The District could be losing millions in revenue from taxes and fines every year because of its failure to crack down on vacant and blighted properties, according to an auditor’s report.
The report, issued Thursday by D.C. Auditor Kathleen Patterson, found that the city agency in charge of code enforcement did not strictly regulate unoccupied or derelict buildings, and frequently granted exemptions from those rules that did not appear to be justified.
Such shortcomings resulted in lost money for the District, since the city’s thousands of vacant and blighted properties are supposed to be taxed at a higher rate and be subject to fines. But abandoned buildings also cause frustration in neighborhoods where they become structurally unsafe and “magnets for illegal activity,” the auditor’s report states.
Patterson said in an interview that she was struck by “the sheer magnitude of enforcement failures.” She also noted that the sample of 31 properties examined by her office was chosen on the basis of neighbors’ complaints — and that despite such public scrutiny, the city’s Department of Consumer and Regulatory Affairs had not managed the properties adequately.
“Even when there were properties that [neighborhood leaders] had flagged, that they complained about, that they created a record on — even then there were cases where DCRA was not particularly effective,” Patterson wrote.
For the sample set of properties alone, regulators’ lapses led to about $1 million in taxes and fines forgone, Patterson found. The city’s lost revenue could be many times that amount, the report states, since the District may have more than 2,000 vacant or blighted properties.
Department officials acknowledged many of the problems cited in Patterson’s report but said that since the one-year period examined by the audit, between October 2014 and October 2015, they had made improvements.
The audit comes as local elected officials are grappling with a related problem: decrepit buildings owned by foreign governments in the nation’s capital. Those buildings are often beyond the reach of District regulators because of diplomatic protections.
D.C. Council Chairman Phil Mendelson (D) introduced legislation this week that would require the city to maintain a public list of run-down buildings owned by foreign governments. For years, the District has not been able to enforce its building codes on embassy properties that fall into disrepair, since those are considered foreign soil for legal purposes.
According to Patterson’s audit, however, District officials are not aggressively regulating those nuisance properties that are within their power. Poor information-management systems meant that incomplete or inaccurate information was passed on to departments responsible for taxing and fining abandoned properties.
“Without complete, accurate, and consistent data, DCRA could not effectively monitor program performance,” the audit states, adding that lax internal controls and oversight make the regulatory process “vulnerable to fraud, waste and/or abuse.”
A particular problem highlighted by the audit was the city’s granting of exemptions from the fines and higher tax rates imposed on vacant or blighted buildings.
The report cites a property bought for $732,000 in 2012 and whose owner was granted an exemption for “economic hardship” despite having owned up to 12 properties since 2002, including a property with the mailing address of the owner that was purchased for $2.36 million.
In a written response to the findings, DCRA Director Melinda Bolling acknowledged that “some exemptions were granted without sufficient supporting documentation” but said the agency had adopted procedures since the audit to ensure that the law is consistently applied.