Baltimore will remove about 2,500 owner-occupied homes from the city’s annual tax sale — withdrawing them from the properties with liens that were slated to go to auction this month due to unpaid taxes and fees.
The decision, announced Monday by Democratic Mayor Brandon Scott, came amid mounting pressure from advocates to cancel the May 17 sale or remove homeowners from the process amid an economic crisis created by measures to control the coronavirus pandemic.
The city schedules a tax lien certificate sale each May to collect on past-due property taxes or other delinquent charges. Investors purchase the liens from the city during an online auction. Those investors can then collect the debts, with interest. If they’re not paid, the buyers eventually could foreclose on the properties.
Before Monday’s announcement, about 14,000 properties — commercial sites, as well as rental homes and those occupied by their owners — were scheduled for the tax sale. Properties in Maryland go to tax sale if they owe more than $750 in back taxes.
Flanked by dozens of city officials during a new conference, Scott said he remains committed to protecting homeowners during the pandemic.
“This marks a historic shift in Baltimore’s thinking around the tax sale, and it’s only the first step my administration will be taking regarding the tax sale,” Scott said.
The 2,500 properties withdrawn from the sale represent the most vulnerable owner-occupied properties, city officials said, and ones that were due to be auctioned at a tax sale for the first time. They account about 18% of the properties that were on the tax sale list.
Scott also pledged Monday to provide assistance to other homeowners facing tax lien sales. The Finance Department will assign three full-time employees to assist homeowners who call a help line at 410-396-3556.
The move will create a budget hole for the city, which already has seen revenues sapped by the pandemic and incurred millions of dollars in new expenses. Baltimore typically receives about $20 million from a tax sale. About $12 million to $15 million was expected to be realized this year, a projection based on last year’s sale amid the pandemic.
The removal of a portion of the owner-occupied properties will cost the city $6 million to $9 million in revenue, said Daniel Ramos, Baltimore’s deputy city administrator. Officials are not sure how they will make up that difference, which will be added to a deficit already expected for the 2021 fiscal year that ends June 30.
Ramos said the city is exploring ways to use some of the $670 million allotted to Baltimore from the federal American Rescue Plan, although the funds cannot be used to backfill for tax credits, reductions in rates, rebates or major changes in policy or law. Ernst & Young, an accounting group hired by the city to assist with managing its federal assistance during the pandemic, is exploring the question with federal officials, Ramos said.
The city also would have the option of drawing additional money from its rainy day fund, a move that’s already likely to be necessary to balance the 2021 budget in June. Officials used $8 million from the fund to close out 2020.
As of February, Baltimore had a $59 million deficit for 2021, although that included funds city officials hope to recoup from the Federal Emergency Management Agency for COVID-19 expenses.
Critics of the tax sale argue the process is predatory. During a March rally in front of City Hall, advocates for canceling the sale said elderly homeowners, in particular, fell behind during the pandemic and can’t pay lump sum bills because of medical costs. Longtime homeowners are more likely to have paid off their mortgages, and therefore no longer pay property taxes monthly via an escrow account. Such older homeowners can face large tax bills.
“It’s not that people don’t want to pay. It is that they haven’t been able to pay,” Democratic Councilwoman Odette Ramos said at the rally. “We have to work with our homeowners.”
She and nine of her 14 fellow council members signed a letter earlier this year to Scott and Finance Director Henry Raymond urging them to delay the sale or, as a compromise, remove homeowners’ properties from the auction.
Then-Mayor Bernard C. “Jack” Young, a Democrat, delayed the 2020 tax sale due to the pandemic, but it ultimately proceeded last July.
Daniel Ramos said the option of delaying the sale this year “didn’t meet the mayor’s commitment to make sure no one lost their home from the tax sale.”
Scott pledged to protect homeowners in his State of the City address in March.
Odette Ramos, who represents North Baltimore, said she was “pleased with the level of commitment the administration has shown on this issue.” The councilwoman said there will be legislative reforms needed at the state or local level to further reform the process, but she called Scott’s decision a “great first step.”
“I think that their solution gets to just about everybody,” she said. “I’m really thrilled that they took this issue as seriously as many of us have for a very long time.”
Some advocates, however, felt the mayor did not go far enough. The S.O.S. Fund, a collaboration of several groups that have been assisting homeowners who are headed to tax sale, issued a statement Monday calling Scott’s plan a “first step” that “doesn’t fully meet the mark.”
“The annual tax sale is a practice rooted in institutional racism that continues to destabilize homeownership in the city, displace people from their homes, create more vacancy and further strip Black Baltimoreans of their wealth,” the group said. “Solely removing new homeowners from the city’s annual auction does not fully address the deeply harmful and multigenerational impact of the tax sale on Baltimore City’s most precious homeowners.”
All owner-occupied homes, not just those experiencing tax sale for the first time, should be removed from the sale, the group stated.
In 2019, the General Assembly passed legislation barring the city from sending homes to tax sale based solely upon delinquent water bills. Baltimore’s water billing system has been fraught with problems, including numerous instances of overbilling.
Last year, Democratic Councilwoman Danielle McCray sponsored legislation to keep the city from putting homes owned by people who are elderly, have low incomes or are disabled in the tax sale. That bill, which was signed into law by Young, will become effective July 1 with the new fiscal year.
McCray said Monday she was pleased with Scott’s move to remove homeowners from the sale.
“I’m confident the mayor’s tax sale plan will have a positive impact on our residents and reduce the financial burden that many of them face, especially now due to the pandemic,” she said.
McCray said she plans to keep pushing legislation to further reform the sale.
“We can’t weather the COVID-19 storm and recovery using the same old tactics,” she said.
Democratic Comptroller Bill Henry said in a statement he was pleased to see the mayor removing properties from the tax sale, but he encouraged Scott to “face the reality that we will never be recouping some of these taxes and fees.”
After the 2020 tax sale, Baltimore held 1,352 lien certificates, totaling over $66 million in liens, Henry noted. When liens are not purchased at a tax sale, they become property of the city.
“We should explore every avenue to get these liens off the books entirely and, if possible, lean on the American Rescue Plan for support,” Henry said.