Department of Revenue Delinquent Real Estate Taxes November 2013

Audit Date: November 20, 2013
Audit Categories
  • Other
Controller: Alan Butkovitz
Audit Tags
  • Finance,
  • Homeowners,
  • Office of Property Assesment (OPA),
  • Permits and Fees,
  • Revenue,
  • Taxes,
  • Treasurer

Executive Summary

For Immediate Release:
November 20, 2013

Contact: Harvey Rice

Butkovitz Says Poor Collections Resulted in $120 Million
Lost in Real Estate Taxes
City Controller’s report recommends improvements to increase millions
in tax revenues annually for the City & School District

Department of Revenue – Delinquent Real Estate Taxes

PHILADELPHIA – City Controller Alan Butkovitz today released a review of the Department of Revenue’s Delinquent Real Estate Taxes that found the City and School District lost a combined total of $120 million over two years as a result of poor collections and enforcement.

The City’s collection rate of 88 percent was below the average rate from the peer cities selected for the Controller’s review. Due to this gap, the City and School District have lost approximately $25 million and $35 million, respectively in both fiscal years 2011 and 2012.

“This is a serious revenue loss and the effects of poor real estate collections are hurting all Philadelphians,” said Butkovitz.

“If that $70 million was collected for the School District, then needed positions such as nurses and counselors could have been provided in our schools,” said Butkovitz.

Some of the problems the Controller found which contributed to the poor collection rate included:
• during the time period of the review, the City made no attempt to send out late notices to property owners after the March 31 due date and instead had waited nine months to contact them;
• payment plans were ineffective and often difficult to enforce once a property became delinquent;
• once a property was moved from delinquency to foreclosure, it took nearly 2.5 years and sometimes reportedly upwards of six years to move the property to more responsible ownership – one of the worst records of any large U.S. city.

“Annual budgets and supporting dollars are shrinking incessantly,” said Butkovitz. “Efforts to collect these revenues can no longer go by the wayside.”

According to Butkovitz, the real estate dilemma was heightened in recent years as it was found that approximately 200 properties per month have been sold at Sheriff Sale. If this pace were to continue, it would take more than 40 years to clear the already-existing delinquent property backlog.

The Controller has recommended the following to prevent delinquency from occurring and to improve collections:
• report delinquent property owners to credit bureaus;
• improve the City’s contractor efforts to contact past-due property taxpayers immediately following the tax deadline;
• annually assess its tax lien digest to identify a poll of redeemable quality liens, and consider the feasibility of redeeming those liens through a negotiated bulk tax lien sale;
• allow property owners who have difficulty paying their taxes all at once to pay them monthly, while charging them a processing fee for each payment; and
• invest in productivity enhancing technology for the Sheriff’s Office so that Sheriff Sales happen expeditiously and predictably.

“We can no longer have our poor collection rates impact the much needed revenue for the City and School District,” said Butkovitz.