Lien Collection efforts stall redevelopment

January 25, 2010  |  Courier Post  |  Link to article

Maneuvering around dripping water, hanging wires and broken ceiling tiles, Father Michael Doyle headed toward a sagging stage at the back of a cavernous abandoned building.

The Star, a circa-1924 silent movie theater that takes up almost an entire city block on the southern end of Broadway, shut down in the '60s. It became an athletic club, a bingo hall and then a day care before it was deserted five years ago.

If Doyle had his way, this decaying piece of history would be rehabbed into a gym for students at Sacred Heart across the street. Heart of Camden, a nonprofit development group, even won state grants to get started on the project.

But plans have been stalled since 2006 because of a $697,000 lien -- more than six times the estimated value of the property -- that had accumulated over years of unpaid sewer and tax bills.

The lien is held by the Tax Lien Financing Corporation, or TLFC, a quasi-state agency created seven years ago to help the financially distressed city collect whatever it could on about 5,400 delinquent properties. If the agency can't get owners to pay up, it can take the property through foreclosure or sell the liens at reduced rates. Those who purchase the liens have the right to foreclose if the owner still doesn't redeem.

TLFC board members and staff say their efforts have not only generated revenue for the city but have also stimulated development. So far, they've recovered roughly $11 million owed to the city, worked out installment payment plans to keep homeowners from losing their properties and designated 948 parcels that will be transferred to nonprofit and city agencies for redevelopment.

But neighborhood leaders and nonprofit development corporations question whether the TLFC has been doing as much as it could -- or should -- to get abandoned properties like The Star back onto the tax rolls. If it was, they said, why would thousands of buildings still be sitting empty, accruing penalties and interest on exorbitant liens?

"Whatever's abandoned is destroyed, whether it's a human being or a building," Doyle said, stopping to stare at black scorch marks tattooed on a brick wall in The Star. After thieves pillaged the building, a fire ate away at whatever was left, he said.

Often, nonprofits can't even attempt to redevelop an entire block without running into parcels tied up in TLFC liens, said Manny Delgado, director of the Cramer Hill Community Development Corporation. They're at the mercy of the corporation to put those liens up for sale at a reasonable price, which has been taking at least two years.

"It just doesn't make sense," Delgado said. "I can't develop a holistic plan for a community."

A success to some

Dean Reiche, vice president of Xspand, a private tax-collection firm that was contracted to service the TLFC liens, said he believed Camden's partnership with the state had motivated owners to pay and also made the liens more marketable to outside investors.

By the early 2000s, the city was getting stuck with the vast majority of the liens that came up at annual tax sales, said Tax Collector Sherri Garton. In 2004, the year after the TLFC legislation had passed, the city sold all but 90 of 2,200 liens to outside investors.

Tax records show that the city continued to sell more than 90 percent of its annual liens until this year, when it was left with just under half. Garton said that could be related to the economic downturn, which has made borrowing money more difficult for investors.

Board member Angel Fuentes, who will leave his position as city council president to join the state Assembly in January, said he was most proud of the way the corporation had helped delinquent owners keep their properties. The board authorized more than 500 payment plans and lowered liens down to the appraised value of the property for about 200 of them.

"We have done a fantastic job in both languages trying to really educate the public about their responsibility, saying that we are here to help you so you don't have to lose your home," Fuentes said. "I intend for this to be a model for the state."

As a third-party lienholder, the TLFC can also allow owners to spread their payments over five years and grant installment plans to those who previously defaulted. City governments can only offer three-year installment plans, and owners don't get second chances if they miss payments.

Reiche said development agencies have also benefited from having the chance to purchase liens at a discount, not to mention all the properties that the corporation agreed to transfer to them at heavily subsidized prices.

The first batch of 124 properties, about 13 percent of the total, should be through the foreclosure process by the end of the year, Reiche said.

Not such a good deal

Heart of Camden is among the agencies that took advantage of the discounted sales to create a pipeline of properties. Executive Director Helene Pierson said she was fortunate to have $180,000 in grants to purchase 35 liens. In some cases, she said, auction prices were lower than what she paid to get property from private owners in the past.

Despite that perk, she said, "the process was slow, inefficient and painful."

The corporation didn't officially take over the city's liens until 2006, three years after it was created. The five-member board charged with overseeing the agency held its first meeting nearly a year later.

Pierson and other nonprofit leaders criticized the board for not holding regular quarterly meetings or posting minutes online. The board isn't mandated to have a certain number of sessions, but members can't authorize action without them. In four years, the board has met only five times.

That meant interested buyers had to wait about a year for sales to be authorized. Because the board ruled that every lien be posted at full value the first time it comes up for auction, buyers had to wait another year, or more, for discounts.

"It was made absolutely clear to us that this was about the dollar, not the redevelopment," Pierson said.

Delgado said it's easier and faster when nonprofits can work directly with the city to purchase a tax delinquent property. The corporation "just adds another layer" of complicated bureaucracy, he said.

He said he also didn't understand why the city would ever want to give up control of which liens were sold and to whom. "The city basically shut down a major portion of its ability to redevelop Camden."

The liens it transferred are critical to every neighborhood, "and they're just being sold on an auction basis to anyone," Delgado said. "Someone could buy that lien and sit on it for eternity."

He said some might argue the corporation was never set up to manage redevelopment, but with so many parcels, "you've got to think about that."

The deal to designate properties for redevelopment also isn't great as it sounds, Delgado said, because only 133, or 14 percent, are going to neighborhood groups. That amounts to a dozen or so for each community development corporation. The rest go to the city's redevelopment agency. It's now been four years since that agreement was made, Delgado said, and nonprofits have yet to get a single one of those parcels.

"We're still fighting the same battle," Delgado said.

Looking for change

Jud Weiksnar, a pastor at St. Anthony's of Padua in Cramer Hill, had hoped to get an abandoned house next to his parish school property for $1 in exchange for promising the city to tear it down. City officials regularly made deals like that in the '90s.

Instead, he paid $14,000 in May for the lien.

That was half price.

The $28,000 lien first came up for auction the year before, but Weiksnar said he simply couldn't afford that much money. Even the discount was a strain for church coffers, but waiting longer for a better deal meant more chances of children getting hurt, Weiksnar said.

"I'm just extremely frustrated by the whole thing," he said.

The state corporation seems to inhibit people from doing something constructive with abandoned properties, he said.

"I am sure there's a better way," he said. "If the state really wanted to make things move faster they would change things."

Delgado said he'd like to see the board work with nonprofits to identify groups of properties in certain areas that could be sold at super discounted rates with a legal agreement that redevelopment occur. "Some of these parcels you're just going to have to give away and the city's going to have to eat the back taxes," he said.

If the liens aren't selling even after they're lowered to the estimated value of the property, nonprofit leaders said the board should consider foreclosing. As a government agency, the TLFC can go through an expedited foreclosure process that takes about a year, while a private lienholder might wait more than double that time to get through the backlogged courts, Pierson said. So far, the TLFC hasn't done any foreclosures other than a few of properties designated for redevelopment agencies.

Treasury spokesman Tom Vincz said he didn't think the board was dragging its feet. The initial lien transfer took time because it was a complicated legal process, he said, but the board is moving quickly now.

Reiche said holding more sales would be tricky because investors need time to get their financing together. Foreclosing on liens that don't sell isn't practical either unless there's a realistic end goal for the property, he said. If there aren't buyers who are interested -- and able -- to do something with the land, the corporation gets stuck as the responsible owner. That includes paying taxes and upkeep. The TLFC is not designed to be a land bank, Reiche said.

Instead, the corporation has become a lien bank. It has no set timeframe for how long it should try to collect payment or try to sell a lien before foreclosing. Even the corporation itself has no end date, unlike the recovery law, which is set to expire in 2012.

Gov.-elect Chris Christie and the city's incoming mayor, Dana Redd, have both called for less state control. Whether that would include dismantling state entities such as the TLFC remains to be seen. Redd declined to comment, saying that she was still trying to gauge for herself if the agency had helped or hindered the city.

Pierson has already lobbied her to do away with the corporation.

City officials "should take what's left and match it up to the redevelopment plans and neighborhood plans," she said. "The city process before didn't work but the city of Camden isn't using all the tools available to move these properties. They need to relook at this whole process from a local level."

Pierson agreed that nonprofits and the city would be hard-pressed to immediately find funding to develop thousands of abandoned properties. But, she said, it would still be better to have possession of them "so when there is money available, you can move and you can move quickly."

Some grants are only available to agencies that already have control of the property they want to develop, she added.

While Pierson waits to see how the political changeover will affect her world, she might have at least one long-awaited distraction: The Star was among 809 properties that came up for reduced bids in November. The minimum bid was $83,073, well within her price range. She finds out if she won the bid in mid-January.

Because she knows the owner, Pierson said she could potentially begin construction right away under a lease agreement instead of having to wait for the official foreclosure.

Doyle said he can't think of anything more important to build than a gym.

"If we don't save youth, then we just build more jails," he said. Abandoned buildings are ugly realities, he said, "but the concept is beauty will save us. You've got to create beauty for children."