D.C. tax office’s chief faces tough questions over sale of delinquent payments

A system that enabled the District to efficiently reap delinquent property taxes but allowed some of the city’s most vulnerable residents to lose their homes over tiny debts went unchecked for years.

But how?

A letter last year alerting Mayor Vincent C. Gray (D) to potential abuses in the tax-sale system was routed directly to the tax office, where it was largely dismissed. D.C. Council member Jack Evans (D-Ward 2), who oversees that office, was also alerted and introduced legislation that would address some of the most harmful practices, but only now is he making plans to hold a hearing.

Meanwhile, on Tuesday, the head of the D.C. Office of Tax and Revenue played down the findings of The Washington Post’s investigation into the sales of thousands of property tax liens to private speculators, telling an audience at city hall that the examples cited in the article could not happen today, when, in fact, that is not clear.

The revelations come nearly six years after the tax office was rocked by an embezzlement scheme totaling nearly $50 million. Despite reform measures, controversy has persisted and accountability has been fleeting, with promised computer upgrades delayed and suggestions from civic activists seemingly ignored.


D.C. Councilman Jack Evans. (Bill O'Leary/The Washington Post)

Observers say the circumstances that allowed private buyers to seize the homes of Bennie Coleman, a former Marine who lost his home to foreclosure in 2011 because of a $134 delinquency, or Daisy Dolsey, an Alzheimer’s patient who underpaid her tax bill by $44.79 and lost her $300,000 home, illustrate a system where the tax office is rigorously held accountable for collecting funds — but less so for protecting the public interest.

“The bureaucrats in that agency have one rule: Get the money,” said William P. Lightfoot, a lawyer and former D.C. Council member who has been critical of outgoing Chief Financial Officer Natwar M. Gandhi, who oversees the tax office. “As long as they get the money, they feel they are doing the job.”

In interviews, representatives of the finance office have noted that auction is the only option they have under D.C. law to recover tax debts, even small ones. One company even sued the office, spokesman David Umansky said, after the city tried to reduce its caseload by establishing a minimum amount on the tax debts offered at auction.

At no point, it appears, did the tax officials make administrative changes intended to protect residents from unfair tax sales or recommend to lawmakers that additional safeguards be instituted.

Evans and other council members are now prepared to pass emergency legislation next week that, among other changes, would place a $2,000 floor on the liens auctioned and exempt senior citizens and the disabled from lien sales.

Some of those measures were discussed in testimony Evans heard in October from Amy Mix, a lawyer with the AARP-affiliated Legal Counsel for the Elderly, and Marie Drissel, a Kalorama civic activist.

After the hearing, Evans introduced a bill containing AARP-backed reforms, and he reintroduced it in January after a new council period began. But he has not scheduled a hearing on the bill or otherwise taken action on tax-sale reforms. He said this week that he submitted the legislation pending recommendations from a “residential tax advisory council” appointed last year by Gandhi.

That body, Umansky said Monday, has tackled other issues — such as providing better notice to senior citizens available for a special tax deduction.

James McSpadden, who monitors D.C. legislative issues for the AARP, said he never heard from Evans or his staff that the advisory council’s work had any bearing on the bill. “He may have been waiting for that; I never got word of that,” he said.

“It’s sort of taken a back burner to whatever else the committee is tackling,” McSpadden added. “They kept saying, ‘We want this to happen.’ They were definitely all in favor of it. We’ve never really seen a barrier. It just hasn’t moved.”

Evans, who is a 2014 mayoral candidate, said the council has taken multiple steps through the years to lower residential property taxes, particularly for senior citizens, so they would not go into debt. He also questioned why the D.C. Superior Court judges handling the foreclosure proceedings didn’t take more steps to limit attorney’s fees or otherwise prevent the loss of the homes.

He also defended his oversight efforts more broadly, saying that the “overall structure works” in the financial office and that recent issues in the office regarding tax-sale abuses, property assessments and undisclosed internal audits could not reasonably have been foreseen.

“What you’re having now are issues that come up that are of significance but are things you can’t anticipate,” he said. “And when they come up, we deal with it.”

The head of the tax office dealt with matters Tuesday by assuring a small group of D.C. Council insiders that “we’re not throwing little old ladies out of their houses for $200.”

Stephen M. Cordi, deputy chief financial officer for the District’s Office of Tax and Revenue, insisted during a briefing at the John A. Wilson Building that his office had ended the process of allowing residents to lose everything over petty debts. He said one of his first moves when he took over the office in 2008 was to set a bar of $1,000 on delinquencies that could lead to foreclosure.

But that bar is a moving target from year to year, calibrated to the tax office workload rather than the public interest. In 2011, the office auctioned home liens as small as $569.

Cordi faced tough questions from council member Jim Graham (D-Ward 1) and council staff members, who said the cases publicized this week contradict his claims that the issues had been all but fixed.

Although the office has largely stopped auctioning tax bills totaling only a few hundred dollars, 100 of the 965 properties sold at auction this year were certified as owner-occupied homes, according to data furnished by the tax office. Forty-four of those were receiving a tax deduction available only to senior citizens.

And sales from prior years are still making their way through the courts. Nine foreclosures that ended this year began with liens of less than $1,000.

Cordi, however, criticized The Post’s report, saying it was “breathlessly told as though it were happening today. It is, in fact, history, to a very large degree,” Cordi said. “I think The Post article is misleading.”

Graham pushed back, saying that even a $1,000 debt is minuscule compared with the value of almost any District home. “There must be some less Draconian method” than taking someone’s entire home, he said.

Cordi said it is residents’ responsibility to not just pay delinquent bills “but make sure we know they paid,” explaining that payments made in the days before a lien is sold are sometimes mistakenly credited to others or aren’t processed in time to stop a sale.

Amin Muslim, director of constituent services for council member Yvette M. Alexander (D-Ward 7), was among those who confronted Cordi at the briefing.

“I’m interested in us looking at a case like Mr. Coleman’s and saying, how did his $134 tax bill allow that . . . and how do we restore the public’s trust that it won’t happen again?”

Mike DeBonis covers local politics and government for The Washington Post. He also writes a blog and a political analysis column that runs on Fridays.
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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