Syracuse seeks legal path to resume seizing properties for back taxes

Syracuse, N.Y. — Syracuse may start seizing tax-delinquent properties again following a seven-month pause caused by a U.S. Supreme Court ruling last spring.

The Syracuse Common Council is considering a local law amending its property tax foreclosure process to comply with a high court decision in a lawsuit filed by a Minnesota condo owner. The owner lost her home to a county over $15,000 in tax debt, interest and penalties. The county sold it for $40,000 and the woman sued, saying she was owed money from the sale. The unanimous May 25 decision said the U.S. Constitution’s Fifth Amendment gives the property owner rights to the proceeds in excess of the tax-related debt.

The ruling affected property tax foreclosures in 10 states, including New York, that have tax foreclosure laws similar to Minnesota’s. The city of Syracuse has its own tax foreclosure law based on state law that it’s been using since 2013. The city was foreclosing on tax-delinquent parcels and transferring them to the Greater Syracuse Land Bank, a public authority that then works to sell the acquired properties to responsible owners.

City officials said the arrangement with the land bank has been effective at dealing with problem properties and at getting owners to pay their taxes. Through Dec. 20, the land bank had acquired more than 2,100 properties and sold more than 1,300 during its first decade operating.

But the rate at which the city completed foreclosures and transferred sites to the land bank dropped considerably in 2023 because of the Supreme Court ruling, with just 24 completed city foreclosures, by far the lowest total since the land bank started. The next lowest total was 48 during 2020, when the COVID-19 pandemic started. The city completed 107 in 2022.

The pause has also hurt the city’s efforts to get property owners who fall behind on taxes to pay back some or all of their debts before a seizure is finalized, said Michelle Sczpanski, deputy commissioner of neighborhood development.

City officials begin the tax foreclosure process when a property owner falls two years behind on taxes with a series of notices and outreach efforts. They also attempt to make debtors aware of foreclosure avoidance programs that can help them through financial challenges. Those efforts continue for a year or more before the property is actually seized.

Prior to the Supreme Court ruling pause, Sczpanski said, about 50% of property owners would begin to pay back taxes. In the past year, that has dropped to 25%.

“If there is not additional escalated action being taken, people are not going to pay or redeem even though we have the tools and the programs available to them,” she said.

In order to resume tax foreclosures in 2024, city officials have crafted a proposed local law that would establish a process for property owners to recover equity left over after tax debt and other liens are satisfied.

At least 30 days before properties are seized, owners would receive an additional notice giving them 30 days to file a claim for surplus equity on the house if they don’t pay the back taxes. If a claim is filed on time, the land bank would have an independent appraisal performed to determine fair market value of the seized property, and then hold a proceeding overseen by an independent hearing officer to determine what is owed to the owner after debts are satisfied.

The land bank would initially pay any surplus money owed to the property owner, and then get reimbursed by the city. Officials estimate the new process of paying out surplus equity would cost about $300,000 per year, but they stressed that the number is hard to forecast.

During a committee meeting Jan. 4 to discuss the proposal, some city councilors said they were nervous about the unknown cost.

“I want to be more clear of exactly how this going to pan out,” Councilor Rasheada Caldwell said. “We’re approving stuff before we know; that’s typically not how we do it here. ... I’m trying to see how this makes sense.”

Corporation Counsel Susan Katzoff, who heads the city law department that crafted the proposal, said she understood that concern, but emphasized that the city’s options are limited by what the Supreme Court decided.

“That is the reality of the choice you’re making,” Katzoff said. “Either make the choice that you’re never going to foreclose on tax-delinquent properties or we need to find a path forward.”

Common Councilor Pat Hogan, who also chairs the land bank board, supports the law, saying the pause in foreclosure efforts has hurt the city’s neighborhood revitalization efforts.

“No tax-delinquent properties, no abandoned houses, nothing that affects the stability of our neighborhoods has moved forward at all because of this ruling,” he said.

The proposed law that would allow tax foreclosures in Syracuse to resume could be voted on as early as the council’s Jan. 22 meeting.

City reporter Jeremy Boyer can be reached at jboyer@syracuse.com, (315) 657-5673, Twitter or Facebook.