City Hall’s belated effort to collect $22 million in unpaid Housing Court fines is coming up empty.
A dry run by a collections agency hired by the city earlier this year that sought about $430,000 from deadbeat court defendants yielded only $59 in fine payments, according to City Comptroller Mark Schroeder.
That experience prompted city officials to scale back their expectations of what was collectable from the $22 million in unpaid fines that have accumulated since Mayor Byron Brown took office in 2006. Rather than $1 million, Schroeder said administration officials believe only $40,000 to $80,000 is collectable.
“In terms of a ratio vs. $22 million, that’s pretty bad,” Schroeder said.
The court and city appear to be having more success obtaining payment from those fined in the past year, however. Fines payments to the court are on target to double this year.
Court records don’t specify what share of the payments were made by defendants fined by the court in the past year. But given the city’s failed experiment in collecting the $430,000 in long overdue fines, it’s likely that most of what the court has collected the past year has come from those recently fined.
That would mean collections, which had been bringing in less than a nickel on the dollar, are now probably in the 25 to 35 cent range. While that represents a big increase, it means that court defendants found guilty of not fixing their property are still failing to pay at least two-thirds of their fines.
Housing Court Judge Patrick Carney praised city officials for their efforts the past year, which have included hiring a collection agency, improving their internal record keeping and taking greater advantage of the legal tools it has at its disposal to obtain payment from recalcitrant property owners.
“I think they’re doing an excellent job,” Carney said of city officials.
Schroeder, while noting progress, said the city and court hasn’t done enough.
“We should be further down the road,” he said.
And the Brown administration’s take? Mike DeGeorge, their spokesman, ignored several interview requests from Investigative Post for this story.
While collections are up, Investigative Post found Carney is imposing fewer and fewer fines. He fined only 13 defendants a total of $44,318 during the first six months of this year, according to court records. Carney fined 58 defendants during the same period a year ago.
Fines have steadily decreased in the three years since Carney succeeded Henry Nowak on the Housing Court bench. As recently as 2011, fines topped $1 million for the year; in 2013 they’re on track to total $90,000 to $125,000.
City Hall turned its attention to unpaid Housing Court fines after an Investigative Post report last July that determined the Brown administration wasn’t even trying to collect from scofflaws.
The reasons were many, including disjointed, incomplete record-keeping and an ignorance on the part of City Treasurer Mike Seaman that his office had the power to collect the fines. As a result, only $455,000 to $787,000 of the more than $22 million in fines imposed from 2006 through the end of 2011 were paid. Not one of the 22 defendants fined at least $100,000 paid up.
Numerous officials said many of the fines were difficult to collect because properties were owned by out-of-town corporations or limited liability corporations that had few, if any assets to go after.
But Investigative Post determined that many property owners with local roots also failed to pay their fines.
City and court officials began to meet after Investigative Post reported its findings. Since then, the city has put in place a more efficient system to collect from defendants who fail to pay the court within 30 days of being penalized. A collections agency is on the job and procedures have been put in place by the law department to use the legal leverage provided by the filing of judgments for failure to pay.
Carney said the measures are “way more than adequate” in dealing with property owners based in Western New York. The trouble is, he said a majority of defendants are based out of town or operate behind corporate facades. They pose a “problem without a solution,” the judge said.
Schroeder said the city and Housing Court have not done enough to improve their record keeping to track deadbeat property owners.
The city, court, and Erie County Clerk all maintain records necessary to track the imposition and payment of Housing Court fines, but Investigative Post found last year that the records are not coordinated. Over the past year, the city and court have started to keep some common data, but it’s mostly done by hand.
“Old fashioned paper,” is the way Carney put it. “Not optimal in this day and age.”
Schroeder doesn’t buy Carney’s contention that Housing Court records can’t be accessed via computer to build an automated database.
“The bottom line is you can’t continue to do this in a manual way,” the comptroller said. “There needs to be automation.”
Payments up, but still modest
Despite improvements to the system, the city has had little success the past year getting long-term deadbeats to pay.
As a trial run, the collections agency hired by the city earlier this year targeted scofflaws who owed some $430,000. The effort netted only $59, Schroeder said.
Hence, the revised calculation that only $40,000 to $80,000 of the $22 million is collectable.
Why can’t the city collect more, beyond the obvious reasons that some of the fines date back six years and much of the paperwork is in disarray?
“A vast majority is what they call in the collection industry ‘bad paper,’” Carney said. “It’s a debt against a defunct corporation, it’s a debt against an LLC, it’s a debt against a bank that might have loaned through one of the federal programs, meaning they’re exempt from collections.”
The city does have recourse in cases where corporate fronts own multiple properties that liens can be placed on. But in many instances, the corporation or LLC has no other assets except the property in question, or their officers are located out of town, which makes it difficult to compel to appear in court because defendants can’t be extradited.
As a result, solutions to dealing with this class of property owners have proven “extremely elusive,” Carney said.
Carney can, however, issue warrants to compel local scofflaws to appear in court and it’s unclear whether he is being aggressive as he can be with that power. It’s also unclear whether the city is doing all it can to recoup payments through aggressive use of liens and judgments.
Regardless, fine collections are increasing. The court reports payments of $44,318 the first six months of this year, close to the $46,022 paid all of last year.
Nevertheless, Investigative Post calculated that payments over the past 12 months account for only 35 percent of the penalties assessed by the court during that period. While that’s a major improvement over the nickel on the dollar collections of the past, it means most negligent property owners are still defying the courts, not once but twice. First by not making required repairs and then by not paying their fines.
Court issuing far fewer fines
Carney operates much differently than Nowak, his predecessor, who routinely issued big fines in an effort to compel defendants to appear in court and commit to making repairs. Fines during Nowak’s tenure on the bench ranged from $2.2 million to $7.8 million annually.
Nowak’s strategy was undermined by the city’s failure to collect the fines, although some critics have subsequently faulted him for imposing fees that were difficult to collect.
Fines in 2010, Nowak’s last year in Housing Court, totalled $4.2 million.
Carney, in his first year on the bench in 2011, imposed fines worth almost $1.1 million.
His fine total last year was $355,956.
Court records shows that Carney through the first six months of this year imposed only 13 fines worth a total of $44,318. Prorated, that works out to a little over $88,000 for the year, but Carney said that number will increase.
“The fines this year will be about the same as last year,” he said. “Most of our fines come in the fall and winter. We give homeowners, corporations, people the summertime to get their work done.”
An Investigative Post analysis found, however, that Carney did not impose significantly more fines the second half of last year. If he holds to his pattern of last year, his estimated fines for 2013 will be about $125,000.
The judge said he doesn’t see the point to throwing the book at most defendants.
“I have found that levying excessive fines simply overburdens, make it more difficult for the city to collect,” he said.