Schenectady's taxes are high enough without driving a sledge hammer into the problem by charging exorbitant interest rates on overdue tax payments.
What often happens is that people have some financial troubles and can't pay their tax bills in full on time. That's tough enough. But then the city tacks on a lot of interest on late payments. So even when taxpayers recover and can pay their original bills, the interest that's piled up makes it impossible for them to get even.
After a time, the city eventually forecloses on the property, which then must be sold (often at far less than market value) so the city can recoup the unpaid taxes and get the property back on the tax rolls. In many cases, these properties fall into disrepair due to not having an occupant, bringing surrounding property values down and sometimes leading to blight, vandalism and arson. If the city can't sell a property, it has to pay to demolish it. In one case last month, a city-owned foreclosed property on Paige Street exploded because of a gas leak.
So it's in the best interests of the city and all its taxpayers to keep properties off the foreclosure list as much as possible.
That's why an initiative by Councilwoman Leesa Perazzo to lower the interest rates on overdue taxes and introduce a repayment plan is so important.
Currently, the city charges 21 percent interest on late taxes, which is in line with high credit card rates and 6 points more than Albany and Saratoga Springs charge.
It's important that the city charge some kind of penalty for overdue taxes. Otherwise, there'd be no incentive for people to pay their taxes on time, or at all. But it doesn't have to be at usury rates. The city just needs to make the penalties high enough to provide the incentive to pay.
There are no shortage of examples on how communities deal with the problem.
New York City bases its interest charges on overdue taxes on assessed value, with a 9 percent rate for properties under $250,000 and 18 percent for properties over it, figuring people who own more expensive properties can afford a higher rate. In Ulster County, the owner can't be more than three years in arrears and must pay the overdue taxes back within two years. Interest is tacked on, and there are additional penalties (5 percent) for making the monthly installment payment late. Suffolk County allows taxpayers to pay their property in two installments over six months. Interest payments after that are 5 percent, plus 1 percent per month. The city of Buffalo dealt with this very same issue back in 2011, when its building vacancy rate was third highest in the U.S. Its options included limiting foreclosures for delinquent taxes to taxpayers owing $500 or more, installment payments and reducing penalties for low-income residents.
There are plenty of creative examples of how to collect overdue taxes without either coddling tax delinquents or unfairly punishing those who would like to pay all their taxes, but just can't right now.
Eliminating the high interest rates is a very good start. But it's only the beginning of what can and needs to be done.