Philadelphia Mayor Michael Nutter has talked a good game about cracking down on property tax deadbeats. At a recent press conference, he said, 'We're going to chase their little asses down as hard as possible!"
Yet somehow, more than 1,700 tax delinquents in the city are still getting breaks on their property taxes. That's according to a NewsWorks/It's Our Money analysis of records obtained through a right-to-know request. In some cases, the city has the power to revoke those tax goodies — but often doesn't.
The deadbeats include a broad mix of residents, from Two Liberty Place condominium owners to real estate companies, city data show. Attempts to reach owners of the luxury condos were unsuccessful. This year, those delinquents are reaping $15.1 million in property tax breaks, which include both abatements and nonprofit exemptions.
At the same time, these property owners are shorting the city on more than $8 million in back property taxes that they owe. (Property tax breaks often don't cover 100 percent of the bill.) What could that $8 million do for the city? If it all went into city coffers, it could pay for about 85 additional police officers. Or if it was all directed to the School District (which normally gets a bit more than half of city property tax revenues), it could pay for roughly 80 more teachers.
How to collect?
For a percentage of these deadbeats, the city's options are limited. Property tax exemptions for nonprofits are granted by state government. But some nonprofits that enjoy this tax-exempt status still do owe taxes on portions of their for-profit operations. The city classified 145 of the 1,700-plus delinquents as nonprofits that failed to fork over on taxable properties. But under state law, the city has no power to remove a nonprofit's tax exemption if it fails to pay taxes that it does owe.
The rest of the 1,700-plus deadbeats include property owners who enjoy a city-provided abatement on part of their property's value while failing to pay up on the taxable parts. In the 1990s, the city began offering 10-year tax breaks to developers who converted commercial buildings into residential properties. Supporters have said that the program, which later expanded to include tax breaks on all new construction and improvements, sparked significant investment in Philadelphia.
Still, if a property owner isn't paying the taxes owed, the city has the power to yank the abatement.
So why doesn't it always?
Revenue Commissioner Keith Richardson said the city checks to make sure that property owners are up to date on their taxes when they first apply for a local abatement. But after that, the city has no process in place to make sure they all continue to pay.
Passing the bucks
Richardson suggested that it was the Office of Property Assessment's job to initiate a formal process. That office reviews applications for property tax breaks.
"That information is within OPA's website or their data," Richardson said. "If they want to send it to us, we'll be more than happy to check."
Over at the OPA, deputy administrator Michael Piper suggested that — you guessed it — it's the revenue department's job to implement a routine check. "Delinquency issues are all generally revenue," he said, "unless it's something that we specifically ask them for."
The city has pulled local abatements from tax delinquents in the past, Richardson said, but he could not provide a specific example.
Mayoral spokesman Mark McDonald said the city has entered into payment plans with some of the delinquents that are getting tax breaks. According to city data, 47 of those delinquents fit that description.
A lesson from the state
Zack Stalberg, president of the government watchdog Committee of Seventy, said the city should make it a priority to go after money owed by property owners enjoying tax breaks. "I think it's crazy that the city is not taking this seriously," he said. "There’s real money at stake and a real opportunity to get some of these people to pay up."
State Sen. Larry Farnese, a Philadelphia Democrat who introduced enabling legislation for the city's tax-abatement program, said the city should be aggressive in getting its money from delinquents with breaks. "Pulling the tax abatement certainly is the reasonable remedy for that situation," he said.
Revenue's Richardson said that the city is investing in new software and employees to get tough on delinquents. Some of those resources could be used to make sure that deadbeats aren’t getting tax breaks, he said.
To see how that might work, look no further than the state of Pennsylvania.
The state and city offer multiple tax breaks to businesses in "Keystone Opportunity Zones," areas that are economically distressed. When a company applies, the state checks to make sure it's paying all its taxes. According to a state spokeswoman, Pennsylvania then verifies several times each year that the business is still up to date. McDonald, the mayoral spokesman, said the state also asks the city annually if the business is paying its local taxes.
And if a business falls behind? Then it won't get the tax break anymore. Simple as that.
But when it comes to city departments communicating and collaborating, things rarely are simple.
It's Our Money is a joint project of the Daily News and WHYY, funded by the William Penn Foundation, that works to shed light on where your tax dollars are going.
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