Gotham Gazette Thu, 13 May 2021 15:01:49 +0000 Joomla! - Open Source Content Management en-gb (Webmaster) After Years of Community Organizing, Nonprofits Now Get Much-Needed Relief from Dangerous Tax Lien Sale 596 acres empty lot

Nonprofits have a lot less to fear now as a new law takes effect (photo: @596Acres)

Our interconnectedness has rarely been more pronounced than it is in this moment. The fact that we can take so many of our life-sustaining connections into the digital sphere is an unprecedented miracle. But if you’re missing New York’s places of physical gathering, where many of those connections were first forged, you’re not alone.

At its core, New York is a city of communities precisely because of its bounty of gathering places. As we reflect on the ones we miss, that we hope to return to as soon as possible, we can celebrate a new law that goes into effect today - Friday, March 27 - that will protect some of them.

In 2014, attorney Paula Segal, founder and then director of 596 Acres, the community land access advocacy nonprofit, got a call from community gardeners in Crown Heights, Brooklyn. They were distressed. They had continuously grown food and flowers and found solace on a patch of earth in their neighborhood since 1979. Now the land was in peril.

Unpaid tax debt on the nonprofit garden would soon be sold as a lien to a private investor-backed trust via the city’s tax lien sale. If left unpaid, the debt could lead to the trust initiating foreclosure. Gardeners were planning their first-ever bake sale to pay off the taxes, and they weren’t sure if it would be enough to keep the garden from disappearing.

Taking on the case as an attorney, Paula helped this Crown Heights garden get out of the tax lien sale and into the hands of Brooklyn Queens Land Trust (BQLT), a network of community gardens that, together, have bigger administrative capacity. BQLT raised money, paid the bills, and ensured that the garden would get the nonprofit tax exemptions entitled to it going forward. But the problem wasn’t over.

Soon after, Paula got a call from elders at a second garden having the same problem. Then a mosque, a community center, a synagogue, a theater, a choir hall, a church, and it went on. Each nonprofit-owned place was enduring a nightmarish situation of its own due to the same government practice: the New York City Department of Finance tax lien sale. Paula turned to the public data to understand the scope of the problem.

It is well known that nonprofits are exempt from paying property taxes in New York State. Less well known is the tax lien sale process. The tax lien sale in New York City started in 1996. Through it, each year the Department of Finance (DOF) bundles all the outstanding bills --unpaid taxes, water and sewer bills -- and sells the whole bunch to a private investment fund as liens, which is the right to enforce debt through collection and foreclosure. Wealthy individuals and corporations alone can buy into the fund to grow their wealth.

Through the sale, the city government gets paid 72 cents for every dollar of debt and private investors get triple-A investments plus the right to charge interest, collect debt, and initiate foreclosure leading to sale of these properties at auction to the highest bidder. Unfortunately, this sale routinely and mistakenly included nonprofits entitled to tax exemptions. At auction, these nonprofit-owned properties could be sold to anyone.

We know 300 nonprofits had debt sold by the city to the investment trust because advocates painstakingly went through the public data. Every year since Paula first got that call from the Crown Heights garden, it was like a bell would ring 90 days ahead of the sale, and staff from advocacy organizations, with help from volunteers, would begin to dig through the DOF’s spreadsheets, separating out the charities, hunting down their contact information, and reaching out by any and all means. Dreaded phone calls went something like: ‘Um, hi, you don’t know me, but your lovely theater might be at risk of foreclosure? Here’s who to call and what to do to get off the list.’

At first, advocates would whittle DOF’s lists (both sold and to-be-sold lists) down to all properties not classified as residential or utilities, then compare what remained to property ownership records to find which were charities and to locate contact information. In 2017, in response to advocates' requests, the City Council mandated that DOF publish a list specifically of the charities headed to each year’s lien sale. But these lists left out the owners’ names, so advocates still had to hunt those down in order to get in touch.

At the same time, 596 Acres set other strategies into motion: publicizing maps of all the nonprofits at risk in past and current years, meeting with City Council members, hosting events that brought together DOF staff with the leaders of at-risk nonprofits, creating guides for nonprofits to navigate the process, working with the DOF’s newly-minted taxpayer advocate so they would be prepared to assist nonprofits, and coordinating press pieces.

TakeRoot Justice and 596 Acres organized the impacted nonprofits and their supporters into the Protect Our Places Coalition, which had meetings and rallies on the steps of City Hall each year. At these rallies, leaders of impacted organizations would speak, often in conjunction with opportunities to testify before the City Council on the new bill, known as Intro. 245, that the coalition was working on to stop the problem. Paula had joined TakeRoot Justice as a staff attorney in early 2017.

After roughly six years of work and legislative wrangling, Intro. 245 was finally passed on February 27, 2020, and thankfully goes into effect today. The Protect Our Places Coalition had a final gathering on the steps of City Hall that February day, celebrating with speeches and music, and expressing gratitude for all who came together to correct this injustice, including the elected officials who truly can be the people’s lawmaking champions.

Organizations contributed to this winning campaign from far reaches of New York City: from Brooklyn, 1100 Bergen Street Community Garden in Crown Heights, Masjid Al Aman in East New York, and Devoe Baptist Church in Williamsburg; from Queens’ Merrick Marsden Community Garden in Jamaica, Haven Ministries in Far Rockaway and Al Muneer Foundation in Hollis; from the Bronx, Mary Mitchell Center in Crotona; from Manhattan, Hebrew Actors’ Foundation in the Lower East Side; and many others. These groups advocated tirelessly for the survival of their own spaces. Doing so together, they connected the dots between their individual nightmares to push for system-level change.

Aligned technical assistance and umbrella organizations contributed by supporting at-risk organizations in their networks, connecting organizations to city officials, and helping draft legislation. Elected advocates helped individual nonprofits in their districts while championing the new law, led by City Council Member Antonio Reynoso and members of the Council’s Progressive Caucus.

Today’s victory is a chance to reflect on how individual struggles against bureaucratic practices can be scaled up to make legislative change, with the help of many advocates. It’s a moment to gain inspiration from a winning campaign that moved from case-by-case problem solving to big-picture change by considering the elements that led to its success, including persisting on the path year after year.

It is also a moment to appreciate the belief at the heart of the work: small charity organizations across our city provide neighbors with invaluable services in decentralized, locally-relevant ways. The city should support their capacity to own, develop, and operate property that provides for their neighbors and that becomes the setting where we form strong connections to one another. Our connections are essential for our resilience. Even as we continue this work from home, our networks have never been more important than they are today.

Mara Kravitz was an organizer with the Protect Our Places Coalition between 2016 and 2020, working for 596 Acres and TakeRoot Justice.

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After Years of Community Organizing, Nonprofits Now Get Much-Needed Relief from Dangerous Tax Lien Sale Thu, 26 Mar 2020 04:00:00 +0000
City Must Remove Nonprofits from Tax Lien Sale garden tax lien sale

(photo: Sofie Hecht/Gotham Gazette)

In New York City, tiny, vulnerable, nonprofit organizations too often lose the real estate they own to for-profit developers. These unjustifiable losses are a complete mix-up of city and state tax policy, through the mechanism called the tax lien sale. New York City needs to fix this problem by removing nonprofits from the tax lien sale.

Nonprofits of various sizes -- religious institutions, universities, and community gardens alike -- frequently own property. These organizations, due to their nonprofit status, according to the New York State Constitution and New York State law and are tax exempt. Yet every year, New York City facilitates the sale of some of these properties to private speculative developers, and it is never the mega universities or big churches that end up in this mess, but small, local nonprofits.

New York City is correctly concerned with maintaining its tax base to keep the city functioning. In 1996, the Giuliani administration drastically changed the way the city deals with owners who don’t pay their property taxes out of concern for the lost tax revenue. One aspect of that change was the introduction of the tax lien sale for all property owners, including nonprofit owners even though they do not owe these taxes in the first place.

The tax lien sale works like this: if you, as a property owner, don’t pay your property taxes, the city places a lien on your property and sells it to a tax lien trust, an investment vehicle only rich ("accredited") investors can use. The trust then adds interest and fees and collects the "past due" taxes even when they were not technically due. If the property owner doesn't pay those fees, the trust initiates foreclosure and then sells to a buyer, usually a developer, at a post-foreclosure auction.

If you are a nonprofit owner, to avoid the tax lien sale you need to successfully apply for a tax exemption. When your tiny organization has a staff of two or three people, sometimes the administration is imperfect and you don’t file an exemption form when you acquire the property, which can lead to the loss of your property because of the tax lien system.

To continue avoiding the tax lien sale, your nonprofit needs to annually file a renewal form with the Department of Finance. So, if your community garden board misses a few pieces of mail because the former president retired and the new generation of garden caretakers doesn’t have every city agency sending mail to the right place, the renewal might not get filed. And the tax lien warnings may go unnoticed.

In a year or two, New York City thinks this property has a civic duty to pay taxes (which it does not) and is delinquent in that duty. The lien gets sold, and then your garden or church gets foreclosed. The worst case scenario happens when a developer shows up with court papers at your garden’s fence and tells you “we own this now and you must go.”

So, even though the state constitution provides for the exemption of property taxes for nonprofits, and even though New York law provides that your property is exempt from the date you acquire the property as a nonprofit, the City Department of Finance is still permitting the tax lien sales of nonprofits.

As D.W. Gibson reported earlier this year, the Black Veterans for Social Justice in Bedford-Stuyvesant, Brooklyn learned this year that tax debt on their property had been sold. Tax debt that, under state constitutional principle and state law, they do not owe. They are working on untangling this mess before their building ends up in foreclosure.

Tax revenue from property owners is an important piece of how the city functions. But this cannot be an excuse for seeing a small community nonprofit, especially in an already pressed neighborhood, fall into foreclosure.

The city should collect taxes from luxury real estate developers. The city should exert more muscle to collect fines from delinquent landlords who permit their buildings to collapse around tenants. The city should focus its hunt for lost revenue on the actual organizations that legally and morally should be paying it.

The rules around tax lien sales are up for renewal this year. New York City must exempt nonprofits from the tax lien sale altogether. New York City should not be seeking lost revenue from the most vulnerable populations. This problem can be fixed.

Richard Semegram is a tenant lawyer and an advisory committee member of 596 Acres. On Twitter @richagram.

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City Must Remove Nonprofits from Tax Lien Sale Thu, 05 Jan 2017 05:00:00 +0000
Passing the Buck on Affordable Housing bdb water bill rebate bay ridge

Mayor de Blasio makes an announcement (photo: Demetrius Freeman/Mayor's Office)

Passing the buck is one thing. Passing seventy million bucks is quite another.

Each year, New York City sells between $70 million and $120 million in unpaid tax debt, water charges, and emergency repair loans to a private trust. These liens—which enable the owner to foreclose on the property—then increase rapidly in value. The trust can charge nine percent interest on 1-3 family houses and 18 percent interest on multifamily housing, compounded daily.

Yes, daily. Total tax debt can triple or even quintuple in a year.

For homeowners who fall behind on their taxes and cannot enter into a payment plan with the City, being put into the tax lien sale means shooting down a steep waterslide into a deep pool of debt. Predatory lenders and equity firms often prey on them as they either try to hang onto their property or sell it for as much equity as they can possibly keep. Sometimes even being on the tax-lien sale list can lead to foreclosure by a lender.

For tenants in buildings in the tax lien sale, times can be just as hard or worse. Landlords tend to pay their taxes even if they withdraw services from a building: they want to hang on to their property. But when they stop paying taxes and end up in the lien sale, it’s often a sign that the building is already in deep trouble. Being in the lien sale doesn’t make it better. Under pressure to sell, landlords often try to harass tenants out because empty buildings sell for more than full ones.

Nonprofit organizations such as churches, daycare centers, and community gardens also find their property in the lien sale in spite of the fact that their property should be exempt from local taxes. The tax lien sale can wipe out years of tax benefits that add up to public investment in these organizations if, for reasons of age, illness, death, or simple ignorance of, or inability to navigate the Department of Finance’s new online system to renew their tax exemptions, they fail to do so in time.

Meanwhile, the city is dealing with an unprecedented homelessness crisis, an affordable housing shortage, and—by its own lights—a dearth of land and property with which to help solve these problems. And yet, at the same time, for the last twenty years, it has given up its own power to foreclose on much of this property and to preserve it for affordable housing and to meet other community needs in favor of selling this right to a bank-managed, private trust.

This wasn’t always the case. Before Mayor Giuliani instituted the tax lien sale in 1996, the City did foreclose on tax-delinquent housing. It wasn’t always a pretty story. The City managed much of this housing poorly. But beginning in 1986, under Mayor Koch, it used a lot of this foreclosed property to create over 250,000 units of housing. Much of this is the only truly affordable housing for poor people in the city apart from public housing.

With this year’s tax lien sale on Thursday, May 12, the time for reform is now, so that this year’s is the last of its kind.

The City doesn’t have to go back to the bad old days of owning thousands of units of foreclosed housing. It could divert the majority of the more than 4,000 properties a year from the lien sale and make huge strides toward meeting Mayor de Blasio’s goal of preserving or creating 200,000 units of affordable housing.

Through regulatory agreements that subordinate tax debt to permanent affordability requirements, and foreclosure and disposition to nonprofits like community land trusts and mutual housing associations (much like large, low-income cooperatives), the City can put financially shaky housing on new footing by realizing economies of scale in purchasing and management. It can preserve nonprofit assets and the public investment that went into them, and it can even turn vacant lots into affordable housing opportunities. By keeping these properties out of the lien sale, it can keep them from becoming prohibitively expensive to save.

Would it cost money? Of course. But so does passing the buck for New York’s housing crisis to generations to come.

John Krinsky is an associate professor in the Department of Political Science at The City College of New York and a board member of the New York City Community Land Initiative.

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Passing the Buck on Affordable Housing Wed, 11 May 2016 04:00:00 +0000