Xspand deal needs to be scrutinized…

UPDATE…Pundito informed me…this was passed yesterday 12-3…I am dollar short and a day late or something like that…nice….

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A couple of days ago Buffalo Pundit wrote blog piece critcizing PUSH Buffalo for running a some opposition against Erie county’s plan to enter a deal with Xspand to collect on tax liens.

BP wrote his screed after he received this from PUSH

Hello friends:

As many of you know, Joel Giambra and County Comptroller Mark Poloncarz want Erie County to sell its tax liens in bulk to a private company so they don’t have to collect the debt themselves and get a whole lot of cash up front to balance the budget. Sounds good, right? Well maybe not.

I urge you to contact your county legislator to make sure all of Erie County does not get on board a train wreck. When you call demand:

– That the County Legislature have the power to review, amend, and approve the contract
– That your legislator learn from years of bad policy and act as a voice of reason against shortsighted
– That county government open a public conversation about regional development

Three and a half years ago the City of Buffalo was in the same place. Selling 1,500 liens to a state agency with its financial back against the wall has proved to be a huge blunder and has hindered redevelopment in the city since. What’s been left in the wake of that deal is a spiral of abandonment and vacancy in some of the most distressed parts of the city and a hostage situation for the parcels that have significant development potential.

And while the County seems to be getting a better shake from the municipal debt collector Xspand, the volume of liens is staggering — 30,000 county wide. What’s worse, the deal on the table is simply a yes/no vote to give Giambra the ability to negotiate the contract without any process for amendment by your elected representative. With less than a third of those liens are in the city, this could spell a development nightmare for Erie County. Regional planning groups have concerns with the proposed deal and so should we.

From BP’s post…

What PUSH is doing (and Legislator Maria Whyte is lobbying along the same lines) is comparing apples with anvils.

They are trying to compare the county’s deal with a private entity – Xpand – with the city’s deal with MBBA, which you don’t have to go far to learn is a pretty lame deal, in retrospect. When the MBBA – a state agency – is stuck with a house that isn’t worth the amount of the lien, that agency has no resources to keep up the property or otherwise prevent the blight that has occurred.

By contrast, Xpand is a private company that isn’t generally in the business of giving money away. Xpand would buy the county’s tax liens for 105% of the amount, and keeps the interest and late fees. Because it’s a private entity, it has a huge incentive to actually pursue the money. MBBA has no such incentive; it exists tomorrow whether it collects a dime or not.

I am glad Eric Walker of PUSH Buffalo took the time to respond via Buffalo Punditio’s blog comments…here is an excerpt…

I’m not screaming for the train to stop on this sale and neither is Legislator Maria Whyte to my knowledge. What I am calling for is to make sure that the legislature exercise some power in getting the most favorable terms for all of Erie County before a contract gets negotiated without their (and by definition of representation your) say on it – simple.

You misinterpret this notice as direct opposition to the proposed tax sale when it is simply a call to have a rationale conversation about what we don’t want to happen at the county level based on what we know has happened on a much smaller scale at the city level with disastrous consequences and a poor remedy.

The larger discussion about how municipalities collect their delinquent taxes and how these strategies affect long term development is at the heart of my original email.

We could debate the issue of public vs. private, but that is not the issue at hand. In fact, MBBA, the state agency responsible for over a thousand homes in the city, actually hired a private firm just like Xspand called JER revenue services, to collect the liens it purchased from the city – In all likelihood thinking that a private company could do it better. While the hope is that what we both get out of the deal, a balanced budget for Erie County and successful collections for Xspand, we should not blindly assume that profit incentive will translate into collections.

30,000 properties are an awful lot of properties.

I can see where Giambra or Poloncarz and even Buffalo Pundito look at the situation as a no-can-lose proposition for a cash strapped county, but I share in Mr. Walker’s concerns in entering the deal with Xspand without really having any type of public conversation on the issue.  Considering what happened in Buffalo with MBBA, it just seems practical.

More from Mr. Walker…

To this very moment, the conversation has revolved almost entirely around how this deal is better than the one we had as opposed to critically questioning if this is the best deal for the long term stability of the county and the region. That goes far beyond an accountant’s balance sheet.

And..

The resolution being voted on has several glaring red flags in it that should make any one who lives in this county cringe at the thought of its passage as is. There are some striking similarities between this proposal and what happened with MBBA. For example:
– It is merely a vote to authorize Joel Giambra to enter into contract negotiations with Xpand and has no language to insist on things like performance evaluations, methods for lien buybacks if the county decides it wants to maintain control of the property, or any sort of nullification if it becomes clear that Xpand can’t do the job.
-The liens being purchased from the county are its worst, most uncollectible liens.
-The blinding lure of cash upfront and a balanced budget has drowned any consideration by local electeds on the possible pitfalls to the sale of tax liens as a matter of public policy.

Those are enough red flags for me…

Don’t allow this go through without any debate…contact your legislator…sometimes things that look great on the surface are not so great if you scratch them a little bit.

After some debate and ensuring that safeguards are in place to protect the county, go for it…because it does look like a good deal.

4 thoughts on “Xspand deal needs to be scrutinized…

  1. It passed yesterday 12-3 (Republicans voted nay). There’s no extra scrutiny needed because the county already has several years’ worth of experience with Xpand, and it’s completely not comparable to MBBA.

  2. Man…I am outta the loop lately…so it goes…think what you want about it not needing a bit more scrutiny, but it does (did)…

  3. They county has had several years of experience with Xpand but not in this new capacity. They were previously servicing the liens, not owning them. What’s more, an amendment was also passed resolving that 1) the County has the right to see the contract before ultimately voting on it (this has not happened yet, they approved the County Exec to go forward in negoiations), and 2) the County has the right to buy back the liens if they need to in the future. The deal lasts for 3 years.

    You’re right to be cautious and while yes, this deal turned out to be different from MBBA for several reasons, slowing down to take a closer look at this major decision should be encouraged, not suppressed.

    Once the contract is written and presented to the Legislature, extra scrutiny is needed. So please, continue contacting your legislator.

  4. Pay your taxes, and you will have no worries. It does not matter if a bank buys the liens in bulk, or if an individual buys the liens. You guys are LUCKY anybody is buying them. It buys the homeowner more time to pay the taxes. Would you guys rather nobody buys the lien ? If nobody buys the lien, you loose your house faster. If you guys don’t like property taxes, vote for Libertarians, until then, stop complaining.

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