’s commitment to improving delinquent tax collections
July 7, 2016—Philadelphia, PA—Philadelphia City Councilman At-Large Allan Domb, along with Mayor Jim Kenney, City Council President Darrell Clarke, and City Revenue Commissioner Frank Breslin, announced today at a press conference at City Hall that the City will be issuing a Request for Proposals (RFP) to explore various solutions to the City’s uncollected real estate taxes.
“Despite a tax collection rate of 92 percent, 8 percent of uncollected taxes still remain. Of this 8 percent, 40 percent of delinquent taxpayers live outside of the City and 50 percent to 60 percent are commercial investors,” said Councilman Domb.
“Collecting delinquent taxes is one of my top priorities as a member of City Council and I am eager to begin this process. The RFP the City plans to issue today will provide the City the opportunity to review and evaluate the best strategies that will help equip our government with the means necessary to better collect the money owed. This is a win for those who pay their taxes.”
Results of a feasibility study, commissioned by Councilman Domb, and conducted by the National Tax Lien Association (NTLA) were also announced at today’s press conference. The study, which outlines the feasibility of collecting delinquent property taxes through securitization of tax liens, explains that the liens are sold to a city-owned trust that issues bonds to investors to secure the liens and utilizes servicers acting as agents of the City to collect the delinquent taxes on the City’ behalf. Utilization of this method allows the City to be in complete control of the process, essentially acting as both the buyer and seller, which among other things, will protect our most vulnerable residents and will help to establish a responsible and compliant taxpayer culture. Findings from NTLA’s study include the following:
- Philadelphia currently has $492 million in unpaid property taxes from approximately 90,000 accounts
- The City of Philadelphia can receive $90 million to $120 million in as little as three to five months by securitizing its delinquent tax liens, money that will go to the School District and other municipal services
- After year one, the City would receive annual cash infusions of $25 million to $40 million by securitizing any new delinquent taxes
- The City can anticipate that 30 percent to 40 percent of the unpaid taxes will be paid before the tax lien securitization happens as a result of installment agreements and/or payment plans
- Nationally, less than one half of one percent (0.5 percent) lose their properties to tax foreclosure
- To complete a securitization the City creates a trust to administer program and retains control of the established rules or parameters
- Securitization builds in protections to protect low income, seniors, veterans, etc.
*Numbers included may be subject to change.
Brad Westover, Executive Director of NTLA, was also in attendance at today’s press conference. “The City of Philadelphia’s current delinquent tax problem resembles New York City in the ‘90s. For 20 years New York City has conducted annual securitizations to significantly reduce the backlog on years of non-collection,” said Westover. “Philadelphia would be well served to implement a programmatic solution so that the burden does not fall upon those who do pay their taxes and are consistently forced to pay higher taxes for those not paying.”
In closing, Councilman Domb said, “It is my hope that as a result of the RFP, the City receives qualified submissions from established servicers that prefer the securitization method and that those submissions are given serious consideration. This will raise our bond rating, which would only strengthen our City’s financial standing. And just as important, we owe it to the taxpayers of Philadelphia who play by the rules to clean up our books.”
The full NTLA study can be found here.
Video of the press conference:
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Councilman Allan Domb is serving his first term as an At-Large member of Philadelphia City Council. He is chair of Council’s Committee on Housing, Neighborhood Development and the Homeless. More information at phlcouncil.com/AllanDomb