The City Council found a legal loophole to stop foreclosures on four nonprofits Monday.
The council invoked authority given to it by the state Legislature to forgive taxes retroactively. The legislature had intended to give the city authority to forgive only the 2007 taxes, but accidentally included the wrong assessment roll year, allowing the city to also forgive the 2009 taxes, Councilwoman Margaret King said. City officials discovered the mistake when they searched for some way to stop the foreclosures threatened by a private tax collection company, American Tax Funding.
Monday’s action saved Carver Community Center from a foreclosure that could have come as early as next week. It also saved three churches from the same fate. The city did not indicate who they were.
But the city did not have state authority to forgive the 2008 taxes owed by the First Unitarian Society of Schenectady. The Unitarians may be foreclosed upon as early as Thursday.
The church still owes $88,000, after about $12,000 was forgiven Monday. Of that amount, $37,000 is interest and fees.
Board of Trustees member John Reschovsky asked the council to negotiate further with ATF.
The only other option, he said, is for the 400-member church to take out an “extremely painful” multi-year loan to pay off the debt.
“They will somehow bear the incredible burden if they must,” he said. “But they will ask their leaders — us and you — why this happened. And they will not forget.”
The problem began when the city assessor in 2007 enforced a rule that all nonprofits must file a statement affirming that they still used their property for tax-exempt purposes.
Those that did not file, or that filed as little as a day late, were levied full taxes for a year.
Sixteen nonprofits were taxed, but many of them turned to the state Legislature for help. The Legislature passed individual pieces of legislation allowing the City Council to retroactively forgive the taxes for each nonprofit.
But in the meantime, the delinquent tax liens were sold to a private tax collection company, American Tax Funding. It appears that City Council members — and ATF — did not realize the nonprofits’ liens were among the hundreds sold.
This year, ATF began threatening to foreclose on the nonprofits. When it foreclosed on the Hindu Temple, a ripple of fear spread through the nonprofit community, and members began to press the City Council for solutions.
ATF wants to be paid for the liens in bought, but officials also wanted to collect at least some of the interest and fees that have accumulated for years. City Council members tried to exchange other tax liens for the nonprofits’ liens, but ATF refused other liens on the grounds that they were not as valuable.
Negotiations bogged down weeks ago, and the mayor began threatening aggressive code enforcement if ATF actually foreclosed.
With the exception of the Unitarians, Monday’s action should put an end to all of the foreclosure threats, Mayor Gary McCarthy said.
King outlined precisely how each of the 16 nonprofits were affected by the situation.
Three nonprofits paid their tax bills immediately, to the city, before becoming delinquent. Those three — Schenectady Day Nursery, Planned Parenthood and Union Graduate College — were never embroiled in the ATF issue.
Four churches simply paid ATF when the company tried to collect. Two other nonprofits, the Hibernians and Schenectady Home Furnishings, also paid ATF. Home Furnishings held a series of fundraisers to collect the needed money.
Three churches, Carver Community Center and the Unitarians owed 2009 taxes that were held by ATF. Those were all in danger of being foreclosed upon before Monday’s action.
The tax liens for two others — a church and Schenectady Light Opera Company — were never sold to ATF. It wasn’t clear why, but Monday’s action forgave those taxes.
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