The Notebook

Paid Advertisement
view counter

Cash-strapped Philly schools hoping to tackle tax deadbeats

by thenotebook on Feb 18 2013 Posted in Latest news

by Benjamin Herold for NewsWorks, a Notebook news partner

If Philadelphia's legions of property tax deadbeats suddenly paid the $541 million they owe, the beleaguered Philadelphia School District could save any of the 37 schools targeted for closing that it cared to.

And restore a nurse, art teacher, and librarian to every school in the city.

And erase a projected $200 million deficit for next year.

It's not going to happen.

But the School Reform Commission, with an assist from the city, is poised to take a small step in the right direction. Together, they hope to rustle up about $12 million a year in new revenue for city schools through improved collection of delinquent taxes.

On Thursday, the SRC will vote on a policy that would prevent tax deadbeats from getting new contracts from the District. The policy would also allow the District to withhold payment from existing vendors who fall behind on any of their city taxes.

A recent spot check found that half of the vendors seeking capital contracts from the school system in December owed back taxes to the city.

A wave of initiatives

The proposed policy is just one piece of a renewed push by city leaders to overhaul the way Philadelphia collects taxes.

Mayor Michael Nutter's much-discussed new Actual Value Initiative involves reassessing how much every property in the city is worth, trying to peg those valuations accurately to market values.

Under AVI, some residents will pay more property taxes, more than half of which go to the city school system. But others will pay less. By design, AVI won't lead to any new revenue for the city or its schools.

A new crackdown on tax deadbeats, however, might. The proposed District policy is part of a package of efforts intended to improve Philadelphia's notoriously poor collection of all its delinquent taxes to the tune of $260 million in the next several years. A total of $48 million of that money would go to the struggling city school system by 2017.

"We want to ensure that [vendors] are paying their fair share to ensure that the District and city are getting the tax dollars that they're entitled to," said Matthew Stanski, the district's chief financial officer.

"Obviously, we need the revenue."

A big problem

Over the last two years, the District has been hit hard by poor planning and massive reductions in federal and state aid.

Last spring, city schools endured round after round of painful budget cuts as District officials sought the hundreds of millions of dollars needed to balance their books.

In November, the SRC borrowed $300 million just to pay the District's bills.

And officials say that, without drastic measures, the District faces a cumulative $1.35 billion shortfall by 2017.

To help plug that budget hole, Superintendent William Hite proposed closing 37 city schools in December. As opposition to the plan has heated up, critics have accused the District of focusing too aggressively on austerity measures while only halfheartedly pursuing more revenue.

Any change in that equation is welcome, said Anne Gemmell, the political director of the activist group Fight for Philly.

"I think [the proposed policy] a great step in the right direction," she said.

But Gemmell also noted that the city has a limited ability to generate revenue for its schools. She argued that Philadelphians need to form a united front in advocating for more funding from Harrisburg, still the single largest source of revenue for the School District.

"At some point, we have to stop asking each other for five dollars and start going to the state, who has the constitutional responsibility to fund public education," said Gemmell.

Troubling findings

The District receives 54 percent of all Philadelphia property tax payments, all of the "use and occupancy tax" paid by city businesses, and a 10 percent sales tax on liquor sold in the city.

But thousands of Philadelphia residents and businesses fail to pay those taxes, costing the District tens of millions of dollars each year.

Historically, school officials haven't bothered to check whether the vendors who receive District contracts are among the deadbeats.

At the urging of SRC member Joseph Dworetzky, though, the District implemented a new pilot program at the end of last year. Working with the city's revenue department, District officials began screening all vendors looking to do business with the school system.

In December, they found that 13 of the 26 vendors seeking to be pre- or re-qualified for District contracts were tax delinquent.

"It seems to be a culture of some businesses not complying with taxes," Stanski said. "We're going to try to do our part to ensure that they become compliant."

A new partnership

The Nutter administration says the city welcomes the District's help.

"Neither organization wants to do business with entities that owe the city or the School District tax funds," said Mark McDonald, the mayor's press secretary.

The city already screens its own vendors for tax compliance. And earlier this month, Nutter announced a five-year, $40 million plan to improve delinquent tax collection. When it comes to those "trifling and raggedy people" who are able to pay their taxes but choose not to, said Nutter, the city is "going to chase their little asses down."

The District's new policy is just a small part of that effort. By itself, it probably won't generate much revenue, said Stanski. But it will send an important message:

"If you're delinquent on your taxes, get up to date, because it's money for children."

Information sharing is key

Here's how the policy would work in practice:

In order to submit a bid for a District contract or respond to a request for proposals for professional services, all vendors will be expected to provide a certificate of tax compliance from the city Revenue Department.

District staff would be required to notify the SRC whether a recommended vendor is compliant on their city taxes before the commission votes to award a contract.

And each month, Stanski's office would send to the city revenue department a list of all vendors who have been paid by the District in the preceding weeks. Revenue would flag anyone who has fallen behind on any city taxes, and the District would consider withholding future payments from that vendor until its tax debts are settled.

"We're partners with the city, and we'll do our part to ensure that everyone is paying all of their taxes," said Stanski.

School officials, believing that improved tax collection efforts will generate $12 million a year in new school revenues, have already plugged that number into the District's five-year financial plan.

McDonald said the District's effort "meshes well" with what the city is trying to do.

McDonald said he was unable to comment on whether Philadelphia's 80-plus public charter schools, which also receive hundreds of millions in taxpayer funds and regularly contract with vendors who may be tax delinquent, might be able to form a similar partnership with the city.

This story was reported through a partnership in education coverage between WHYY/NewsWorks and the Notebook.

Click Here
view counter

Comments (26)

Submitted by Annonym (not verified) on Mon, 02/18/2013 - 15:40.

There are also many, many residents who do not pay their property taxes. Just look at phila.gov. Why should I pay my property taxes - which will go up - when 1/2 of Philadelphia residents don't pay anything. There are residents who haven't paid in years yet there is nothing done. Everyone has to pay property taxes. It is about time Nutter enforces property taxes on everyone who owes. What other city is owed a half billion?

Submitted by Poogie (not verified) on Mon, 02/18/2013 - 16:31.

Not only do they not pay their taxes; they fill our schools with their dysfunctional children the product of years of parental neglect.

Unfortunately, I do not see the rest of Pennsylvania paying for education that the people of Philadelphia refuse to fund.

Submitted by DarnelCharles Tanksley (not verified) on Tue, 02/19/2013 - 12:06.

I am one of those delinquint tax-payers. I am a first time home owner and the entire concept of property taxes took me for a loop. Somewhere between $3.69 gas and layoffs I postponed the inevitable fees and penalties and now feel a tinge of guilt.

A culture of non-compliance as evidenced by the goings on at Traffic Court going back beyond Frank Rizzo is a fact but not an excuse.

Upon seeing this article, which by the way I don't believe 100%, upon seeing this article I will make an extra effort to pay my fees and interest but a couple of points:

1) Why is the lottery the number one advertised government service. Why not advertise the very headline of this article.

2) Why not apply city taxes to city-owned utility bills? Would such a strategy inevitably target the "wrong people"?

Submitted by Anonymous (not verified) on Mon, 02/18/2013 - 15:48.

If this initiative is Dworetzky's brainchild, what exactly have we been paying Knudsen $25K/month to do? Wasn't he supposed to be looking into ways to increase city tax collection for the school district? Isn't Knudsen still on the payroll part-time or have we finally been able to wean him?

Submitted by Anonymous (not verified) on Mon, 02/18/2013 - 19:58.

Excellent question. Where have they been hiding him and what does he actually do? If we're broke, where is that $25K coming from?

Inquiring minds want to know!

Submitted by Joe (not verified) on Mon, 02/18/2013 - 20:38.

Wherever they have him hidden, keep him there. He's far too full of himself to be taken seriously. He's the typical statue in dire need of a pedestal. Keep him hidden. Of course, Philly isn't broke by the way.

Submitted by Anonymous (not verified) on Mon, 02/18/2013 - 15:55.

Maybe City Government has made a decision to delay going after these tax deadbeats until the District resizes itself, thereby ensuring that the demolition of the District takes place sooner rather than later.
If the proposed portfolio model comes to fruition, what would stop charters and Catholic schools from sharing in the financial windfall that stricter property tax enforcement would bring in? Is there anything in place to prevent that?

Submitted by Education Grad Student (not verified) on Mon, 02/18/2013 - 20:17.

If Ackerman had done a better job of managing the stimulus funds, the SDP wouldn't be in such a mess. Much of the budget deficit is related to increasing pension liabilities and debt service. Who in the District was looking ahead to see these payments on the horizon and plan accordingly?

I am totally on board with a policy to prevent vendors that owe taxes from receiving payment or contracts from the city. This policy should have been in plane long ago. Nutter's legacy may be that he really tried to improve the property tax collection in the city.

Submitted by Joe (not verified) on Mon, 02/18/2013 - 20:30.

Can you say, Kenny Gamble?? Nutter is a big bag of wind. Likely 90% of the slumlords are big money buddies of the shot callers in the city to begin with. That money will never be collected and nobody, especially Uncle Mike, expects otherwise.

Submitted by Education Grad Student (not verified) on Tue, 02/19/2013 - 00:18.

Joe,

You are right that many of the slumlords have friends in high places. It will be interesting to see what happens if the District passes the regulations about not giving contracts to vendors. If, as you say, Kenny Gamble is delinquent, will that affect Universal Companies and their ability to take on more Renaissance schools?

EGS

Submitted by Anonymous (not verified) on Tue, 02/19/2013 - 09:40.

No, it won't touch him and other friends of friends. The fix is in, has been and will continue to be.

Submitted by Joe (not verified) on Mon, 02/18/2013 - 20:51.

Anne Gemmell gets it. Our political leaders, regardless of color, are selling our kids out rather than fighting for more money from Corbett. Corbett means our children and ourselves no good and the sooner we all accept that stark reality, the better off we will be. He is systematically carpet bombing Philly and Pittsburgh while building new prisons to house the survivors. PA. isn't broke folks, far from it. This ain't complicated. In any case, Anne Gemmell is my new hero.

Submitted by Jane (not verified) on Mon, 02/18/2013 - 21:00.

Why should the Commonwealth of PA cough up more money when the city is owed over $500 Million? What other city is owed so much in taxes? (Just look at PGW and the traffic court - too many Philadelphians think they are exempt from paying their fair share.) Until everyone who owes property taxes pays, Harrisburg can look the other way. It is ridiculous that someone can go for years without paying property taxes and there are no consequences. Now with AVI, will there be more people claiming they can't pay? Part of owning property is paying taxes.

Submitted by Joe (not verified) on Mon, 02/18/2013 - 21:48.

Jane--It's just more complicated than that. In summary, a pox on all their houses as there's plenty of blame to go around but squeezing pennies from the poor, is the least attractive of all the options. Most of that 551 Mil. is owed by many of the same people doing the yelling. You know it, I know it and The American People know it as Walter Mondale used to say. The point is, Uncle Mike is full of it and knows the deal perfectly, He and his good buddy, Kenny Gamble, are probably laughing in some corner somewhere as this is being written.

Submitted by Anonymous (not verified) on Tue, 02/19/2013 - 03:53.

It really isn't much more complicated than what Jane says.

This property tax system is a deliberate creation of the Democrat machine- the ability of politicians to give gifts to certain people, exempting them from paying taxes while screwing the general populace is the heart of the machines power. Some tax exemptions are developers who give cash or jobs to the political grifter class. Some are people who give the machine votes. Either way it is corruption. It only happens on this scale in Philadelphia. Most everyone else in the state understands this and, of course, feels no sympathy.

Like most of the machine's interest group rackets this one has grown too unwieldy to maintain. There is unlimited demand on the taking side and limited capacity on the giving side. Philly has been beyond capacity on the giving side for decades now with the highest city tax rates in the country. The taking side never gets seriously reduced, even as 500k taxpayers left the city.

Even with $500mm in receivables, the only people in council who seem to care are the newcomers. Machine fossils like Jannie Blackwell seem perfectly happy with the status quo. How many nice houses do I see in UC that have not paid a dime in 10-20 years? Check the map. There are a lot.

Submitted by Joe (not verified) on Tue, 02/19/2013 - 09:43.

My point was that politics, ugly and uglier, always needs to be factored into any equation.

Submitted by Joe (not verified) on Mon, 02/18/2013 - 21:41.

No disagreement here on your points as you state them.

Submitted by Anonymous (not verified) on Mon, 02/18/2013 - 22:56.

There should never have been a 10 year tax abatement and now people are crying foul because they have been reassessed. What bothers me the most is I have lived here all of my life I pay my real estate taxes but yet my nextstore neighbor has a 10 year tax abatement. Meanwhile my taxes are going up and my house sure does not look like what they are saying it is worth.

Submitted by Anonymous (not verified) on Tue, 02/19/2013 - 03:35.

Most of the people yelling the loudest are not 10 year tax abatement people, but longtime residents of gentrified neighborhoods. Many of them have been paying way too little, but given the size of the increase, many of them have a good point. There are fair ways to deal with longtime residents- deferring collection of the increase until they sell or die for example, so no one gets a windfall gift and no one loses their house.

But the 10 year tax abatement was incredibly effective at attracting new taxpayers and investment into the city, allowing them to overlook the wage tax and other problems of Philly.

Do you think people would have bought all these $500k houses thinking if they knew they were going to pay $6500 a year in property taxes, on top of their wage taxes? Of course not. People have a tough time looking 10 years into the future. Add to that the uncertainty of the old system- that no one could know what the taxes would even be in 10 years, and the 10 year abatement was a perfect recipe for suckering people into the tax hell of Philadelphia.

Remember, the abatement was only on improvements. The city lost no revenue, it just deferred collecting on the increase in investment. Now the city is collecting.

New development really escalated in 2002-2007, and picked up again in 2010 so for the next 5-10 years all of these abated properties will be added to the tax roles at high valuations. Tax revenue will grow dramatically and the schools will see a lot more than they would have with no abatement.

BTW, going forward, the abatement will be much less effective since buyers know for certain they will be paying 1.3% of $500k in 10 years. The higher tax expectations will be a negative force on housing values. So you will get your wish of fewer abatements, but no one will not be better off for it.

Submitted by Anonymous (not verified) on Tue, 02/19/2013 - 08:27.

you will be surprised at how many of the people who have the 10 years tax abatement are also crying foul. Can you blame the people in gentrifying areas. As i said earlier my taxes go up because the house next store sold for and is worth a few 100,000 thousand, i have to pay they do not now where is the fairness in that

Submitted by Ms.Cheng (not verified) on Tue, 02/19/2013 - 09:39.

The City has a calculator/web app up which you can use to estimate the new tax: http://avicalculator.phila.gov/ Check it out.

Submitted by Anonymous (not verified) on Wed, 02/20/2013 - 14:02.

Although they should really be mad at themselves for overpaying and ignoring Philadelphias well earned reputation for gross waste and high taxes, they have some good reason to be pissed off that they are being screwed while people paying $200 a year will get a $100 tax cut (via homesteading).

We hear that everyone should pay their fair share. But the AVI plan is designed to screw newcomers and provide yet another subsidy to people who don't contribute enough to even cover the cost of their trash pickup.

Philly needs to learn that it can not be an agent of redistribution. That is a federal job. It is too easy to leave the city.

Submitted by Anonymous (not verified) on Tue, 02/19/2013 - 08:19.

There should be a public list of all tax delinquents and how much they owe. Anyone not paying their real estate taxes should have their businesses boycotted!

Submitted by Katie (not verified) on Tue, 02/19/2013 - 15:57.

It is great that Philly is thinking of ways to secure revenue for the schools and collect the revenue it should be owed... these changes (AVI, cracking down on tax delinquents, cleaning up the sheriff sale process and making it available online days before) have been long over due... but there is still a long way to go- and none of these changes will bring in the cash flow needed to take schools off the chopping block NOW... nor increase funding to schools struggling with buildings in disrepair and lack of on-the-ground programming and teaching for kids.

We need to make sure these programs are rolled out fast
1. collect delinquent taxes NOW- knock down doors- get that money!,
2. keep the sheriff sale process transparent so that property rolls over from the hands of people who do not pay to those who will- without making the excuse of sitting on vacant properties to package them and sell them off for nothing to real estate moguls,
3. put in place broken window fines for deadbeat landlords who let their properties get run down. Collect those fees- use the Philly 311 app for citizen reporting- and then COLLECT!

If the parking authorities can show up a minute after my parking ticket expires and hand me a fine or invite me to contest it in court- the city ought to have as smooth a system for property management... with delivery of funds to the schools... and YES- before they all get sold for parts and turned over into charter schools.

These neighborhood schools, with their gyms, playgrounds and sport fields, are huge assets to our neighborhoods. We need to have the same tier of facilities that schools in the suburbs have- or the children of the city will suffer for it- and families that can flee- will.

Submitted by Wendy Harris on Wed, 03/20/2013 - 09:59.

Hi:
My name is Wendy Harris. I am the managing editor of The Philadelphia Public School Notebook. Someone named Katie posted a comment on our website in response to a blog post titled "Cash-strapped Philly schools hoping to tackle tax deadbeats." We would like to get permission from Katie to reprint the comment in our print edition in a section called "From our readers". Here is the comment:

"It is great that Philly is thinking of ways to secure revenue for the schools and collect the revenue it should be owed... these changes (AVI, cracking down on tax delinquents, cleaning up the sheriff sale process and making it available online days before) have been long over due... but there is still a long way to go- and none of these changes will bring in the cash flow needed to take schools off the chopping block NOW... nor increase funding to schools struggling with buildings in disrepair and lack of on-the-ground programming and teaching for kids.
We need to make sure these programs are rolled out fast
1. collect delinquent taxes NOW- knock down doors- get that money!,
2. keep the sheriff sale process transparent so that property rolls over from the hands of people who do not pay to those who will- without making the excuse of sitting on vacant properties to package them and sell them off for nothing to real estate moguls,
3. put in place broken window fines for deadbeat landlords who let their properties get run down. Collect those fees- use the Philly 311 app for citizen reporting- and then COLLECT!
If the parking authorities can show up a minute after my parking ticket expires and hand me a fine or invite me to contest it in court- the city ought to have as smooth a system for property management... with delivery of funds to the schools... and YES- before they all get sold for parts and turned over into charter schools.
These neighborhood schools, with their gyms, playgrounds and sport fields, are huge assets to our neighborhoods. We need to have the same tier of facilities that schools in the suburbs have- or the children of the city will suffer for it- and families that can flee- will."

Katie could you please email me at wendyh@thenotebook.org and let me know if we can reprint your comment. If you could get back to me ASAP that would be great as we are wrapping up our edition in the next couple days.

Thanks very much. Hope to hear from you soon.

Wendy Harris
The Notebook

Submitted by Anonymous (not verified) on Tue, 02/19/2013 - 17:30.

The whole city is a disgrace. Has been and always will be.

Post new comment

The content of this field is kept private and will not be shown publicly.

By using this service you agree not to post material that is obscene, harassing, defamatory, or otherwise objectionable. We reserve the right to delete or remove any material deemed to be in violation of this rule, and to ban anyone who violates this rule. Please see our "Terms of Usage" for more detail concerning your obligations as a user of this service. Reader comments are limited to 500 words. You are fully responsible for the content that you post.

Follow Us On

          

SIGN UP FOR OUR NEWSLETTER

 

Philly Ed Feed

Recent Comments

Top

Public School Notebook

699 Ranstead St.
Third Floor
Philadelphia, PA 19106
Phone: (215) 839-0082
Fax: (215) 238-2300
notebook@thenotebook.org

© Copyright 2013 The Philadelphia Public School Notebook. All Rights Reserved.
Terms of Usage and Privacy Policy