By Allan Domb
Philadelphia, like major cities across the country, continues to face many pressing challenges that require additional tax revenue to support city services and operations, long-term financial obligations, and the School District of Philadelphia.
Despite these urgent financial needs, Philadelphia continues its struggle with the collection of delinquent taxes. This long-standing culture of noncompliance has resulted in less than substantial resources and support for many programs and initiatives benefitting the city's taxpayers and residents.
Nationally, the average tax collection rate is 96 to 97 percent. Philadelphia for far too long has been lagging behind, though its collection rate is now 93 to 94 percent. Currently, the city has an outstanding balance of about $492 million in overdue property taxes, according to a report conducted by the National Tax Lien Association.
Increasing our tax collection rate is crucial. For every one percentage-point cut in the delinquency rate in Philadelphia, the city would receive an additional $13 million annually - without increasing taxes. In order to make this a reality, the city needs a method to collect new delinquencies in addition to addressing the backlog.
One method, prior tax lien sales, did moderately well in 2015, bringing in a majority of funds from presale notices. However, the growing consensus seems to recognize that a more reliable and effective tax-collection method must be put in place.
This is why, in July, I joined Mayor Kenney and Council President Darrell L. Clarke in announcing the issuance of a Request for Proposal that would suggest options to help the city recover hundreds of millions of dollars in delinquent property taxes.
After examining the many available methods, it has become unequivocally clear to me that the tax-lien securitization method, used effectively for 15 years by New York City, is exactly what Philadelphia needs in order to recover these funds.
The securitization method could offer the city the following benefits:
an upfront advance of $90 million to $120 million;
additional annual revenue of $25 million to $40 million on top of current collections;
the creation of a sustainable taxpayer culture;
much-needed funds for our schools, which are the primary beneficiary of property taxes (55 percent of every dollar goes to the School District);
the opportunity to support critical issues important to the city that may otherwise not receive healthy funding.
Additionally, compared with previous methods used by the city, the securitization method would enable Philadelphia to maintain control of the entire process - allowing protections to be established for vulnerable homeowners and saving tens of millions of dollars that would have otherwise been paid to overly expensive tax collection agencies.
With all this considered, the good news is we have the chance to make a real change. In the coming days, the administration has the important job of deciding which of the submitted proposals will most effectively address our tax delinquencies. The city should not only choose a method that will ensure we collect and dedicate the necessary funds to support our schools, city services, and a growing pension deficit, but also one that puts Philadelphia on a sustainable tax-compliant path for years to come.
The financial health of Philadelphia is my utmost priority. In order to enable prosperity and growth for the city we all love, we must change the way we collect taxes.