More than 20,000 Baltimore property owners who have fallen behind on real estate taxes or services such as water bills must pay up by the end of the month or face possible foreclosure.
City officials plan at their annual tax sale next month to auction up to $70 million in liens to private investors, who can then collect the debts - plus thousands of dollars in fees and interest - or foreclose if they can't collect.
The liens are mostly for delinquent property taxes but also include municipal levies such as water and sewer billings, charges for sidewalk and alley repair, and fines for failing to clean up trash or other environmental hazards. About 37 percent of the liens don't contain any back taxes, an analysis by The Sun found.
City officials expect to collect about half the overdue bills by the deadline. That would make the number of properties included in the sale similar to or slightly higher than the 9,875 offered a year ago.
"We're encouraging them to satisfy their accounts so it doesn't go into the tax sale," said Stanley Milesky, chief of the city's Bureau of Treasury Management.
As it prepares for the tax sale, the city is also pressing a federal lawsuit that accuses Wells Fargo Bank, one of the nation's biggest mortgage lenders, of helping precipitate the city's foreclosure problems by steering black homebuyers into high-cost, subprime loans.
One advocate for the poor said that tax sales - especially over debts for essential services like water - compound the foreclosure problem and create "a state-sanctioned, high-yield investment product" for investors who buy the liens.
"Low-income citizens of Maryland who are caught up in this problem bear the worst consequences, because they really have little choice in how they're going to be able to pay back these investors," said Louise M. Carwell, senior attorney at Legal Aid Bureau Inc. in Baltimore. She said she would like to see the city keep all water bills and alley paving fees out of tax sales.
State Sen. George W. Della Jr., a Baltimore Democrat who pushed to change the tax sale system in the General Assembly, said he does not see parallels between the city's efforts to recoup these sorts of debts and the subprime lending tactics it is challenging in the court case against Wells Fargo.
"The subprime folks, I believe, knowingly lure people in with low interest rates and allow financing for people who maybe shouldn't have gotten it. They took advantage of people, not just here, but all over the country," he said.
"The city is providing water for everybody, and if you don't pay your bill, they're not getting paid."
There are more than $9.1 million worth of water bills due on 11,225 properties on the current tax-sale list. Some of the property owners also owe the city for other services. More than half the water charges are for less than $500, though a few dozen run into the thousands of dollars.
City officials have defended the practice of including overdue water bills in tax sales by saying that many residents would not pay their bills without the threat of losing their homes.
Buildings with tax liens as of April 3 ranged from vacant shells appraised at a few thousand dollars or less, to stately residences. There were also shuttered factories and other industrial sites, and a handful of apartment complexes, city records show.
Though they stretch across more than 250 census tracts, the properties tend to cluster in a few areas. In two neighborhoods, Broadway East and Belair-Edison, about 1,300 properties are subject to sale, records show.
The collection process angers Leola Myers, who has owned her Belair-Edison home since 1995 and is listed in city records as owing about $500 in overdue water bills and alley paving fees.
"I'm sick of the city's water bills," she said. "On top of that, they included alley paving. I didn't even ask for it to be done. I didn't ask for it, because I knew I couldn't afford to pay it. It's hard enough to pay the bills we have."
Myers said she is on permanent disability after being injured at her job as an operating room technician at Union Memorial Hospital in 1984. She said a friend recently showed her the newspaper listing of properties up for tax sale, which included her house. Her husband has been out of work after two employers shut down, she said.
She said she borrowed against the value of her disability payments to cover her property taxes, and would have had enough to cover the water bill if late fees hadn't been tacked on.
"I have to try to get the money up for April 28th or I'm going to lose my home, and I'm not going to lose my home over a $173 water bill," she said. "I don't know where I'm going to get the money."
Rather than try to collect back taxes and other debts on their own, many Maryland counties sell the right to collect them to investors in annual auctions. The process is intended to help find new owners for abandoned properties, and to help restore downtrodden neighborhoods.
Investors make money by charging property owners interest and fees that can amount to thousands of dollars. Typically, these lien buyers file lawsuits - thousands in Baltimore alone last year - to collect their debts, while adding legal fees and other charges on homeowners. Those who don't pay risk a court judgment that entitles the lien holder to seize their property.
Most taxing jurisdictions nationwide threaten homeowners with some sort of penalty, including foreclosure, if they don't pay their taxes. But Baltimore's policy of adding minor debts such as water bills and fees that many homeowners ignore - the $30 rental property registration, for example - has sparked criticism from advocates for the poor and some Maryland lawmakers.
Last year, The Sun found that at least 400 city homes were lost over debts other than property taxes during a three-year period.
A federal grand jury in Baltimore began investigating possible mail fraud and restraint-of-trade violations in tax-sale auctions in several Maryland counties last year, according to government documents. The Sun reported last year that three investment groups bought about two-thirds of the liens auctioned off in the city in 2006. The investor groups have denied any wrongdoing and said they are cooperating with the federal probe, whose current status is unclear.
Concern that homes could be seized over a paltry debt prompted the General Assembly to pass emergency legislation that increases the minimum debt that could trigger a tax sale from $100 to $250.
That affects about 10 percent of the city's properties in the tax sale.
The legislation also caps attorney fees at between $1,300 and $1,500, depending on the status of the case. And it requires lien buyers not only to notify the homeowner of the debt, but also to contact any party of interest, including the mortgage holder.
The new law follows a year of work by a task force, established by Baltimore Mayor Sheila Dixon, that made recommendations including setting a discounted water and sewer rate for low-income senior citizens, reducing the turn-off threshold for city water and sewer accounts from $500 to $250 and expanding the use of payment plans.
Gov. Martin O'Malley is set to sign the new law on April 24. It would apply to liens sold in tax sales starting this year.
"I think the new legislation should restore a sense of sanity back into the tax sale market," said Jay A. Dackman, an attorney who once was one of the most active in local tax sales but lobbied this year to have the system reformed. "The whole purpose of the legislation was to just stop the abuses. I'm happy about that."
Della said many of his colleagues initially wanted to get water and sewer bills out of Baltimore's tax sale. But they agreed to a compromise that raised the minimum amount triggering a lien for sale, because city officials argued that all water customers would share the tab for any bills that didn't get paid.