As Baltimore senator seeks to end water bill-related tax sales, new data highlight prevalent debt issues

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As Mayor Catherine Pugh’s administration seeks to alter a bill that would forever end Baltimore’s practice of selling homes’ water-bill debts, advocates have stumbled across data they say point to the city’s over-reliance on the tax sale process.

In a fiscal note for Sen. Mary Washington’s SB 96, the city said that as of January 23, “there are approximately 18,189 residential properties” with water and sewer debt of at least $750 outstanding for at least 270 days, or roughly nine months. The cumulative amount owed by those households: $61.6 million, the city said.

DPW said as recently as November that it has approximately 180,000 water and sewer customers in the city limits. That implies one in 10 Baltimore households has $750 or more in unpaid water bills, the threshold at which a property is eligible for tax sale, even as the city’s rates continue to rise. And while many of them are now shielded from tax sale thanks to a 2018 moratorium protecting homeowner-occupied properties, thousands of renters still face the risk that the city will sell the liens on their landlord’s property in the springtime, after which a new creditor can foreclose if the owner does not pay.

The nearly $62 million debt figure is double what DPW reported just 11 months ago. In its own February 2018 financial disclosure, DPW said cumulative water and sewer bill debt that’s roughly nine months past due totaled $30.85 million.

Advocates from the water-rights advocacy group Food and Water Watch Maryland, who flagged the data, argue DPW has become over-reliant on the tax sale process as a means of recouping revenue.

“The current system isn’t working. There are deep problems with DPW,” said Mary Grant, the organization’s Water for All campaign director. She added: “It seems like they’re abusing the tax sale process.… Tax sale is supposed to be the last resort.”

DPW spokesman Jeff Raymond told Baltimore Fishbowl Thursday that the 18,189-customer total is simply “a snapshot,” not a fixed, representative tally.

“Those numbers as to how many customers owe so much money change as people pay up and as others fall behind,” he said. And they often drop as people pay up come tax sale season in April, he said, when the city puts properties with outstanding liens up for sale to real estate investors.

Asked about the apparent spike in debt, Raymond didn’t have a clear explanation. “We recognize that some of our customers do have difficulty,” he said, pointing to DPW’s assistance options. Those include assistance for seniors, payment plans for low-income households and a hardship exemption from stormwater remediation and bay restoration fees. (In the fiscal policy note, the city did admit that even for households on payment plans, delinquency rates range between 50 and 60 percent annually.)

Raymond also pointed to Baltimore H20 Assists, a new offering that will cut bills by 43 percent for very low-income households that qualify and eliminate some other charges on their bills. Raymond said that should help “to proactively offer assistance to some of our most vulnerable customers.”

Councilman Bill Henry, who’s helped write legislation that would create an income-based water billing option for low-income customers—in line with what Philadelphia has introduced—said DPW’s rising debt figures “make the case that being able to put people’s houses in tax sale for water bills as a deterrent must not be working.”

“If the amount of the overall outstanding water bills increased by that much year to year, I would say it does make a strong case to support the concept that when people’s water bills become unaffordable because the rates have risen past their ability to pay, they basically stop paying.”

Councilman Zeke Cohen agreed, calling $62 million “an enormous amount of debt” that suggests current assistance isn’t enough. He worries whether that total is even accurate, given the city’s errorprone billing system that’s led to inaccurate charges for Cohen himself and many others around the city, some of which have wrongly put properties on the tax sale list.

“It’s really clear that in a system that has struggled with accuracy, no one should lose their home over a water bill,” the Southeast Baltimore councilman said. “What I see in that report is we have a great number of citizens who are struggling, and I believe that taking away their home will ultimately be more expensive for the city, for the taxpayer, and is also deeply immoral and wrong.”

Sen. Mary Washington (left) and advocates testify in favor of SB 96. Still via live stream from Senate Budget and Taxation Committee.

More than a dozen people testified at a Wednesday hearing in Annapolis in favor of Washington’s bill to end Baltimore’s use of water lien tax sales, including representatives from AARP, the Homeless Persons Representation Project and the Maryland Consumer Rights Coalition, among others.

“Tax sale is not and was never a system designed as a primary collection mechanism, but rather as a last resort for delinquent residents,” Washington, senator for the 43rd District, told the Senate Budget and Taxation Committee. She argued it’s become a “predatory practice,” with the average affected homeowner being a senior citizen who’s lived in their home for 22 years, and with a household income of $19,000. Seventy percent of customers whose homes go to tax sale are black or of color, 40 percent are disabled and 11 percent are veterans, Washington said.

She and others made the case that peer municipal utilities, such as the Washington Suburban Sanitary Commission and thousands of others across the country, don’t threaten customers with seizure and sale of their homes due to water bill debt. DPW also doesn’t threaten tax sale for homes in the surrounding counties served by Baltimore’s water and sewer system.

Pugh’s administration has proposed a handful of amendments to strip out protections for renters, more narrowly define churches and allow the city to continue combining a household’s debts to bring their property to tax sale (i.e. if they have only $5 in water bill debt, but $745 in overdue property taxes, meeting the $750 past-due threshold).

The reason: the city stands to lose out on millions in revenue. Baltimore already removed more than 3,500 homeowner-occupied properties from the tax sale list last year as a result of new protections for homeowners, at a cost of $5.7 million in potential revenue, the fiscal note on Washington’s bill said. This would protect thousands more homes and places of worship whose liens the city could sell off to recoup revenue.

“We ask that you recognize there is a balancing effect that must be met,” Pugh’s director of government relations, Karen Stokes, told the committee Wednesday.

DPW Director Rudy Chow joined her as the only other person to testify in support of the amendments. The city is making billions in underground infrastructure repairs to water and sewer lines as part of a federal consent decree, and needs bill payers’ money to fund it all–the same impetus for the city’s ongoing 10 percent annual water-rate hikes–Chow said. They also argue the changes could hurt the city’s bond ratings in the future.

But Baltimore City’s delegation in Annapolis has endorsed the bill without any amendments. And advocates, who testified before Stokes and Chow, argued that DPW’s and the mayor’s office’s concerns are overshadowed by harm done by a practice overwhelmingly affecting neighborhoods of color, and relying on a system that already can’t be trusted given its issues with billing errors–the subject of a 2018 city audit.

Molly Amster, director of Jews United for Justice’s Baltimore branch, and Belair-Edison resident Kimberly Armstrong offered themselves as exhibits A and B: both received erroneous water and sewer bills in the thousands, were unable to successfully resolve them with DPW and had their homes placed on the tax sale list as a result. Their mortgage lenders helped to rescue their homes, but have now raised monthly payments to cover additional calculated risk.

Renters don’t even have that option in case their landlord falls behind on water and sewer payments, argued Public Justice Center attorney Zafar Shah. Washington’s bill needs to ban all sales outright—not for just homeowners—to ensure equal treatment, he said. Otherwise, they may continue to be evicted or have their residences’ liens sold with as little as 30 days’ notice.

“This is the kind of disruption that this tax sale model, which is wholly unnecessary, causes to real people,” Shah said.

Del. Nick Mosby of District 40 has sponsored companion legislation in the House of Delegates. It’s due for a hearing next Tuesday.

This story has been corrected to reflect that the city sells the liens on a property, not the property itself, during the spring tax sale season.

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Ethan McLeod

Senior Editor at Baltimore Fishbowl
Ethan has been editing and reporting for Baltimore Fishbowl since fall of 2016. His previous stops include Fox 45, CQ Researcher and Connection Newspapers in Virginia. His freelance writing has been featured in CityLab, Slate, Baltimore City Paper, DCist and elsewhere.
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