Ordinance Committee Holds Tax Sale Update Till Oct. 20

WARWICK, RI — The Warwick City Council’s Ordinance Committee held Mayor Picozzi’s proposed re-write of the city’s tax sale ordinance Monday, giving the administration till Oct. 20 to address concerns raised by residents and the Warwick Land Trust.

Picozzi’s Chief of Staff Bill Facente – “The administration is asking to clean up Chapter 2-14: “Sale of tax title and treasurer’s auction property by the city.” he said to better synch with state law and also the recent U.S. Supreme Court ruling, Tyler v. Hennepin County, Minnesota that state laws allowing municipalities to retain equity from a foreclosed property, in excess of any taxes and fees owed by a property owner, were unconstitutional under the Takings Clause of the Fifth Amendment of the U.S. Constitution.

The ruling prevents municipalities, including Warwick, from retaining the full value of properties sold at tax sale once the proceeds have been used to remedy delinquent taxes, limiting the revenue generated by such sales. The portion of Chapter 2-14 that appears primarily affected by the Supreme Court ruling is Section H, “In adopting this section, the city council wishes to express its desire and intent that the funds realized through this procedure be allocated and budgeted to pay the costs and to sustain the procedure for selling tax title land as open space,” as well as portions referring to an auction process to award sale to the highest bidder above the amount determined to remedy delinquent taxes.

“Currently as it’s (Chapter 2-14) written,  the administration believes it’s in violation of state law, and the solicitor is here to talk about it as well,” Facente said.

He noted there are about 1,100 tax title properties in the City of Warwick, in various statuses, where either the city or a private entity possesses the tax title. “We’re looking to clean up the list to allow for the transfer of these tax title properties to become viable, developable parcels instead of sitting in perpetuity, and not being able to maximize the tax revenue from those properties.

Facente said the proposal would also put it in line with state law RI Gen. Law 44-9-18, which states, “The treasurer of any city or town holding a tax title, upon payment to the city or town of a sum not less or more than the amount necessary for redemption, may assign and transfer the tax title to any person, and may execute and deliver on behalf of the city or town any instrument necessary for this purpose.

Council members and residents had a number of notes on the proposed changes, which do set the tax sale price to “no more or less than” the amount required to clear the taxes owed, but eliminate much of the other existing language, including mandates to alert abutters and council members in the ward.

Councilman Jeremy Rix  said in the first page, which reads, ‘In the event that more than a single person seeks the tax title of a single parcel, then the tax title should be assigned to the person who first tenders the redemption price to the city and signs the above-referenced form.”

“I do have concern about that language,” Rix said, saying he would prefer if we were able to make an amendment to that language, so that, on paper, this doesn’t look like a Best Buy on Black Friday situation.”

Facente agreed, proposing to eliminate that line and set a deadline for individuals to put in a bid, which would enter them in a lottery.

“We’ll come up with something that’s fair and equitable to everyone,” Facente said.

Rix also suggested a provision to make sure that before tax title is put up to see if the city has an interest there in conservation of the land.

Facente – To do that the city would have to foreclose the right of redemption in Superior Court.  But admin does review to see if property would satisfy its other goals. “That process is available today and would be after this amendment”

Rix said his concern is more a matter of equity in providing the opportunity. “It is a different kind of issue,” which a lottery would satisfy.  Otherwise the city could have multiple properties going to a single entity.

Councilman Ed Ladouceur was skeptical of how much power the ordinance put in the hands of the City Treasurer. “I have a problem with that,” he said.

Facente said that usually with tax sales for delinquent taxes, the person buying has the ability to exercise right of redemption and take property within one year. But in other cases, no one bids on it. So, he said, the administration wants to be able to assign that tax title to someone else, who has the responsibility of exercising right of redemption.

Muto said the new ordinance appears to shift the onus or create a shift in power, the decision making, from the City Council to the Administration.

“I can’t see state law or the Supreme Court saying that hey, it goes to the mayor instead of the City Council,” Muto said, adding later, “I am totally against this.”

“I will put together a secondary memo that will address this prior to this coming out in October,” Facente said.

Muto said that while he appreciated the first memo the administration had sent about the proposal, it arrived too late. “Having this land on our desks and our emails four hours before this council meeting is totally unacceptable.”

City Council Solicitor David Walsh apologized for that timing, noting he had thought the council had been notified earlier.

Muto replied that, nonetheless, that timing meant that in his opinion, the matter should be held for further notice.

Councilman Vinny Gebhart  asked if the city faced any risk on pass tax sales due to the Supreme Court ruling. Facente said he is reasonably sure the city is not at risk.

Wednesday morning, Rix said that he and other Council members could not discuss the content of the memo.

“It’s an attorney-client privileged memo so I am not allowed to talk about what is in the memo,” Rix wrote in response to questions about the document.

Frank Shuster spoke, saying the new ordinance takes away notice to abutters and to the Council member in that ward when the tax title is to be sold, as well as notices to the Land Trust and also takes away the power of the City Council to approve sales of tax title.

“None of those things are prohibited by state or federal law. And the answer that the administration has given is that they will come up with a fair process for transferring tax titles. Well, we have an ordinance right now that has a pretty good process. You notify the land owners who are adjacent, you notify the city councilman from the ward, you notify the land trust and you bring it before the City Council.

So I appreciate the need to make the adjustment for the purchase price, of the tax title, but we have a pretty robust statute that covers all the rest. And I kind of like that better than ‘just trust the administration to do it right,’ ” Shuster said.

Shuster said that since so many properties have been tied up in tax sale red tape, many homeowners have begun using such abutting properties. The new ordinance would set up a situation where those properties would be sold without them knowing. In that scenario, the new owners could surprise the abutters, telling them to move off the newly acquired property. That would create a lot of ill will within the city, he said. He also suggested the resolution be held for further study and perhaps have the 1,100 lots sorted by what the administration thinks is in the best interests of  the city to do with them.

Jane Austin, chair of the Warwick Land Trust, also spoke against the proposal, and suggested holding it as well.

“By and large, the value of these properties doesn’t take into consideration the natural resource value, the hazard mitigation value, and potentially, are they currently a neighborhood amenity, is there development potential, if this is developed, is that going to create new obligations on the city, or infrastructure requirements.” Austin also suggested an analysis and basic inventory of the properties in terms of the additional benefits they’re providing to the community.

In an email to the Council, Michael Zarum also opposed the proposal, listing several points against it:

• Removes current layers of transparency to the public
• Removes authorities of council
• Removes current review process participants and stakeholders involved in the process
• Removes current public notices and legal processes designed to protect the public and
  Rights of individual land owners.

Further, he wrote, “PCO 3-25 may promote illegal transfer of excess equity from land owners to the City of Warwick or Others (violating Tyler v. Hennepin County).  Council should instead be passing a Resolution to the RI General Assembly for legislation, where equity in real property in excess of taxes and fees due, remains and transfers back to the pre-tax sale owner subsequent to a tax sale, else the city may be unduly enriching itself or others by excessively taking landowners equity,” Zarum wrote.

Instead, Zarum recommended an ordinance recently passes in Massachusetts that he said remedied the conflict with the new ruling.

Facente suggested continuing the matter until Oct. 20, and vowed to use the time to take all the suggestions into account.

Rix noted that although he’d been on the Council for nine years, he had just with this issue learned he was supposed to be notified of tax sales, and has never received such a notice.

The Ordinance Committee unanimously voted to hold the resolution until Oct. 20.