Top District officials said Monday that they were outraged to learn about an aggressive practice of recouping city tax debts that pushed hundreds of city landowners into foreclosure.
Mayor Vincent C. Gray (D) and a key D.C. Council member said they would pursue emergency legislation next week to reform the practice after learning about it Sunday in an investigative report published in The Washington Post.
But both Gray and council members were warned 16 months ago in a letter from a coalition of community advocates and law firms that the District’s collection system deprived homeowners of fair treatment and due process.
The Post found that the District’s Office of the Chief Financial Officer had for years recovered outstanding tax debts by selling liens on resident’s delinquencies to investors. Some of those investors engaged in a predatory system of debt collection that used legal fees and interest to turn $500 in late payments into $5,000 debts.
The practice has allowed investors to foreclose on nearly 200 houses since 2005; lien holders are in the process of seeking control of 1,200 more.
At a news conference Monday morning, Gray said he reacted with “anger and outrage” to the story of Bennie Coleman, a 76-year-old ex-Marine who lost his home after a $134 delinquent tax bill was sold at auction. “That is absolutely unconscionable, and we cannot allow those kinds of things to happen again,” Gray said. “We’re going to stop this. People are not going to lose their homes as a result of something like this.”
D.C. Council member Jack Evans (D-Ward 2), chairman of the finance and revenue committee and a candidate for mayor, said he was “outraged” by the stories. He said he would introduce emergency legislation at next week’s council meeting that would place new curbs on tax lien sales to protect vulnerable residents.
The pledges come after the Alliance to Help Owners Maintain Equity (AT HOME) warned in an April 2012 letter that “[t]he current tax sale system deprives affected homeowners, many of whom are elderly or economically disadvantaged, of fair treatment, including constitutional protections.”
The missive prompted a June response from the tax office, which said it would issue post-sale notices for the first time, but did not address other suggested reforms.
Neither Gray nor Evans responded, said Amy Mix, an attorney for the AARP-affiliated Legal Counsel for the Elderly and an AT HOME affiliate. Pedro Ribeiro, a spokesman for Gray, said the group’s letter was forwarded directly to the tax office.
After testifying before Evans’s committee in October, Mix and other advocates were invited to meet top finance officials, including Natwar M. Gandhi, the District’s outgoing chief financial officer, who manages the tax office. At the meeting, Gandhi described a new advisory board on residential property tax issues.
Mix said she has not been contacted since about serving on the board or participating in its work. David Umansky, a spokesman for Gandhi, said the Residential Tax Advisory Council has met twice since then but has focused on concerns not related to the lien sales.
On Monday, officials promised speedy action. Gray said he had convened a meeting Monday morning that included the deputy mayor of health and human services, deputy mayor of economic development and top housing, budget and legislative aides.
“I think this is one of those issues that was looked at principally, maybe solely as a financial issue, when there are vulnerable people who are affected by this,” he said. “Many of us didn’t even know this was taking place.” A package containing “legislative and administrative remedies,” Gray said, will be issued “as quickly as possible.”
Evans said his emergency bill — a temporary measure that can become law with the approval of nine of 13 council members — would freeze the sales of liens for seniors, veterans and the disabled; increase the minimum lien offered for sale from $1,000 to $2,000; cap legal fees at $1,500 per lien sale; and require that if a lien is sold for more than the amount of the delinquent tax, the surplus is paid to the property owner. A hearing and permanent legislation will follow, he said.
Umansky said the tax office has “no objection” to changing the law governing lien sales and that representatives have met with mayoral officials to discuss options. “Additional safeguards could be added to the law that are not in place now, and we are working with the mayor” to develop legislation, he said.
But Umansky strongly rejected the notion that city homeowners are at serious risk of having their homes seized over insignificant tax bills. Owners receive at least seven mailed notices before their properties are sold, he said, and the most egregious examples cited in Sunday’s Post story predate the tax office’s decision to stop auctioning the smallest tax delinquencies.
At last year’s tax sale, for instance, the smallest debt on a home auctioned by the city was $1,267. But the tax office is free to raise or lower that floor at any time, and finance officials acknowledge it is calibrated to reduce the volume of properties auctioned rather than protect homeowners.
Umansky said the intentions behind the floors are immaterial: “It doesn’t matter what the purpose is; the effect is that people’s property is not sold.”