Jonetta Rose Barras: What lies beneath D.C.’s tax-lien abuses

September 20, 2013

D.C. officials are engaged in yet another cover-your-backside spectacle. The latest scramble to camouflage dereliction of duties was instigated by a Post investigative series on the city’s tax-lien-sale process. It revealed that many poor and elderly residents have been ensnared in a system rife with incompetence, inhumanity and exploitation.

Mayor Vincent C. Gray (D) and Chief Financial Officer Natwar M. Gandhi last week imposed administrative remedies, including the cancellation of 2013 tax-lien sales for all properties receiving the homestead deduction, which is only available for owner-occupied properties. They also created the position of real property tax ombudsman to help needy homeowners find assistance.

This week, the D.C. Council approved emergency legislation, formulated by Jack Evans (D-Ward 2), that freezes all tax-lien sales involving property owned by seniors, veterans or disabled people; sets a threshold of $2,000 in tax debt before a sale could occur; allows homeowners to recover the balance of their equity in cases that go to foreclosure; and caps the fees that lien buyers can charge property owners at $1,500.

“Attaboys” were generously offered to Evans — although his proposal came too late for many homeowners. As head of the Committee on Finance and Revenue, which has direct oversight of the CFO’s operation, including the Office of Tax and Revenue (OTR), Evans introduced legislation after a public hearing last October that would have addressed some of the concerns raised about the sale process. But he allowed that bill — his own bill — to languish in his committee.

“We have a lot going on in my committee,” Evans told me this week, in defending his handling of the matter. “Sometimes things don’t get to the top of the pile” quickly.

The council also passed emergency legislation, introduced by Mary M. Cheh (D-Ward 3), that requires the chief financial officer to determine how many properties with tax bills of $2,500 or less were sold and to report on how much it might cost the District to provide some compensation to the injured homeowners. The council would decide later whether to actually provide a reimbursement.

Those actions only massage the symptoms. They don’t address the critical underlying problems with the OTR’s operation, which include mismanagement and unequal tax application. Consider as evidence of incompetence the fact that Post reporters Debbie Cenziper, Michael Sallah and Steven Rich found that, over the past six years, the OTR sold the liens for nearly 1,900 homes where taxes had been paid but misapplied.

Gandhi’s spokesman David Umansky defended the agency, asserting that the OTR has “operated within existing law to equitably administer the sale of tax liens. It is not guilty of incompetence or mismanagement.” In the past, Gandhi and his supporters have cited consecutive balanced budgets as one indicator of his effectiveness — as if that was the prime reason Congress created the post as an independent management center.

Interestingly, while OTR Director Stephen M. Cordi and crew were pressing seniors and low-income homeowners about outstanding tax debts, they were reducing the assessed values of 500 commercial properties, costing the District $48 million in revenue. During Gandhi’s tenure, at least $150 million more in tax revenue may have gone uncollected or been stolen.

This year, independent auditors disclosed 34 internal-control weaknesses and deficiencies, including the fact that the OTR lacked adequate policies and procedures for property tax appeals and “insufficient controls” over tax withholding reconciliations. Later, the Securities and Exchange Commission launched a review of the CFO office’s operation, after two of the agency’s former ethics directors asserted that Gandhi withheld critical audits from the public.

Umansky described the SEC review as an “informal information request” and argued that there wasn’t any “indication [it] has found anything wrong.” Actually, the SEC has yet to issue any report.

Put plainly: The office of the CFO is a certifiable mess.

Thankfully, Gandhi resigned his post June 1; he has remained on the job, waiting for a successor to be named. “Hopefully we will transmit a name very soon” to the council, Gray said Wednesday, adding he would like the new finance chief to help “flush out areas that are the province of the CFO, but have to involve the executive and the council as well.”

Collaboration is good. But serious systemic management issues need immediate attention. A culture of waste, fraud and abuse, abetted by Gandhi’s poor management, has taken root. The entire CFO structure should be thoroughly examined.

Gray hasn’t proposed any changes, however. That shouldn’t prevent Council Chairman Phil Mendelson (D) from establishing a commission to conduct such a review. The panel might consider whether there should be adjustments to the CFO’s mission, organizational structure or range of control. Should the CFO supervise every finance officer throughout the entire executive branch, as he does now? Should the office continue to manage the lottery?

Short of that wholesale assessment, Mendelson could push Evans to bring to a vote the OCFO Audit and Revenue Projections Amendment Act of 2013. That legislation, introduced by Council member Vincent B. Orange (D-At Large), would essentially mandate a forensic audit. Evans told me earlier this year he would “hold a hearing on [Orange’s] legislation, probably before the end of the summer.” That didn’t happen.

So, get ready for more duck-and-cover maneuvers in the not-too-distant future.

jonetta@jonettarosebarras.com

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