Delinquent taxes trickle into Schenectady books

PHOTOGRAPHER: Kathleen Moore

The city’s tax collection company has delivered only $500,000 in 10 months of work, rather than the millions it projected it would collect.

Still, Finance Commissioner Ismat Alam said Tower Capital Management didn’t have a full chance to show its skills this year. The city needed more money at once, so it sold the easiest tax liens to American Tax Funding. That left Tower to go after the harder-to-collect liens.

Next year, the city will not sell any liens to ATF, giving Tower a clear playing field, Alam said. She said she’s confident the tax collection company will succeed.

Tower officials predicted that they could collect $4.1 million this year, far more than any of the other tax collection companies that made proposals to the city. Tower also charges far less than the other companies, making it the City Council’s top choice.

But the city needed more money, so city officials also reluctantly sold some delinquent tax liens to American Tax Funding. They raised $3.1 million in doing so, but ATF would buy only the liens it considered easiest to collect.

Given that sale, Alam said she ended up budgeting that Tower would bring in less than $1 million this year. “What we’re counting on for Tower this year, they surpassed our expectations,” she said.

Although the company has managed only $500,000 so far, Alam said there are indications it will do better. Residents have already started responding to Tower’s warning letters and paid up on their own, Alam said. Over the course of the year, delinquent taxpayers have brought $500,000 to City Hall to pay on their past due accounts.

“Because of Tower’s efforts, the city is collecting more now,” she said.

Next year, she plans to count every delinquent tax bill that Tower brings in through March 2013, when the city officially closes its 2012 books. She can count the tax revenue in the 2012 books even if it arrives in 2013 because it’s old revenue, money that was owed in prior years.

Getting the money so late means that the city will have to use its cash-strapped savings account to pay bills, and then replenish the savings when it finally gets the tax revenue. That will exacerbate the city’s cash flow problem, but Alam doesn’t see any other choice.

“It’s going to trickle in throughout the year,” she said. “It’s not going to come as one lump sum.”

ATF does make one-lump-sum payments, but the city won’t be using it again because ATF is now paying so little for the city’s liens.

With the exception of the easy liens, which it bought at face value, ATF offered to buy the city’s delinquent taxes last year for just 64 cents on the dollar. That meant the city would be giving up a third of its tax revenue to a private company.

The city refused the 64-cent deal and turned to Tower for collections.