TAX LEVY SALE LEGISLATION
Short definition of Tax Levy Sale legislation: Prior to Schundler, a Municipality had to wait 2 years before selling a tax lien on a delinquent taxpayer's home but the City got 18% annual interest for the wait! Schundler immediately successfully lobbied to have that wait reduced to 6 months. But that still wasn't fast enough, so his Tax Levy legislation reduced the wait to 5 DAYS! The State by law grants a 10 day grace period. The developers get 20 year tax abatements at cut rate prices but inner city homeowners who struggle to keep food on the table while subsidizing luxury housing on the waterfront and facing constant cuts in City services, gets 5 days to pay or else... a tax lien sold to Breen Capital on the 15th calender day after each quarter. In the spring of 2001, Breen lost a JC taxpayers' class action suit to the tune of $40 Million... But Schundler wanted more cut rate properties for the developers with no guarantee that the City would collect from Breen ( as they didn't in the Bulk Lien Sales) & he could care less that the City would loose the 18% interest income. The lost interest would have been anywhere from $3 to $5 million/ year. Millions of lost revenue $$$$ = more budget deficits = more bonding for operating deficits.
History..... By 1996, the City's collection rate was 95% and Breen Capital hadn't paid the City the $25 Million of notes. Schundler had put the subordinated notes, from the 1993-1994 Bulk Line sales, into the budget for two years as a revenue item, and the results were Budget Deficits. But that didn't stop Mayor Schundler and his former Chief of Staff Michael Cook from "cooking up" the Tax Levy Sale legislation. Schundler wanted to eliminate the open, competitive bidding tax auction and give himself sole power to select a "buyer" and sell all the liens quarterly to one company, a "quarterly bulk lien sale". His buyer would have been Breen Capital Services, the '93/'94 bulk lien buyer.
Schundler's plan was to sell any tax delinquencies immediately after the 10-day grace payment period ended! That would have meant that thousands of homeowners would have had liens placed on their homes as early as the 15th day after the quarter end, a mini bulk lien sale after every quarter! Thousands more who had paid would also have seen liens since it takes the Tax Collector's office up to 30 days to post all the payments, especially for seniors who prefer to pay at local banks! Sooner or later we'd all be part of the class-action lawsuit against Breen Capital who lost to the tune of $40 Million!
In 1996, I prepared several analyses detailing how the legislation would hurt taxpayers by applying actual numbers from Jersey City's latest tax sales, delinquencies, and interest earned by the City. I then broadcast faxed the analyses and various other updates to all 120 NJ legislators.
One of the letters follows:
December 12, 1996
To: All New Jersey Senators and Assemblypersons - via fax
From: Mia Scanga CPA, resident and taxpayer of Jersey City
Re: S-1091 and A-2033 bills- Total Municipal Property Tax Levy Sale
Dear Senators and Assemblypersons:
Considering the pending legislation, I thought an update of the results of the annual, Tax Lien Sale in Jersey City held on December 5th would be appropriate. Of the 2,985 properties up for sale on December 5th, 2,549 were sold and the City collected $1.5 million in PREMIUMS, which is a record! Consequently, more than 1,000 homeowners saw their interest rate penalty drop to 0%! The heaviest area of concentration, more than 70%, was in the JC Heights area, a voting, and middle/ working class section of the city. This was followed by the area near the Martin Luther King Drive redevelopment, then by Country Village.
Of the 442 unsold liens of $1.8 Million, $1 Million was for demolition charges for the Majestic Theater and several major, abandoned, apartments buildings; $575,000 for tax liens; and $305,000 for water & sewer liens. The unsold tax liens of $575,000 represent less than .0026% of the total 1996 tax levy of $217 Million!
If the legislation had been in place on December 5th, those 1,000 homeowners would continue to pay 18% interest as opposed to ZERO, the others sold would not have seen at least a 35% reduction in their interest rate and the City would not have gotten the $1.5 Million in premiums which will be invested until the liens are redeemed. For those properties eventually foreclosed on, the City keeps the premiums!
I would like someone to explain to these taxpayers why this legislation is in their best interests and the overall interests of the City. Mayor Schundler has squandered $575,000 in taxpayer financed, self-promotion mailings this year alone. Why can’t legislation be introduced to halt his use of hard earned, taxpayer dollars for his self-promotion rather than spending valuable time on this legislation.
Thank-you for your attention to this matter.
Because of my broadcast faxed letters, support from the NJ League of Municipalities, who also opposed the legislation, speaking out at City Council meetings, I made it too obvious of a bad deal that Schundler backed off and did not implement it in Jersey City. The Tax Levy legislation had passed as "permissive legislation" which means it was an option available to any municipality but not required. As a result of my broadcast faxes, The County of Atlantic (Atlantic City) adopted Resolution No. 529 on 12/10/96, opposing the legislation. The Hudson County Freeholders never responded. In Peter Weiss's 11/9/96 column, "Bret soft on Bob?".. "And it naturally has people wondering if the pair has reached an accommodation. Several weeks ago Schundler confirmed that he and Janiszewski met and agreed to stop bashing each other. Perhaps it goes further."
On June 3, 1996, Schundler's, Jersey Journal Letter to the Editor titled "Tax Levy Sale no Gimmick" was in response to Jerome Lazarus's and my criticisms of his attempt to sell the tax levy. This letter followed numerous articles regarding Bret’s latest new fiscal idea of solving the City’s woes. In Jim Kennelly’s JC Reporter article, 12/22/96 " Lieners get Meaner", "Mayor Schundler says he will push for such a levy sale next year." Schundler doesn't give up as his LTE titled "City hit homer with lien sale" dated 12/17/99. As he begins, "Contrary to Mia Scanga's baseless attacks in a letter to the editor, the 1993 Bulk lien Sale was a home run for Jersey City."
But I will never forget in December 1996, when I was in front of the City Council again explaining how detrimental the legislation was and used real JC examples, Council President Tom DeGise with a smirk on his face commented that he thought it was a good idea. Many of the delinquent taxpayers were from his area in the Heights but no matter to Tom, it's what the mayor wanted. Council President Tom DeGise ran for mayor in May 2001, with Schundler's endorsement, AND LOST!!!
Throughout his reelection campaign in 1997, Schundler preached how good this legislation was for the City and it was the first thing he’d push through. When Mayor Schundler took office in 1992, the City had to wait TWO YEARS before they could sell a lien on a property. He immediately lobbied Trenton to have it reduced to six months. With this legislation ‘The Total Tax Levy Sale’ it would be down to 15 DAYS! (see BAD DEALS FOR CITY FINANCES- Casamasino section)
In February 1998, North Brunswick implemented the Tax Levy legislation & sold their liens to the highest bidder. In the end, they spent $20,000 more in consultant fees than they received from the entire sale! They lost the properties and $20,000 in the red... The Star Ledger article reported that the $188,000 premium received from the buyer was to reimburse the City for the interest income the City earned the prior year. Instead, the money was spent on lawyers, DeCotis, Fitzpatrick and Gluck, (major Whitman supporters) and financial consultants, Michael Cook of Lepercq Financial Advisors. Michael Cook was Mayor Schundler’s former Chief of Staff who orchestrated Jersey City’s bulk lien sales in 1993 and 1994. Mayor Paul Matacera was not re-elected.
PS... A regular tax auction handled by the City's tax collector costs the City nothing. Even the newspaper advertising is pro-rated and charged to the listed, delinquent property owners.
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