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Tax delinquency's impact varies in Valley

| Tuesday, March 11, 2014, 12:36 a.m.

Real estate tax bills are reaching households this month, but municipalities and school districts that rely on taxable land for operating money know many property owners won't pay their share.

Tax delinquency rates in Western Pennsylvania can reach as high as 25 percent, Trib Total Media found in interviews with budget and finance officials.

It's a reality that further squeezes the budgets of cash-strapped municipalities and school districts.

“Naturally, it puts a burden on the districts and municipalities, because it's revenue you're just not going to see in full,” said Mark Lukacs, business manager of the Leechburg Area School District.

Leechburg Area routinely doesn't collect about 10 percent of the $4.86 million in property taxes it levies on about 3,500 parcels. “It's tough with revenues for school districts being so tight in the past five years or so,” Lukacs said.

Part of the blame falls on taxpayers, but some goes to taxing bodies, contends Kevin Gillen, an economist at the University of Pennsylvania's Fels Institute of Government.

Enforcement should be strict, and people should feel they get what they paid for, in terms of police, fire and other services, Gillen said. Uncollected taxes can lead to inefficient government.

“There's a very high correlation between delinquency and municipal performance,” he said.

In Allegheny County, municipal governments and school districts are not required to report delinquencies to county or state agencies. The Allegheny Intermediate Unit does not track delinquency rates among school districts, and municipal leagues don't track rates for townships and boroughs.

Taxing bodies in the county often give delinquent accounts to private collectors. Some scofflaws end up in court.

Districts and municipalities in Allegheny County have sued 1,454 property owners for taxes since this year began.

Centralized enforcement

The delinquent tax collection systems in the less populated Armstrong, Butler and Westmoreland counties help prevent such litigation, according to John Pallone, superintendent of the New Kensington-Arnold School District.

Each county has a centralized tax claims bureau to which tax authorities turn over delinquent taxes at the end of the calendar year.

Once the claims bureaus take over the delinquent accounts, property owners pay additional monthly fees at 0.75 percent interest until their debts are settled.

If the property owner still owes back taxes by April of the following year, the property goes to upset sale, with the revenue going to the owed taxing authority.

That revenue, Pallone said, is what helps districts balance their budgets while the state withholds “inadequate funding until the 11th hour.”

“The delinquent tax system in Westmoreland County is set up in such a way that it balances out,” he said. “The percentile for our collection ratio is in the high 90s. Whatever we don't receive by the penalty date (Dec. 31), is almost made up for with revenues that are coming in from older delinquencies.”

Each year, the owners of about 20 percent of Westmoreland County's 186,400 parcels fail to pay some form of taxes by the Dec. 31 cutoff, according to bureau director Yvonne Hayes.

The average value of the delinquent taxes is about $24 million.

Hayes estimates that about 600 of the delinquent accounts the tax bureau receives each year are never paid off. It collectively costs taxing authorities in the county, based on unofficial calculations, about $384,000 in annual revenue they'll never see.

Uninhabitable, uncollectable

Most uncollectable delinquencies are on uninhabitable properties, Hayes said. In some cases, the land owners don't even know it's in their possession.

“A lot of the parcels are steep hillsides or cliffs where people can't do anything with it,” she said. “Sometimes, the property is passed down in wills and it's difficult to tell who the heirs are. Sometimes, they don't even know, so it's really kind of a lost cause.”

Armstrong County and its 45 municipalities sent out real estate tax bills on March 1, while the Armstrong School District sends it bills in the summer, said Jeanne Englert, director of the county's tax claim bureau.

Each year, she said 12 percent of all school, county and municipal real estate tax bills in Armstrong County are delinquent. It amounts to $6.6 million.

“There's various reasons why we see property taxes go delinquent, but the main reason is the economy,” Englert said. “We see new people come in here every year, and most of those people have never had to deal with us before.

“Those are the people who call us, in tears, because they couldn't pay their taxes.”

Collecting delinquent property taxes can help government budgets.

After tacking on a $15 penalty on each late tax bill and 0.75-percent interest each month, county, municipal and school officials collect about $7.5 million. It amounts to an additional $900,000, Englert said.

In Butler County, roughly 7 percent of the 6,056 parcels it taxes each year are uncollectable, according to county tax director Janet Mentel.

Uncollected revenues affect some municipalities in the Alle-Kiski Valley more than others.

Impact varies

In Plum, the uncollected delinquencies have a nominal effect on the borough's annual budget, according to tax collector Harry Schlegel.

“We're collecting at 95 to 97 percent, and we anticipate that small percentage to not be there each year, so it doesn't present too many challenges,” he said. “We're fortunate. It hurts some other Allegheny County municipalities, like Wilkinsburg, a lot more than us.”

The Wilkinsburg School District routinely doesn't collect on 22 to 25 percent of the $13.1 million it levies on about 5,000 parcels.

Tax forgiveness?

Tom Ginsberg, a project manager for Pew's Philadelphia Research Initiative, says tax penalty forgiveness should be a one-time gift followed by strict enforcement.

“It's a form of kicking the can down the road,” Ginsberg said of amnesty programs. “If you don't enforce, then you're going to have the same problem.”

Braden Ashe and Aaron Aupperlee are staff writers for Trib Total Media. Ashe can be reached at 724-226-4673 or Aupperlee can be reached at 412-320-7986 or Staff writer Brad Pedersen contributed to this report.

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