When It Comes to Collecting Back Property Taxes, Does Philly Have Hope?

In March, the Inquirer’s data-laden, three-part series on tax delinquency, by Patrick Kerkstra, essentially reaffirmed much of what we learned from Kerkstra’s data-laden Inquirer series on tax delinquency in 2011: Philadelphia has more delinquent parcels for its size than any major city in the country, and subpar collection efforts haven’t helped.

The big reveal on day two of Kerkstra’s second series, though, wasn’t that upwards of 100,000 properties are in arrears on property taxes. It was that 57,500 of those delinquent properties are owned by private developers and property speculators—not low-income owner-occupiers. (Low-income homeowners accounted for only 21 percent of the delinquencies.) As Kerkstra put it, “The findings run counter to the long-standing assumption of many city political leaders that the delinquency rolls are dominated by low-income owner-occupants, a belief that has helped to undermine rigorous enforcement.”

But is it really true that officials were so blind to absentee landlords? Current and former City Hall insiders told me that while a misconception about who did own the delinquent properties might be at play somewhat, that can’t account for the lack of enforcement. In fact, two theories emerged about that “Misconception.”

Theory One: The Misconception Is True (A.K.A. The Blackwell Theory)
The Blackwell Theory: A misunderstanding rooted in ignorance, political savvy and a compassionate desire to not kick people out of their homes intentionally stalled enforcement.

The 2011 Inquirer series included a deeply buried nugget in which Councilwoman Jannie Blackwell admitted that she intentionally asked the city not to foreclose on properties in her district.

“They misquoted me,” Blackwell tells me. “I remember reading that and thinking to myself, ‘I didn’t say that. I don’t know where [Kerkstra] got it from.” I asked Blackwell if she has indeed tried to stall collection efforts in her district. “I have not,” she said. “I haven’t tried to slow it down.” (Kerkstra, for his part, says Blackwell did tell him that and points to a 2009 Inquirer piece in which she said, “We know who can pay and who can’t. You have to get it where you can and just accept there are some who can’t pay.” The article added that Blackwell acknowledged in a phone interview “that she occasionally asks the city not to foreclose on delinquent properties in her district.”)

Blackwell has built a reputation that, depending on one’s perspective, either makes her a champion of the poor, or a savvy politico hell-bent on stopping gentrification under egalitarianism’s veil—a reputation that many councilpersons have built.

One former longtime city official, who like most I interviewed asked not to be named, articulated the Blackwell Theory, which he believed. “She played to the emotions of other people on City Council,” he said. “They didn’t want to look like the sheriffs of old.” In other words, Blackwell painted the picture of a bloodless enforcer banging on people’s scrappily constructed shacks to tell them they were going to lose the shack if they didn’t pay up. Accordingly, collection efforts were cast as rich vs. poor, and those in the city’s revenue and law departments were dissuaded from enforcing much of anything—all on the assumption that the backlogs were flooded with poor people.

Theory Two: The Misconception Is Partially True, but Doesn’t Actually Explain Anything (The Incompetence Theory)
The problem with the Blackwell Theory, taken by itself, is that it’s too simplistic to fully explain the situation—maybe even a bit too conspiratorial. Officials told me councilpersons do put the brakes on tax collection for favorites in their districts—but not nearly to the extent that this would gum up the works of an entire collection apparatus. “Even out of say 30,000 properties, “ one official told me, “if 100 to 300 of them aren’t being foreclosed on for political reasons, that doesn’t get to the core of the problem.”

Before I explain Incompetence Theory, there’s an administrative detail that needs edifying. (I understand that tax and property law can get really boring really fast, so I’ll make this quick.) The form and method of tax collection is set by internal law department policy, not an ordinance. That means before the city moves to foreclose on a property, it’s up to the law department to design the agreements that taxpayers can enter into to repay their debts. And that means the adeptness of collection largely falls upon the law department and its current policymaker—in this case, City Solicitor Shelley Smith.

Incompetence Theory goes like this: The city may very well have been concerned about the effect of collections on low-income homeowners. But that could have been softened by crafting an adequate policy under which low-income homeowners repay their debts slowly, contingent upon income. (Indeed, last week, City Council finally passed a bill that codifies collection policy in an ordinance. The bill provides a meticulous, unbendable list of requirements that allows taxpayers to enter into income-contingent repayment plans, and forces collectors to notify taxpayers of the ability to enter into those programs.)

There was actually a time when the law department did this very effectively: During the Rendell Administration, Deputy City Solicitor Andrew P. Bralow devised an amnesty strategy, and he did this so effectively that by 1992, the city was $17 million ahead of its collection efforts over the previous year. His lawerly magnum opus was a deal he struck with the delinquent Jack Frost sugar refinery to get it to pay $1.2 million owed in back taxes.

Bralow died at age 41 in 1994, the administration changed a few years later, and whatever ad hoc policy he designed ended up dying, too.

So why didn’t the current law department do something similar? Smith declined to comment. But nearly every person I interviewed attributed the lack of internal law department policy to poor execution, not misunderstandings about who owed money.

Regarding the Misconception, administration spokesman Mark McDonald told me, “I guess I would say that that was a little bit of a straw man [Kerkstra] chose to set up the way he did. He said everybody thinks they’re just a bunch of poor people and they couldn’t pay. You know, I don’t know who thought that.”

The whole point is that even if everyone thought it, it doesn’t explain the failure of the law department to try to fix the problem. Collecting delinquent taxes isn’t Fermat’s Last Theorem.