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Is This Good Housing Policy?
Is This Good Housing Policy?

Mary Smith and her neighbors - they need, and deserve, your help

Rochester, NY (February 20, 2013) -- Life is not fair. We all know that. But there are also times when justice demands that we take another look at what is “fair” or what is “legal” and ask if the underlying drivers of our policy are, themselves, unjust. This is essentially the principle that guided Martin Luther King, Jr. Segregation was legal -- one could have told him and many others that the law is the law, live with it. But the law was built on an unjust principle. Thankfully, through civil disobedience, nonviolence and what similar leaders like Mahatma Gandhi called Satyagraha -- or “soul force” -- King and many thousands of civil rights activists changed hearts, minds and ultimately laws.

Here in Rochester an injustice is about to boil over -- and it demands that the community take notice and ask some tough questions about how our city and our county do business. It raises questions about what is just, what is fair and how a decent community treats its most decent citizens.

Mary Smith’s story
I borrow heavily from a press release from the organization Take Back the Land Rochester (www.takebackthelandrochester.org) to recap Ms. Smith’s story.

Mary Smith’s home of 30 years is scheduled to be auctioned on Tuesday, February 26th. The auction is the result of Ms. Smith not paying her taxes on time. On the surface, an unfortunate turn of events, but rules are rules, right? This case deserves a deeper look. Consider Mary Smith’s story (excerpted from press release):

“Mary Smith has lived at 53 Cutler Street for 30 years, raising six children. She paid off her mortgage to ESL 12 years ago. She is the Vice President of the Cutler Street Plus Block Club and has been a commanding force in the community for decades. She is affectionately known as the "Mayor of Cutler Street," who has served hundreds of hotdogs to neighbor kids at kickball games. In her dining room she displays a large promotional poster featuring her as a poster person for volunteerism. To see photos of Mary and her well-maintained home, visit: http://www.gelfandpiper.com/Take%20Back%20the%20Land%20etc/mary%20flash%20gallery/index.html.

“Although Mary has a long history of paying her bills, serious health problems have fallen on Mary and she fell behind on her taxes.  Although she always tried to catch up it seemed she was only paying off the interest. To make matters worse, the City of Rochester and the County of Monroe sold her tax liens to a for-profit company in Florida called American Tax Funding (ATF).  A predatory privatization scheme, American Tax Funding charges usurious interest on the liens of Rochester residents going through financial hardship even though it buys the liens from the City and the County from .43 to 49 cents on the dollar.

After having serious health problems that often left her unable to work, Mary has now qualified for disability, has steady income, and is willing and able to pay off her liens to American Tax Funding.  However, despite repeated attempts to set up payment plans and, to work out a settlement.  ATF will not answer her lawyer's calls and is planning to auction off her house for as much profit as possible on February 26, 2013.”

[Wikipedia on American Tax Funding]

Legal -- but is it just?
Although lawyers have been involved to assist Ms. Smith, the legal case is a challenging one. It appears that ATF is legally entitled to pursue the auction: they are the lienholder on her home and they have the discretion to seek  compensation through auction of the property. Both the city of Rochester and the County of Monroe have ceded this authority to this for-profit corporation for a very practical reason: collecting back taxes consumes resources; both the city and the county (like municipalities all over the country) have decided that it is a better deal for the taxpayers to sell tax liens to a private collection agency, taking the discounted upfront cash rather than pursuing the more laborious process of trying to collect from delinquent taxpayers (or, ultimately to seize the property and auction it).

Such a decision is certainly justifiable from a fiduciary perspective: government should provide services efficiently and at a low cost to taxpayers. Selling tax liens is a fiscally sound decision because it generally provides, on average, a better return for taxpayers.

But the sale of tax liens has not been without controversy. Consider the dramatically different incentives that government and for-profit businesses have with respect to collecting back taxes:

Local government: local government obviously prefers to collect the tax payment with as little cost as possible. However, because local government also has responsibilities to ensure neighborhood stability, it balances the need to collect taxes with the need to ensure that neighborhoods retain stable property values. Overly aggressive auctioning of properties to collect tax revenue could lead to declining property values, leading to an overall decline in the real taxable base available to the city.

For-profit business (particularly one located out of state): A for-profit business has one driving incentive: profit to shareholders (if it is a public corporation) or profit to the principals (if it is privately held). Decisions may be made that could affect short-term versus longer-term profitability -- thus the business might decide to be more forgiving in pursuing auctions if it felt its business would do better by doing so. But such decisions are subjective: if the current leadership is insisting on near-term profit (risking longer-term reputational damage), that is their discretion. One thing is certain: a for-profit company does NOT have the same interest in neighborhood stability and property values as does a local governmental authority.

The bottom line: the selling of tax liens is problematic
The case of Mary Smith is not, by itself, a reason to end the sale of tax liens to for-profit corporations, but it does provide an instructive case study. If tax liens were retained by the city and the county, Mary Smith -- and the over 500 hundred local residents who have signed a petition supporting her -- could literally march to city hall or the county office building and exercise their democratic rights. If elected officials were unresponsive, elections could provide an opportunity for voters to show their disagreement.

[Sign the online petition supporting Mary at signon.org.]

But none of this is currently possible: American Tax Funding is a private corporation. It owes nothing to Mary Smith -- she does not hold a vote on its Board. It owes nothing to the residents of Cutler Street -- they live hundreds of miles away from ATF’s headquarters. It owes nothing to city residents generally -- it paid for the liens, fulfilling its only contractual obligation.

ATF could exercise discretion in how it pursues collection on the money it is owed. Mary Smith has offered as much -- she is now able to pay. But faced with a payment plan or with an immediate payoff by auctioning her home, ATF has made a business decision.

And here is the ultimate irony: why is Mary Smith’s property such an attractive asset to auction -- after all, it’s not in one of the more desirable neighborhoods in the city. Ms. Smith’s home could fetch a nice price because it is on a block with a strong, vibrant block club and the house itself has been impeccably maintained by its owner. If the auction goes forward, ATF’s profit will ultimately be based on the very labor of the woman who will be left homeless.

Rochesterians do not have to simply stand by helplessly. Take Back the Land Rochester is holding a community meeting on Thursday February 21st to rally support for Mary Smith:

Community Meeting to Support Mary and Stop Foreclosures on February 21, 2013 at the Northeast Neighborhood Service Center, 500 Norton St. Rochester, NY at 6:30pm

Then, next week, unless ATF alters its current plans, Take Back the land Rochester and dozens of Mary Smith’s community supporters will make their voices heard at the auction on Tuesday February 26:

ATF Auction Protest to Defend Mary's Home on February 26, 2013 at front steps of the Monroe County Office Building, 39 West Main St., Rochester, NY. At 10 am
Let’s show the community what a just, decent community looks like. Help Mary Smith in any way you can. Most important is your presence: showing up, in person, to show you care and to show that her 30 years of neighborhood commitment is worth a few minutes of your time.

Stand Up!
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Member Opinions:
By: tfb on 2/20/13
Signed the petition some while ago, and (to no avail) attempted to raise this issue in the 2011 city council primary. So many issues, so few stamps. Sigh. Glad this awful practice by the city finally getting serious attention. Thanks for the article.

Tom Brennan
Rochester, NY

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