The county and the city have come to an agreement on the millions of dollars in unpaid property taxes owed to the county.
The city will pay the county for all delinquent taxes from 2012 and 2013. But from then on, the county will be paid only when property owners actually pay up.
Mayor Gary McCarthy said the deal will protect the city’s financial footing.
For a copy of the agreement between the city of Schenectady and Schenectady County, click HERE.
“It’s not a cost to the city,” he said. “We will pay the taxes to the county as we collect them. This will put us on a pay-as-you-go.”
County Attorney Chris Gardner said the county was willing to agree because the only other option would be to share responsibility over collecting taxes in the city. That’s because Schenectady is not required to make the county whole on property taxes, but it can’t refuse and then keep all tax collection authority to itself, Gardner said.
But sharing could lead to a quagmire, officials said.
Gardner envisioned both entities trying to foreclose on the same property while grappling with different laws on how to do so. The county cannot foreclose on residential properties until the owners haven’t paid for four years; the city can foreclose after three years. But the county can foreclose on commercial properties after just two years, while the city must wait for year three.
“It’s a mess,” Gardner said. “If you look at it realistically, I don’t think the county would want two different entities involved in foreclosure.”
Until 2012, the city paid the county for all delinquent taxes, and then tried to collect them from the owners. But city officials said they would rather simply pass on the money as they collected it, rather than draining their savings account to pay the county in one lump sum.
After two years of debate, and a lawsuit filed by the county, both sides are planning to vote on a compromise.
The City Council will vote Monday. The county Legislature is expected to vote in January.
There are enough votes on the council for the measure to pass, said Councilman Carl Erikson, who chairs the finance committee, but he isn’t sure he’ll vote for it. He didn’t want to pay the county for the 2012 and 2013 delinquent taxes, but he said the county refused to make the agreement retroactive so the city could pay up as it collected those old taxes.
“So then my goal was to push the payments out far enough that we wouldn’t have to make a lump sum payment,” he said.
The agreement now calls for the city to pay all of the uncollected 2012 taxes on Jan. 31. That amount is currently $653,000, although some owners may pay before that date because foreclosure notices are going out next week.
Then the city will pay half of the 2013 uncollected taxes on Feb. 15, 2015. The other half is due on Feb. 15, 2016.
By then, Erikson said, he’s hoping the final payment will be “a nominal amount.” Right now, the total is a bit more than $1 million, he said.
The agreement also lays out specific instructions for paying the county when the city takes a house through foreclosure. If the city sells the house for less than the taxes owed, the county gets its share of the total, and the rest would be wiped out.
But if the city transfers the property to the land bank or the Schenectady Urban Renewal Agency, the county can vote to waive the tax payment.
If the city simply holds onto the property after foreclosure, making no effort to sell it for two years, the owed taxes must be paid in full.
“If they don’t want to put it up for auction, they have to pay us,” Gardner said.
The agreement also gives the city some money for handling the entire tax collection and foreclosure process.
The city will get to keep 30 percent of the interest on the county taxes when it collects those taxes.
The agreement will last for 20 years, unless it is terminated early by “mutual agreement.” Otherwise, it renews automatically for another 20 years. To stop the renewal, one side must say so in writing at least two years before the end of the agreement.
Erikson said he didn’t like the termination agreement because the decision would have to be made two years before the agreement expired.
“I think it becomes cumbersome,” he said.