D.C. Council wrestles with tax lien scandal

A powerful committee of D.C. Council members wrestled Wednesday with how to protect vulnerable residents from losing their homes to petty tax bills while keeping penalties stiff enough to encourage other residents to pay their property taxes on time.

The council is expected to vote on legislation by late this year or early next to curb what has been an aggressive practice of collecting residents’ property tax debts.

The legislation follows a Washington Post investigation this year that found the city has routinely sold liens on residents’ homes to investors who often tacked on thousands of dollars in fees. When owners could not pay, the investors sometimes foreclosed on the properties, keeping all the profits. Among those who have lost homes and all their equity are poor, elderly and even mentally disabled city residents, whose difficulties began with delinquencies as small as $44.

On Wednesday, council members seemed at odds with a key part of Mayor Vincent C. Gray’s reform plan. Gray (D) and Chief Financial Officer Natwar M. Gandhi canceled this year’s tax liens on all properties that serve as primary residences and ordered a review of the pending cases.

To help delinquent taxpayers navigate the process in the future, Gray would create an ombudsman, an office to review tax liens, and require the Office of Tax and Revenue to provide greater notification to property owners of late payments and pending sales. But his plan would still let tax lien purchasers keep all of a home’s equity once it is foreclosed upon.

“No one is looking to take away houses here — just to get the taxes paid,” said D.C. Attorney General Irvin B. Nathan, explaining the mayor’s plan to members of the council’s finance committee. “We still have to have a significant threat to keep people in compliance. Obviously, losing your home is a significant threat.”

Council member Jack Evans, the committee chairman, said he didn’t want to weaken the law or encourage tax scofflaws, but he said the status quo was unacceptable.

“The way it is, it seems there’s always going to be one that falls through the cracks,” Evans said. “And even when there’s one, the cases are so dramatic.”

The plight of Bennie Coleman, a retired Marine suffering from dementia, has become the face of the issue for many council members debating a fix to the system. Coleman lost his $197,000 Northeast Washington home after a $134 late tax bill snowballed to a debt of nearly $5,000 through attorneys’ fees.

Some jurisdictions do not let the process get that far. New York City, for example, does not allow tax liens to be sold on homes owned by low-income seniors, veterans or the disabled.

Evans (D-Ward 2) wrote a bill that would return equity to homeowners once a sale is complete. It would also cap attorneys’ fees on tax-sale cases at $1,500 and provide that no properties with a bill of less than $2,000 are auctioned in the first place.

The AARP on Wednesday also urged the council to let homeowners keep most of the equity in their homes, giving purchasers 10 percent of the sale.

The committee on Wednesday also pressed for answers regarding another Post report this month that found the city for years has been using a list of addresses that contained tens of thousands of inaccuracies to alert property owners when their tax bills are overdue.

The Post found the tax office had inaccurate addresses for 171 properties sold to tax lien investors in July.

Council member David Grosso (I-At Large) said the city’s warnings to residents about the sales are “worthless if our records are incorrect. . . . I want to know what happens to all of those undeliverable letters you get back from the Postal Service?

Stephen Cordi, the city’s deputy chief financial officer, said a legislative fix would be difficult. “We take this address problem seriously, but we think the way to address it is through technology,” he said.

Evans said Cordi’s office should do whatever it takes to reach the dozens of residents with tax liens canceled in July and who could still face sales next year.

“Google them . . . or hire a private investigator, if you have to. Find them,” he said.

Aaron Davis covers D.C. government and politics for The Post and wants to hear your story about how D.C. works — or how it doesn’t.
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