Schenectady seeks state OK for open bidding on tax liens

PHOTOGRAPHER: Kathleen Moore

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The state may finally let Schenectady use an open bidding process for its delinquent tax lien sales — but just once.

After a battle with a Democratic-controlled Assembly committee, Republican Assemblyman George Amedore has managed to get Schenectady’s tax lien request to the floor.

Sen. High Farley, R-Niskayuna, is also sponsoring the city’s request in the Senate. Both houses may vote by Tuesday, when they intend to recess.

The legislation could bring millions of dollars to Schenectady. Currently, under the state’s rules, Schenectady is stuck with American Tax Funding, which is offering less and less for the city’s liens each year. Liens represent the dollar value of taxes that property owners refuse to pay.

Other tax collection companies are willing to offer more than ATF — sometimes much more. Xspand, a division of J.P. Morgan, wanted to pay the city 103 percent for its liens this year — meaning that for every delinquent tax dollar, the company would pay $1.03.

By contrast, American Tax Funding wanted to pay less than 64 cents per dollar.

After negotiations, ATF eventually agreed to buy a small selection of liens dollar-for-dollar, but refused to buy many other liens that it considered more difficult to collect.

Xspand offered to buy those unwanted liens for $2.4 million — but under the state’s rules, the city could not accept. It could negotiate only with ATF.

Now, Amedore has finally gotten new legislation through the Cities Committee run by Assemblyman James Brennan, D-Brooklyn.

The legislation would allow Schenectady to go out to bid on its liens this year. But the city could not take on more than one additional company — and in 2012, it would have to contract with one company, putting it back in the situation it’s in now.

The City Council met briefly Thursday evening to request that the state pass the bill, as required by the state process.

No one was delighted by the final wording of the bill, but Mayor Brian U. Stratton said pragmatically that it was better than nothing.

“Assemblyman Amedore’s office was very helpful in getting us this. We certainly weren’t going to get anything,” Stratton said.

Council President Gary McCarthy added, “This is not an optimum configuration of what we’d like but it’s what’s available to us.”

What the city wants is the ability to go out to bid at least once every few years, Finance Commissioner Ismat Alam said.

“I think it’s a good thing to have competition,” she said. “Give the city the highest bid — the highest value [for the liens].”

If the bill passes, Alam plans to try to sell liens next month. That might bring in upwards of $2 million.

“There’s a possibility,” she said, adding that she can’t be sure Xspand will stick to the offer of $2.4 million that it made in February.

The city could go out to bid again in December to sell all of this year’s delinquent liens, pitting ATF against its competitors. Alam said that would likely push the price up, gaining the city more money for its liens.

“ATF would have to sharpen their pencils,” she said.

The issue is particularly critical for the city now because it faces a $13 million shortfall in 2011. Stratton said that number has already been reduced by millions through cost-saving measures enacted in January — but that the shortfall is still quite large.

He plans to update the council on the city’s finances next month.