Urges use of American Rescue Plan Funds to address arbitrary 18% interest penalty

Erie County, NY- Erie County Clerk Michael P. Kearns and the Western New York Law Center released a report produced by the Erie County Clerk’s Zombies Task Force revealing $112 million in delinquent property taxes on thousands of properties, both residential and commercial, that each owe $500 or more throughout Erie County.

The Erie County Clerk’s ZOMBIE Initiative Tax Delinquency Report was created after several visits with a number of municipalities discussing how the Initiative could assist in addressing Zombie properties. A clear pattern emerged that while many municipalities faced issues around vacant homes with mortgages against them, often referred to as a Zombie Properties, many more were facing issues with vacant tax delinquent properties without mortgages. These properties have been sitting vacant and tax delinquent for several years without any maintenance, other than what is provided by the municipalities out of necessity.

“Zombie properties are a blight on communities; this report hopes to shed light on an emerging issue we refer to as ‘Tax Zombies’,” said Erie County Clerk Michael P. Kearns. “There are currently 13,262 properties throughout Erie County that are delinquent on their property taxes and our report provides common sense recommendations to both address current Tax Zombies and prevent future ones.”

While not all tax delinquent properties are vacant Tax Zombies, they all have the potential to become one. When a property owner in Erie County falls behind on their taxes, they begin to accrue interest on their back taxes. The Erie County Tax Act allows the County to charge an excessive 18% penalty to property owners that are delinquent on their taxes, a rate that was established in the early 1980s when prime interest rates ranged between 10% and 20%. This high interest rate, combined with the practice described above of only foreclosing on a certain number of properties every year, leads homeowners to fall severely behind and lose much of the equity they've gained over the years.

This can also drive disinvestment from a property because a property owner is often hesitant to invest in a property they may lose at any time to a tax foreclosure. If the property becomes too dilapidated to continue to occupy, this can lead to a Tax Zombie or, if the homeowner passes away and the family is unaware of their rights regarding the property, this can lead to a Tax Zombie. There are many scenarios that can lead to a Tax Zombie. However, many of them are exacerbated or accelerated by the excessive interest rates charged to tax delinquent property owners..

"Tax delinquency and high interest rates on back taxes have major long-term impacts on neighborhood stability. By addressing current tax delinquencies, we can help prevent families from losing their homes while simultaneously prevent future vacant Tax Zombies,” said Kate Lockhart, Vacant and Abandoned Property Program Director, Western New York Law Center. “In addition, prioritizing vacant properties in the tax auction can help address the need for additional housing in Western New York and eliminate blight in our communities."  

The Erie County Clerk’s Zombies Task Force is currently collecting information from municipalities on Tax Zombies. While the data in this report is about tax delinquency overall, it is important to know that the majority of these properties are occupied and it is imperative to find a solution to the delinquency in order to keep the homeowner from losing their property to a tax foreclosure.

“Everyone needs to pay their taxes,” stated Kearns. “Our recommendations are not absolving homeowners from paying property taxes, it starts with lowering the arbitrary 18% interest penalty in an effort to address current Tax Zombies and help homeowners get out from the financial avalanche that is burying them.  It is time for Erie County to create tax policies that are sustainable, including negotiating payment plans in an effort to prevent the foreclosure process.”

The recommendations by Erie County Clerk Kearns and his initiative are split into two categories. The first category addresses current Tax Zombies: replicate the expeditated tax foreclosure process for vacant properties in the New York State Tax Act and Erie County law, allowing for a tax foreclosure on a vacant property after one year of delinquent taxes instead of two; hold a special auction for vacant tax delinquent properties, allow municipalities to submit lists of properties they've verified as vacant to be put in this auction; and, utilize Federal Relief Plan funds to address vacant tax foreclosure eligible properties.

The second category seeks to prevent future Tax Zombies: Lower the interest rate on delinquent occupied property taxes; expand payment plans to homeowners who are delinquent on property taxes and expand outreach and education about foreclosure prevention; utilize American Rescue Plan funds to create a local fund to assist homeowner with COVID hardships to preserve homeownership.

To obtain a copy of the Erie County Clerk’s ZOMBIE Initiative Tax Delinquency Report, go to erie.gov/clerk/TaxDeliquencyReport or call the Erie County Clerk’s Office at 716-858-8864.