FINANCIAL MANAGEMENT/Recouping delinquent property taxes
Property taxes fund a large percentage of any city’s services and programs. Therefore, the efficient and successful collection of such taxes is vital. When the current mayoral administration of Camden, N.J., took office in late 2000, the city made it a high priority to improve its dismal 75 percent tax collection rate.
In the summer of 2002, Camden contracted with Morristown, N.J.-based Xspand, founded by former New Jersey Governor Jim Florio, to collect nearly $100 million in back property taxes and to improve Camden’s tax collection rate in the future. Xspand is a private company designed to provide municipalities with no-risk, low-cost solutions to the challenge of increasing revenues from receivables.
City officials believed that most residents would pay back taxes if given the right financing tools. The city has focused its efforts on designing an aggressive, yet compassionate, program to provide ways for taxpayers to pay their past-due property taxes and remain in their homes.
Unraveling the city’s antiquated tax records was the first step in the collection effort. After several months of analysis and verification, Camden and its consultant cataloged every lien in the city. That encompassed more than 7,000 different properties, some of which were vacant. The consultant then created a database for the entire lien pool.
After reviewing the verified liens, Camden and the consultant launched a community-relations effort to inform residents how and why the city was embarking on the initiative. With the consultant, the city is developing interim and long-term property disposition strategies and asset recovery plans designed to accelerate the return of tax-delinquent properties to the active tax rolls.
This past spring, Camden and the consultant announced a financing option with two financial institutions, Boston-based Fleet Bank and Washington, D.C.-based Fannie Mae. The program provides an opportunity for Camden property owners to pay off their municipal tax liens.
Fleet Bank is offering very attractive mortgage rates to qualified applicants, and Fannie Mae will purchase from Fleet the eligible first mortgage loans made under the program. The consultant’s assistance in the effort was critical, from bringing in private sector partners to coordinating efforts among city officials, financial lenders and potential credit counseling agencies.
The city also is working with the consultant to develop a credit facility that will allow it to use delinquent property tax receivables to help close budgetary shortfalls. With the program, similar to a tax lien securitization, the city will maintain control over collection efforts while providing immediate access to a very large delinquent receivable.
A significant benefit to the program has been an immediate change in the mindset of property owners and investors about the city. Positive media coverage of the program has stimulated renewed economic investment in Camden.
City officials believe the collection effort will lead to increased property values and investment that will benefit all residents. The programs helps to stabilize neighborhoods by maintaining pride of home ownership and attracting new investment, two key ingredients to Camden’s financial base.
The effort has not been easy, but it has been compassionate and, as important, effective. During the first six months of the collection program, Camden has collected more than $4 million in delinquent taxes, and the city is on track to collect another $4 million this year. It is just the beginning, but the effort is working and will become a major component of Camden’s overall revitalization.
The author is the mayor of Camden, N.J.