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Recommendations for an Improved Tax Sale in Providence, RI Urban Land Reform Advisory Group February 2005.

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Presentation on theme: "Recommendations for an Improved Tax Sale in Providence, RI Urban Land Reform Advisory Group February 2005."— Presentation transcript:

1 Recommendations for an Improved Tax Sale in Providence, RI Urban Land Reform Advisory Group February 2005

2 Assumptions at Start of Project The assessed owner should have adequate information and reasonable opportunity to right the ship prior to tax sale. Homeowner safeguards in the tax sale process are in the interest of neighborhood stability. Tax-title properties are often prime candidates for redevelopment as affordable housing, affordable business space, or other land uses meeting a community need. SUPPORT Tax-title properties have been abundant in neighborhoods with already-low rates of owner-occupancy. Tax-title properties have been abundant in neighborhoods with low family incomes and gentrification pressures. If a property has been functionally abandoned, physical neglect has likely accompanied fiscal neglect. Municipal acquisition and title transfer of abandoned properties may be an economical approach to redevelopment.

3 Properties with a Sold Lien by Neighborhood Source: City of Providence Analysis: The Providence Plan 04.19.04 2001-03 (5 sales) 1.0% 2.0% 1.2% 0.7% 2.1% 3.9% 1.8% 2.9% 2.2% 4.6% 3.7% 5.5% 4.0% 2.0% 3.4% 7.1% 2.7% 3.7% 3.9% 8.0% 6.2% 5.8% 6.8% 6.4% Tax title properties as a percentage of all properties in neighborhood

4 10 Things Learned About Tax Sale [1-3] 1.The City currently applies tax sale law evenly, seldom exercising discretion for individual cases. This approach lends itself to effective revenue capture and less susceptibility to politically-driven exceptions. 2.The number of properties going to tax sale dropped sharply in 2004. 3.Two-to-five family properties are, by far, the most common type of land use at tax sale. Between 2001 and 2003, the City raised over $7.25 million at tax sale, and no tax liens went unsold in 2003 or 2004. The 1,846 liens advertised and 329 liens sold in 2004 are far less than one year ago (2,560 and 734, respectively). Proposed explanations for a decrease: hot refinance market; residents getting the message. 40% of sold liens were multi- families, followed by single families at 20%.

5 40,358 owners receiving a tax bill in August 2003 6254 (15%) received a January delinquency notice 2806 (7%) received an April delinquency notice 1846 (5%) received the tax sale notice and were advertised 329 (<1%) liens sold in 2004 50 associated with owner-occupants 20 associated with elderly occupants Tax Sale 2004

6 Sold Tax Liens by Tax Classification Percentage of Tax Liens (~1,900) Percentage of Dollars Collected at Tax Sale (~$7,266,000) 2001-03 (5 sales) 45% 55% 60% 40% 47% 53% 61% 39% Owner-Occupied

7 10 Things Learned About Tax Sale [4-6] 4. Just over one-quarter of all tax-title properties have had an owner-occupant. 5.Tax delinquency is down among owner- occupants but is up among elderly homeowners. 6.There are some interesting trends in redemption of tax title (see following 3 slides). From 2001 to 2003, ~500 of 1,900 tax-title properties had an owner-occupant. At the 2004 tax sale, 15% of liens were associated with an owner-occupant homestead exemption, as compared to 27% from 2001 to 2003. At the 2004 sale, 20 liens were associated with an elderly tax exemption, as compared to 33 liens on elderly-exempted properties from 2001 to 2003.

8 Trends in Tax Title Redemption Different neighborhoods have exhibited differing abilities to redeem. Citywide, owners of tax-title properties have consistently redeemed at a rate of about 50%. Many property owners redeem either immediately after the 60-day waiting period or just before the end of the redemption period. For single and multifamily properties, owner-occupants have redeemed at a modestly higher rate than their counterparts. Redemption of Tax Liens 2002-03

9 Trends in Tax Title Redemption

10 Single-Family (209 Liens)Two to Five Family (478 Liens) 2001-02 (3 sales) 61% 39% 41% 59% 55% 45% Redeeming Within One Year 62% 38% 37% 63% 36% 64% Owners Address with Respect to Tax Title Property Trends in Tax Title Redemption

11 10 Things Learned About Tax Sale [7-8] 7. The tax sale is a revolving door for some properties. 8. A small number of buyers have dominated the tax sale. 34% of the 734 properties with a tax lien sold in 2003 had a sold tax lien in at least one of the previous four years; 12% had a sold lien in at least two of the previous four years. The top three lien buyers purchased one-third of the 734 tax liens sold in 2003, and the top eight buyers purchased over half of all liens. Two lien buyers spent one- third of the total $2.98 million paid for tax liens in 2003; and five buyers spent over half of the total dollars collected.

12 Number of times that a Tax Lien was Sold on same property between 1999 and 2003 Five Two Three Four One Tax Sale Recurrence for the 734 Properties with a Sold Tax Lien in 2003

13 Lien Purchasers 2003 Tax Sales

14 10 Things Learned About Tax Sale [9-10] 9. Some initial recommendations of the committee had already been implemented as of the 2003 or 2004 sale. Critiques and concerns applicable in prior years will require time and demonstration to dispel. 10.There has been little attempt to acquire impending tax- title properties for redevelopment/revitalization goals. Planning and the PRA have expressed interest if the process is simple, defensible, and of small economic burden to the City.

15 5-Point Plan to Reform Tax Sale Toward Both Revenue and Revitalization Goals 1.Help owners return to good standing early in the process. 2.Bring greater clarity and transparency to the tax sale. 3.Hasten change of ownership on abandoned tax-title properties. 4.Coordinate collection activity on all municipal and related liens. 5.Acquire parcels of special redevelopment interest.

16 Help owners return to good standing early in the process. Support proposal of Urban League/RIHMFC for homeowners emergency loan program to satisfy liens. Deter predatory lending. Explain important tax concepts on the Assessors AND Collectors page of City website and reference site on tax bill and delinquency notices. Provide Senior Services with resources for case management of elderly property owners who are tax delinquent. Continue to send a second notice of tax delinquency. Send subsequent tax bill to both assessed owner and lien holder. Housing Network RI, with its Dont Borrow Trouble initiative, is a readymade partner. Explanations should be in clear terminology and also in a variety of languages common to Providence residents. Tax concepts should include types of tax exemptions, obligations and rights of an owner whose tax lien has been sold, and referral information for housing counseling agencies. Collector to provide list of tax delinquent owners with elderly exemptions to Senior Services with sufficient time for intervention if warranted. Rhode Island has the highest rate of predatory lending in the nation.

17 Bring greater clarity and transparency to the tax sale. Improve the ease of access to property-based information by insuring the completeness of data in the Land Reform Information System. Produce a public document that clearly explains Providences application of property tax law and tax sale law, including criteria for all discretionary decisions. The Collector might provide a brochure explaining How to Be a Tax Sale Participant. Lottery model: When there are two or more bidders interested in a certain property, the names of the bidders are placed in a hat, with the name drawn receiving the right to purchase a 100% stake in the tax-title. Provide community nonprofits with an additional level of access to property data for assessing neighborhood trends and identifying properties primed for redevelopment. The tax sale auctioneer should sign an affidavit of impartiality. The lottery model would require legislative revision. While the bidding down procedure may serve to protect an owners interest, it only comes into play on properties with more than one bid. This implies that owners with less desirable properties are less worthy of protection.

18 Hasten change of ownership on abandoned tax title properties. Ensure that lien holders are aware of their right to exercise expedited foreclosure on properties that are suspected to be functionally abandoned. Support the re-submittal of a legislative bill to expand the use of expedited foreclosure on abandoned, unimproved land (04H-8265, 04S-2741). Support the re-submittal of a legislative bill to broaden the definition of blighted as it pertains to the Citys exercise of eminent domain (04H-8319). In 2004, at least 34 tax liens (10%) were on vacant land parcels. The same was true of 350 tax liens (18%) between 2001 and 2003. From 2001 to 2003, only 20% of tax liens on residential vacant land parcels were redeemed. Rising tax burden on residential vacant land: In the 2003 reassessment, this type of property increased in value by an average of just over 100%. Blighted is to be expanded to include the presence of hazardous materials impairing redevelopment. Expedited foreclosure on abandoned property was a primary recommendation of the Mayors Vacant Land Task Force (1997).

19 Coordinate collection activity on all municipal and related liens. Coordinate the sale of tax liens and water liens so that a relatively low value lien does not nullify a relatively high value lien. For properties to be sold at tax sale, package all same-property DIS and DPW liens imposed as of an established date forward. Before tax sale advertisement, check the list of tax delinquent properties against the dataset of subsidized housing/community redevelopment funds. Pursue legislation such that sale and foreclosure of an Narragansett Bay Commission sewer lien cannot nullify municipal liens. Of the 2,180 tax-title properties between 1999 and 2003, at least 181 had another municipal lien (DIS or DPW) at the time of tax sale. These 360 other liens represented almost half a million dollars, excluding interest. It may be possible to add DPW and DIS liens onto the real estate tax bill. The Planning Department is currently preparing the dataset of subsidized housing/redev funds. Checking tax sale list with Planning Department dataset is important not only to protect the Citys investments but also to avoid repayment provisions tied to federal program dollars. In the meantime, reach a mutual understanding with NBC to reduce the possibility of lien conflict.

20 Acquire parcels of special redevelopment interest. Provide PRA with a list of the tax delinquent properties to assess the redevelopment potential of these properties. Exercise municipal Taking for Taxes on properties tagged for tax sale that (a) are within a redevelopment zone, (b) meet a set of criteria for redevelopment priority, and (c) have a committed developer lined up. Establish a PRA property disposition system that recognizes revitalization objectives. Single-buyer model: Entailing a tax lien trust in which the buyer and City cooperatively manage the redemption and foreclosure of liens and the disposition of properties. A set of council-approved Criteria for Redevelopment Priority could replace the present system of case-by-case council approval for exercising a taking for taxes. A revitalization-based disposition system would favor prospective buyers whose reuse plans involve affordable housing, green space, or other needs of the neighborhood Related topic: City should adopt the ordinance, required by state law, for exercising the Nonutilization tax. The single-buyer model would likely require legislative revision. City could presumably field many proposals and choose the ideal single-buyer/partner.

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