By Mike Dunn
PHILADELPHIA (CBS) - For the first time in nearly two decades, the city is selling tax liens on foreclosed properties. The goal is more money for the school district, but critics of the effort hope it doesn't backfire.
The Nutter Administration is running an online auction of tax liens on about 1,000 properties, mostly commercial parcels, that concludes on Monday.
"The tax lien auction is another tool that we're using to try to get taxes owed to the city," says the mayor's spokesman, Mark McDonald. "Its a test. We're taking a look at this strategy to see what kind of funds get collected."
The effort was driven by City Council leaders who believe that upwards of $30 million dollars could be brought in for the cash-starved School District by selling liens. McDonald says the mayor's experts aren't so sure, but are willing to test out the idea:
"We simply don't have any credible evidence to support that kind of a number, which is why we're doing this test."
McDonald stresses that this current tax lien sale is a pilot that may - or may not - lead to further such auctions in the coming year. The last time the city sold tax liens was during the tenure of then-mayor Ed Rendell.
But a number of community development groups are worried that letting collection agencies buy the liens will only complicate their efforts to rebuild struggling neighborhoods and commercial corridors.
Sharing that concern is 7th District Councilwoman Maria Quinones Sanchez:
"I understand the need for a pilot. And I think we know enough big large commercial high value properties to do this first, versus going in to different neighborhoods."
Neighborhood tax liens, she believes, could create difficulties for future redevelopment efforts, since more third parties are involved:
"Let's review (the sale) for potential unintended consequences around long-term redevelopment."
Quinones Sanchez and others also site potential conflicts with efforts by the city's new Land Bank, which was created to speed up the sale of foreclosed properties.
McDonald says Land Bank officials have 'signed off' on the specific tax liens included in the current auction. And he rejects criticism by the councilwoman and others that there has not been enough due diligence performed on the properties included in this sale:
"No, I would not describe this as rushed in any way."
McDonald says the decision to hold the sale prompted some of the property owners to step forward and pay back in taxes in order to be taken off the list. Those payments, he says, brought in $4.7 million.
Successful bidders in the sale win the right to collect back taxes on the property but do not win the property itself. The outright sale of foreclosed properties is handled by the Sheriff's Office.
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