Posted on Mon, May. 09, 2005
New city tax collector stirs fuss
Consumer groups decry tactics of law firm
By EARNI YOUNG
younge@phillynews.com
PHILADELPHIA is loath to send owner-occupied homes, especially those belonging to the poor and elderly, to sheriff's sale for unpaid property taxes.
It just doesn't look good to kick Grandma to the curb.
But that compassionate strategy has left uncollected a whopping $253,248,741 - at a time when the city is in dire need of cash.
So the Street administration has decided to get tough with property-tax delinquents: It has hired Linebarger Goggan Blair & Sampson LLC, a Texas-based law firm, to go after the real-estate taxes that the city solicitor's office has been unable to collect.
"The city is serious about cracking down on delinquent taxpayers," said acting City Solicitor Romulo Diaz. "I don't want any lack of clarity on that."
After signing on with the city last October, Linebarger promptly fired off dunning letters to tens of thousands of delinquent taxpayers. The message: Pay up or the property will be sold at sheriff's sale.
Linebarger's scary letter had the desired effect. The firm's attorneys collected more than $8 million in back taxes in six months.
But the firm's tactics have won it few friends among consumer advocates and those who represent the poor.
Big monthly payments
They say Linebarger is being hard-hearted and unrealistic in its treatment of poor and elderly homeowners.
"I'm not saying that these people shouldn't pay their taxes, but should you be driven out of house and home? It's to no one's benefit to send a senior citizen to a homeless shelter," said Monty Wilson, an attorney with Community Legal Services of Philadelphia.
Until recently, Wilson claims, the law firm ignored repeated requests to negotiate affordable- payment agreements for low-income homeowners.
"Instead, they're told to file bankruptcy or take out a second mortgage to raise the money," Wilson said.
Others, like Cheryl Bryant, are offered payment plans that defy reason, he said.
Bryant agreed to pay Linebarger $400 a month for the next two years, even though she receives only $579 a month in disability.
Surprisingly, Bryant has managed to make four consecutive payments. Not surprisingly, her East Mount Airy home is without electricity right now.
Bryant, 50, is not a deadbeat. She inherited the house from her parents in 2000, along with a second mortgage.
On her limited income, Bryant had to choose between paying the mortgage and paying her taxes. She paid the mortgage. The city has turned Bryant's account over to Linebarger for collection of three years in back taxes.
"They told me I had to come up with $3,900, and after that I could make payment arrangements. I was devastated," Bryant said.
Afraid of becoming homeless, Bryant rashly agreed to the payments of $400 per month.
"I offered as much as I possibly could because they made me feel like if I didn't I would not be able to make any arrangement at all," Bryant said. "I didn't want them to turn me down."
Recently, Bryant and CLS attorney Wilson met with Linebarger's managing partner, Sharon Humble, and a representative from the city solicitor's office.
Humble agreed to negotiate more reasonable plan for Bryant on the spot. The law firm also promised to investigate whether Byrant's mortgage lender had withheld money escrowed for property taxes.
But Wilson and other consumer advocates are demanding fair treatment for more than just one delinquent taxpayer.
They want it for seniors such as Wayne Weaver, 73, who insists that Linebarger is dunning him for $2,500 in back taxes that he paid by money order many years ago.
"Luckily, I don't throw anything away and I have the receipts for the money orders," Weaver said. "They're going to try and take my house from me, but I don't owe them nothing."
And for single moms, including Alicia Porres, who is being dunned for a $9,800 tax bill largely accrued by her home's previous owner.
The house in Port Richmond had been vacant for 15 years when the former owner signed it over to Porres for $1 in 2004. Porres said she knew there were back taxes owed, but she didn't know how much. An unemployed mother of three, she was too desperate to examine the deal too closely.
Even after getting the letter from Linebarger, Porres naively believed they would make allowances because of her income is $575 a month. Instead Linebarger demanded Porres cough up $1,500 a month.
Porres refused and went to CLS for help in negotiating a payment with which she can live.
"I want to pay my taxes, but they have to get real," Porres said. "I have to feed my kids, too."
Hands tied by a contract
There are dozens if not hundreds of homeowners in the same fix, said John Dodds, executive director of the Pennsylvania Unemployment Project.
"We need this firm [Linebarger] to operate based on what people can do, not just what they can get," Dodds said. "We want them to step up and do a better job, and City Council has to step up, too."
He and other advocates recently met with Linebarger and city officials to demand more reasonable and specific rules for handling low-income homeowners.
Humble insisted that her firm is "firm but fair" in dealing with consumers. "I'm not aware of any other debt-collection law firm or agency that has meeting rooms set up specifically where taxpayers can come in and discuss their accounts without an appointment," he said.
Linebarger also opened a walk-in taxpayer-assistance center on the concourse level of 1600 JFK Boulevard, Humble said.
As for CLS' demands, Humble said Linebarger was willing to "do what it can within the confines of the law and the contract."
The firm's hands certainly are tied by its city contract, a copy of which was obtained by the Daily News.
That contract gives Linebarger the right only to negotiate two-year payment arrangements. Anything longer must go to the city solicitor's office. That leads to the big monthly payments.
And Linebarger can't waive many of the fees, penalties and interest that add to an unpaid tax bill.
In fact, the contract prohibits many of the changes consumer advocates would really like to see. They want taxpayers to make smaller payments, spread out over a longer time. They'd like to freeze interest and penalties as long as homeowners are paying something.
Ideally, they want Linebarger and the city to agree to waive half of the back tax bill when the homeowner pays off half of the taxes owed.
Diaz said he will meet with Humble and CLS to discuss their concerns.
"I totally agree that people who have a dispute with the amount should be heard," Diaz said. "I totally agree that we should be setting some realistic repayment agreements. We are not trying to set people up for failure."
However, the city also has to keep in mind its responsibility to other taxpayers who share in the burden of unpaid taxes, Diaz said.
Pursuing Philly's business
Linebarger's no-bid contract, with a compensation cap of $6 million, is up in October. It can be renewed twice more in one-year increments without Council approval.
Diaz said the law firm aggressively pursued the city's delinquent tax-collection business three years ago.
In that time, the law firm contributed $30,000 to Mayor Street's election campaigns.
At the same time Linebarger was pursuing Philadelphia's business, the firm's former managing partner, Juan Pena, was charged and convicted of bribing an Austin, Texas, councilman to get a debt-collection contract.
The law firm severed ties with Pena once the scandal broke. The firm reorganized and named Humble managing partner.
Diaz said the city was aware of Pena's problems, and was confident that Linebarger's current partners were not involved.
The deal Linebarger offered was too good to refuse. Previous collection firms demanded upwards of 20 percent of every dollar - taxes, interest, penalties - recouped. Linebarger agreed to accept the attorney fee added to collection accounts as its only compensation. That fee is 18 percent.
The deal means 100 percent of any taxes and interest collected flow back to the city. "We think we did something very good frankly for the city and the taxpayers," Diaz said.
Dodds doesn't think so.
It's only a matter of time before a slew of owner-occupied properties begin to show up at the tax sales, Dodds said.
"Displacing entire families and increasing the number of homeless in Philadelphia is not in the city's best interest," he said.