Why I'm Voting No on Question 7

This started out as an open-thread post, on Rhode Island ballot question 7. The question itself will read...

7. AFFORDABLE HOUSING BONDS -- $25,000,000 -- (Chapter 241 - Public Laws 2012)

Approval of this question will allow the State of Rhode Island to issue general obligation bonds, refunding bonds, and temporary notes in an amount not to exceed twenty-five million dollars ($25,000,000) for affordable housing.

I wanted to provide readers with a little more detail about what they were being asked to finance, so I went to the legislation that authorized the ballot question. Here is the full legislative description of the purpose of the $25M bond, from Article 5 of this year's state budget...

Question [7] relating to bonds in the amount of twenty-five million dollars ($25,000,000) for Affordable Housing.

Provides funding to the Housing Resources Commission to provide state funds to promote affordable housing through redevelopment of existing structures, or new construction.

OK, next I figured within the Governor's budget request for this year, there'd be some detail about the Housing Resources Commission and various programs it runs. The Housing Resources Commission actually appears in two places in the budget. One place is in the "Quasi-Public Agencies" sub-section of the state budget, where $89,040 in operating expenses are listed for each year between FY2011 and FY2013. The other place is as part of "Housing and Community Development", under the "Planning" section of the Department of Administration budget, though no disaggregated total for Housing Resource Commission costs is listed there.

Members of the Housing Resources Commission as well as its various powers and duties are spelled out in Chapter 42-128 of state law. The commission membership is listed below the fold; depending on the exact process used for allocating the bond money, there are potentially significant questions about how much influence members of private organizations should have over direct expenditure of public funds.

The Rhode Island Secretary of State's Voter Handbook says that the bond funds "are expected to be matched by approximately an additional $225M in funding from other sources". As Justin mentioned yesterday, that's an 8:1 match (resulting in 9 times the original bond money being available, under the suitable definition of available). But in a Rhode Island Public Radio interview with Flo Jonic, Question 7 advocate Richard Godfrey mentioned that this bond would be matched at a 5:1 rate, for 6 times the bond amount in total.

The RIPR report mentions that this bond would be used to build 600 housing units. Using the 5:1 match, and adding in about $12M in interest on the principal, that's about $270K per unit. Also according to RIPR, a previous $50M bond approved in 2006 was matched at 8:1 and was used to construct 1300 units. That puts the cost for the previous measure, with any reasonable level of interest added in, at over $350K per unit. There seems to be substantial variability in how much housing is constructed per dollar under the mechanism that's being proposed.

Finally, the Hummel Report from this past week touched on the subject of how "affordable housing" projects have all kinds of implications for local communities, in terms of tax-abatements and building approval.

In short, this ballot question asks voters to put $25M into a not very well-explained process and trust the people involved to use their insider positions to do good with it. This is certainly not reasonable under current fiscal and economic conditions, and needs to be more transparent under any circumstance. For those reasons, I will be voting no on 7.

Continue reading "Why I'm Voting No on Question 7"

Universal Sales Pitches to the Voters on Debt for Affordable Housing

Two multimedia pieces addressing Rhode Island ballot question number 7 — to borrow $25 million through bond sales for affordable housing — are starkly different.  Both are essentially given over to advocates for the new debt, but in one case, the journalist does a reasonable job of raising possible objections, if not quite going so far as to play devil's advocate.

Continue reading on the Ocean State Current...

Town-by-Town Single-Family Home Sales, August

Checking in on single-family home sales across Rhode Island, as I did for July and 1Q12, reveals a mixed picture. Results for the state are mildly improving, but the "downward spiral index" worsened for 22 of the 38 listed cities and towns.

The downward spiral index is the sum of the three percentages given in Table 1.  The idea is that an improving market will see an increase in sales,  a decrease in inventory, and an increase in median sales price.  If inventory is dropping, that indicates that houses are selling faster than new families can put them on the market, and if the median sales price is climbing, that suggests that the demand for homes in the area is increasing.

Continue reading on the Ocean State Current...

Sen. Moura Calls For Fannie/Freddie Forum

State Senator Beth Moura (R - Cumberland/Lincoln) put out a press release calling for a forum with top executives of Fannie Mae and Freddie Mac, the federal governmentally backed financial entities that securitize mortgages for the servicing banks.

Moura's allegation is that Fannie and Freddie aren't working with many distressed Rhode Island homeowners to refinance a mortgage and instead prefer to send the property to foreclosure, add more red ink to their books and then go to the federal government for bailout money.

Moura says, “I believe they are intentionally creating these huge losses in mortgage defaults so they can justify on paper their requests for hundreds of billions in taxpayer money. The longerthey take to review modification applications, the further behind the homeowners end up, the higher the arrearage gets, the larger the investor loss appears, therefore making a modification that much harder to qualify for. The perfect storm has been created.”

Moura wants the top executives of these firms to come to Rhode Island and disprove her allegations and evidence. She claims to have "notes, files and homeowners from Westerly to Woonsocket" ready to testify.

We'll wait to see if she is able to get a response from either of the finance giants.

Maybe Foreclosure Isn't the Worst Thing

We all get that mortgage foreclosure is a bad thing, in an absolute sense, but I can't help but wonder whether this is actually a positive development for borrowers, lenders, or the entire system:

Retsinas said that the increase in people three months behind on their mortgage coupled with the drop of mortgages entering the foreclosure process likely indicates some sort of intervention is preventing those borrowers who are seriously behind from entering foreclosure.

Possible interventions, he said, include cities passing ordinances that have made it harder for banks to foreclose, especially on multi-unit houses. Also, federal regulations have encouraged banks to allow borrowers to "modify" their mortgages and lower their payments by changing the interest rate, repayment term or, more rarely, the amount of principal due.

It seems to me that it mightn't be in the interest of anybody to prolong a difficult situation, whether that means postponing payments to the end of the agreement or some other mechanism for passing along the underlying financial problem.

Narrow Foreclosure Improvement, Broad Decline

In order to interpret trends in mortgage payments, one must look at the overall movement, and I'm not sure the content of this article by Paul Edward Parker merits the the talk of recovery that the front-page headline initiates:

In Rhode Island, the association reported that 11.09 percent of all mortgages were one or more payments behind in the fourth quarter. That’s an increase from the third quarter, when 10.25 percent were behind. ...

But those numbers break down to show a substantial increase in the mortgages three or more payments behind and a modest decrease in those only one payment behind.

Mortgages three or more payments behind went to 5.41 percent in the fourth from 4.45 percent in the third quarter. At the same time, those one payment behind fell to 3.82 percent from 3.93 percent.

Comparing the two quarters, both the total number of mortgages in foreclosure at the end of the quarter and the number that entered the foreclosure process during the quarter dropped.

The number in foreclosure fell to 3.97 in the fourth quarter from 4.05 percent in the third quarter.

Those starting the process fell to 1.15 in the fourth quarter from 1.34 percent in the third quarter.

There are two significant gaps in information, here: First, we don't know what percentage of Rhode Island mortgages are two months delinquent. Second, states, banks, and individual agreements and circumstances vary the number of months that the average homeowner can fall behind before entering foreclosure, and I don't know whether the cited percentages continue to count folks in foreclosure as still being delinquent. (The report itself is way too expensive to justify satisfying my curiosity.)

That noted, the reality is that a borrower must be one payment behind before being multiple payments behind, so the above data suggests a plateau, at best... rather, it suggests an approaching plateau, at best. Overall, an additional 0.84% of all mortgages fell behind in payments, from the third quarter to the fourth quarter. Putting the trends in order, the percentage of all mortgages at one payment delinquency dropped 0.11 points; the percentage three or more behind increased 0.96 points; the percentage entering foreclosure fell 0.19 points; and the percentage actually in foreclosure fell 0.08 points.

Assuming that foreclosures and payments in full haven't wiped out so many mortgages as to affect this data substantially, since the total number of delinquencies went up while the one-month category decreased, delinquencies can only be moving in the wrong direction. People aren't catching up on their payments, they're falling farther behind. The decrease in both new foreclosures and total foreclosures could mean two things, neither of which indicates a recovery: banks could be allowing longer delinquencies before initiating foreclosure or the market is simply between two waves of them.

The ideal trend would be to see an overall decrease in delinquencies at the same time as the number of households that are one payment behind goes up. That would mean that folks are making headway against the hard economic times. Of course, it would also mean that more people are working and making more money, and we'll have evidence of that before the mortgage market tells us anything of note.

Passing Laws Without Legislators

Anybody catch the following in a Sunday Projo article about yet another economy-restricting practice?

The solution he refers to is the Home Valuation Code of Conduct, a set of standards for residential real estate appraisals that grew out of an investigation of the mortgage industry by New York Attorney General Andrew M. Cuomo. The code seeks to guarantee the independence of appraisals by building a "firewall" that prevents mortgage brokers from dealing directly with appraisers.

In exchange for being removed from Cuomo's investigation, mortgage giants Fannie Mae and Freddie Mac agreed they would not buy mortgages whose appraisals did not adhere to the code. The two government-sanctioned corporations buy individual mortgages, collect them into packages and sell the packaged mortgages to investors. The code took effect May 1.

Although the rules are not binding on anyone but Fannie Mae and Freddie Mac, lenders follow them because, if they didn't, they would not be able to sell their loans to the two companies. Because of their size, Fannie Mae and Freddie Mac can drive what happens in the mortgage industry. "Once Fannie does something, everybody else kind of jumps on board," says [Keith White Jr., owner of White Appraisal Co. in Warwick].

Without any legislation's being passed or even, presumably, proposed, the mechanism of leveraging huge, government-backed lenders has imposed new, costly regulations on the housing market. One can see how a similar principle might result in the proliferation of — oh, I don't know — derivatives based on insecure loans granted to lower-income borrowers and crash the economy.

The new policies, by the way, add two layers to produce that "firewall." One wonders what an investigation of names and relationships branching between those layers and various government officials might uncover.

Memories Over Housing in Rocky Point

Even with the market sag, housing is still relatively expensive in Rhode Island, and part of what led to our being hit so hard in the subprime collapse was residents' inability to find suitable housing within their means, and the lack of in-state competition for property owners probably raises the threshold of taxation "price" tolerance in any given community. What to do? How about we devote ever-more-limited public funds to taking land off the RI market in the name of nostalgia and open-space aesthetic:

The state Department of Environmental Management wants to acquire a portion of the former Rocky Point amusement park that had been set aside for private development and preserve it as open space.

DEM Director W. Michael Sullivan yesterday successfully asked the State Properties Committee for permission to begin surveying and appraising the roughly 82 acres that developers have been eyeing for luxury housing. Sullivan said he hopes to create an expansive coastal state park by coupling the land with the 41-acre shoreline portion of the old amusement park that was acquired by the city and state last year. ...

"Even though I grew up in Massachusetts, I did have the opportunity to go there," he said. "And like most people, when I stand there, I still can hear the laughter and have an overwhelming sense of times gone by.

"This is a legacy and an opportunity that we should not forgo without giving a final effort," Sullivan said.

Keeping Up Property One Owns

Offering assistance to steer foreclosed neighborhoods away from blight is a worthwhile goal, and the collection of initiatives recently announced by Governor Carcieri and Senator Reed seems properly targeted. It does seem, however, that the actual owners of the properties (i.e., banks) get a pass on the whole problem.

Increasing the risk of lending money to homeowners — by increasing the responsibilities of banks should the owners fall aside — could have disagreeable consequences, but I'm not sure why taxpayers should wind up on the hook for other people's economic transactions. Don't stagnant and decomposing houses cost banks money over time?

Perhaps banks could contrive some sort of low-income rental system for maintenance purposes, or maybe the state could develop a rent-maintain-and-fix program.

Foreclosures Versus Student Enrollment II

There is at least one glitch in the comprehensive municipality-by-municipality data that the Projo has been providing on foreclosures. According to a John Castellucci story that appeared in the April 15 Projo, there were 108 foreclosures in Pawtucket between January and mid-March of 2008 and 172 in all of 2007. That calls into question the completeness of the Projo's 2007 to 2008 Q1 comparison chart, where figures of only 5 foreclosures in Q1 of 2007 and 1 in Q1 2008 are quoted for Pawtucket.

I can't find any "official" data on the web for municipal level data for 2008, but there are a number of websites that give city-by-city listings of foreclosed properties for sale.

Yahoo has a real-estate site that lists foreclosed properties with the dates they were listed. Here's the number of foreclosure listings I retrieved last night…

Foreclosure.com breaks its listings into "foreclosure" and "pre-foreclosure" categories…

And the site that Ken suggested, RealtyTrac.com, divides its foreclosure listing into "Auction" and "Bank-Owned" categories; the bank owned includes listings originally from 2007. The totals in the two categories are…

The numbers in these other estimates are consistent with the Castellucci story for Pawtucket and roughly consistent with the other Projo-reported estimates for Central Falls/Cranston/Providence.

So, if as Matt Jerzyk postulates, the drop in student enrollment is directly related to foreclosures, then...

1. The drop in in Providence should be 25 to 50 times bigger than the drop in Central Falls…
   • …but it's not. The decline in Central Falls was about 450 students, the decline in Providence, about 1,700 students, a factor of about 4.
2. The drop in Cranston should be 5 to 10 times bigger than the drop in Central Falls…
   • …but it's not. The drop in Central Falls is more than 5 times larger than the drop in Cranston.

If Mr. Jerzyk is sitting on some data source that he's not telling anyone about, now is the time to release it. If not, then someone should be looking into the exact nature of the reverse-redlining that was apparently going on in Providence, because if the problem was only unscrupulous salesmanship, it is unlikely that Providence would be affected so much more disproportionately on a per-capita basis than Pawtucket or Central Falls. Is it possible that lending rules were being relaxed, even further than in other places, for housing with Providence zip-codes? If so, at what level in the mortgage process was that decision made?

Foreclosures Versus Student Enrollment

Matt Jerzyk of RI Future believes that declines in student population in Central Falls and Providence are due to foreclosures…

Speaking of questionable analysis, it is absolutely outrageous to me that anyone can get away with saying that significant drops in school enrollment in Central Falls and Providence are a result of the right-wing's anti-immigrant activism in Rhode Island.

One word, people: FORECLOSURES.

Ian Donnis of Not for Nothing thinks that the theory is plausible. I'm not sure about the causal chain in Providence, but it's hard to believe that foreclosures are having a big impact on student enrollment in Central Falls, unless you're willing to accuse the Projo of some really sloppy journalism.

In the August 16 Projo, Jennifer D. Jordan reported on the student enrollment decline…

In Central Falls, the state’s most heavily Hispanic school district, student enrollment numbers are down by more than 400….Currently, Central Falls enrollment stands at 3,050, down from its usual 3,500.

And the number of foreclosures in the period leading up to the 2008-2009 school year? Well, the Projo gives us two figures for Central Falls to look at, compiled from data provided by Rhode Island Housing…

• Legally Noticed Foreclosure Initiations, Central Falls, April 2007-March 2008: 17
• Legally Noticed Foreclosures By Municipality, Central Falls, Q1 2008: 2

Just to be clear, the numbers above are reported in units of one.

The foreclosure numbers for Providence are much higher, 609 in Q1 2008 alone, versus an enrollment drop of 1,700, but on the other hand, the community with the second largest reported number of foreclosures in Q1, Cranston with 155, has a student population that is holding steady, so there doesn't seem to be much correlation between rates of foreclosure and drops in student enrollment, unless you believe that the Projo is missing a big chunk of data, that foreclosures increased by about a factor of 10 in Central Falls after April '08, or that the average number of students living in a foreclosed home in Central Falls is somewhere in the vicinity of 20 or more.

Charity with Other People's Money

When things go wrong for people, society ought at least to weight the costs of helping, even when the problems are wrapped up in the esoteric complexities of modern finance, but when I read news like this, I can't help but wonder from where the money's coming:

The legislation is likely to draw on elements of the Democratic plan such as letting states issue $10 billion in tax-exempt bonds to refinance subprime loans and permitting homebuilders and other money-losing businesses to reclaim previously paid taxes.

Democrats also want to provide $4 billion to states to buy up and refurbish foreclosed homes, a plan that the administration opposes as a bailout for lenders and speculators. ...

There is also bipartisan backing for $200 million in new money for debt counselors to help homeowners negotiate with lenders.

I'm sympathetic, of course, to any plan that solves problems by cutting or returning taxes, but if these steps are worth taking, shouldn't there be at least some discussion of what other area of government is going to be sacrificed?

Taking a Bad Idea and Expanding It

The cost of healthcare in America has been distorted by the irrational coupling of health insurance to employment. And now, Professor Jeremy Wiesen of the New York University Business School, author of an op-ed in today's Projo, has an even worse idea -- he wants to couple your home mortgage to your employment!

Professor Wiesen is wrong to characterize this as some sort of "free-market" idea. Markets require choices, but the mechanism he suggests for implementing his home mortgage plan…

Congress can help this employer initiative by not taxing the benefit to employees,

…is the same mechanism which has played a major role in creating a system where the only choice people have is to take-or-leave an insurance plan from one company selected by their employer, effectively destroying the free-market for healthcare.

Professor Wiesen suggests that…

Unlike the government’s public-private "partnership" and many other proposals now put forth, employer involvement would have both immediate impact and be a long-term solution, and would be implemented through an infrastructure already in place — companies’ human-resources department.

But it is only big companies with big HR departments that could reasonably take something like this on, which would bring the existing division in the healthcare market between people who work for big companies and people who work for small companies/for themselves to the home mortgage market. That doesn't seem like a positive development.

And do we really want a system where, for instance, teachers in Tiverton might go on strike demanding that the town provide them better interest rates on their home loans? Under Professor Wiesen's plan, that scenario would be no more bizarre than teachers striking against the town demanding lower prices for their healthcare.

Please don't tell me that that there are lots of people out there who think this is a sensible suggestion.

Taking a Bad Idea and Expanding It

The cost of healthcare in America has been distorted by the irrational coupling of health insurance to employment. And now, Professor Jeremy Wiesen of the New York University Business School, author of an op-ed in today's Projo, has an even worse idea -- he wants to couple your home mortgage to your employment!

Professor Wiesen is wrong to characterize this as some sort of "free-market" idea. Markets require choices, but the mechanism he suggests for implementing his home mortgage plan…

Congress can help this employer initiative by not taxing the benefit to employees,

…is the same mechanism which has played a major role in creating a system where the only choice people have is to take-or-leave an insurance plan from one company selected by their employer, effectively destroying the free-market for healthcare.

Professor Wiesen suggests that…

Unlike the government’s public-private "partnership" and many other proposals now put forth, employer involvement would have both immediate impact and be a long-term solution, and would be implemented through an infrastructure already in place — companies’ human-resources department.

But it is only big companies with big HR departments that could reasonably take something like this on, which would bring the existing division in the healthcare market between people who work for big companies and people who work for small companies/for themselves to the home mortgage market. That doesn't seem like a positive development.

And do we really want a system where, for instance, teachers in Tiverton might go on strike demanding that the town provide them better interest rates on their home loans? Under Professor Wiesen's plan, that scenario would be no more bizarre than teachers striking against the town demanding lower prices for their healthcare.

Please don't tell me that that there are lots of people out there who think this is a sensible suggestion.

Helping Whom Live Where

Somebody asked me, the other night, what I would do about the housing affordability problem, and to be honest, I didn't have much of an answer. I guess I'm not at the point, yet, of having comprehensive understanding of or prescriptions for every important issue, and housing is still one of those for which I've mainly reacted to specific developments based on an inchoate sense and general principles.

In constructing a notion of what we, as a society, should actively do about affordable housing — and to avoid creating an invisible barrier to communication between people with different approaches — it seems advisable to divide our thinking into two perspectives:

• Helping a particular family to afford housing
• Increasing housing for such families

On the first aspect, there's a degree to which acknowledging society's developmental history requires us to admit that, as difficult as it is, sometimes families just have to pull up stakes and find that place in which both housing and opportunity exist. If we increase assistance to those who are being priced out of the system, we increase their threshold for sticking it out rather than moving where they could live more comfortably (and productively).

We also keep the pay rates of low-end, but necessary, workers artificially low. The market mechanism might not be wholly adequate, but if store clerks (say) are forced to move out of the system, then there will be fewer around, and stores will have to pay more per clerk, thus increasing the ease with which they can pay for housing.

Permeating this all is the fact that providing sufficient subsidies to make a difference in as expensive a housing market as Rhode Island's will increase the burden on families across the spectrum, including those (such as mine) that are just barely able to afford the housing that they've managed to acquire. So, for the side of the question that seeks to help particular families to afford housing in Rhode Island, the not-surprising solution that I would offer is to implement some variation of the conservative, free-market panoply of policies that, in essence, seeks to help families to afford higher standards of living because they can afford higher standards of living, not because their neighbors can afford to subsidize higher standards for them.

In other words, help low-income families to become less-low-income families. Help them to start businesses. Reduce the barriers and regulations that constrain career ventures. (For example, as far as I know, my 2005 observation that Massachusetts's licensing laws will produce twice as many master plumbers in about a decade as Rhode Island's still stands.) And as another approach, make their housing dollars go farther by decreasing costs and fees for building, renovation, and, perhaps most glaringly, property taxes.

As far as direct government investment in resolving housing problems is concerned, however, I think we're better off concentrating on the second perspective, and it isn't sufficient to mandate percentages of "low income housing," not the least because that engenders hostilities and divisions — building housing for those people because we have to, rather than because we have an opportunity to. Instead, our focus should be on thinking creatively about ways in which to encourage the development of housing that is more likely to be of the sort that we need, such as zoning to encourage the placement of apartments on top of businesses and garages. We must consider the flip-sides of health-related regulations, such as the percentage of property that must be put aside for septic systems and the number of bathrooms that can feed into each.

Indeed, the most appropriate area for local and state governments to invest in housing is the expansion of utilities (such as sewer systems) so that building is less expensive and easier precisely where it is more likely to be of benefit to lower-income families — that is, in out of the way and densely populated areas. (This, of course, would involve an easing of the mandated costs associated with public construction activities.)

To my experience, though, Rhode Islanders are reluctant to allow their neighbors' property to become multifamily lots. They dislike the prospect of construction disrupting their daily lives. And they darken at the idea of development in open areas — even if they only drive down that road once a year to get their Christmas trees.

Building Permits in Rhode Island: We’ll Slow You Down Because We Can

Benjamin Gedan has an article from yesterday’s Projo describing the long wait times involved in getting a building permit approved in Rhode Island. The Rhode Island Builder’s Association believes that the current delays are neither reasonable nor legal…

In an attempt to speed up the permitting process, the association has sued nine cities and towns, arguing that the glacial pace of municipal decision-making violates state law and deprives landowners of their property rights. The defendants include Warwick, Cranston, Lincoln, West Warwick, North Kingstown, Cumberland, Newport, North Providence and Woonsocket....

The lawsuit cites permit applications that were under review for as long as 19 months. The result, the association says, has been a steady decline in development throughout the state.

From 1999 to 2006, the number of building permits issued statewide declined by nearly 40 percent, from 2,600 to 1,600, according to the association. Though the period saw a weakened housing market, the number of permits dropped even in times of strong housing demand.

Two questions arise from this story…

1. I’ve seen affordable housing programs touted as big progress because they will add about 500 new units to the state housing pool. Given the numbers discussed in Gedan’s article, wouldn’t streamlining the permitting process also be an easy (and maybe even better) way to help relieve the housing crunch, if around 1,000 units per year are being lost to permitting delays? (Or is there perhaps an element of snob-zoning involved in the decline in permits?)
2. Is there any reason not to look at these permitting delays as an indicator that Rhode Island has developed a public service culture that is overtly hostile to individual initiative, i.e. activities not fully controlled by Rhode Island officials are not activities regarded by Rhode Island officials as important.

True Tax-Lien Reform: Ending the Government's Claim that it Owns Your Home

Rhode Island�s current tax-lien sale system is based on the idea that the government owns all property and that individuals can never move beyond renting from the government. What Rhode Island calls �property taxes� are really rents paid to a government landlord. How else is it possible to interpret a system that holds, no matter how much money you have invested in the purchase of home, even if you have fully paid off your mortgage, you can still be evicted without compensation if you stop paying your rent?

Like anyone else, the government should have to pay fair market value when it wants to take control of a home. Here�s what this should mean for a tax-lien sale. Suppose a house is valued at $100,000 and that the owner has fully paid off the mortgage but is delinquent on $500 worth of taxes. If the government really needs that $500, it should be required to buy out the owner for $99,500 ($100,000 value of the home, minus the $500 in back taxes). It can then flip the home for the full $100,000, netting the $500 owed.

In addition to being more fair, ending the assumption of universal government ownership creates the proper economic incentives. The incentives of the current system are perverse. The most attractive targets of tax-lien predators are those who owe the smallest amounts. A real deadbeat, on the other hand, someone who owes tens-of-thousands of dollars of back taxes is not an attractive target because the return on the lien-purchaser's investment is significantly reduced by the large up-front amount needed to pay off the lien.

When there is true citizen ownership of property, the incentives are reversed. Delinquent owners owing the most taxes become the top priority in tax-lien machinations. For example, if someone owes $80,000 in back taxes on a $100,000 home, then the government would only have to cough up $20,000 to buy out the owner and get its $80,000. This, obviously, would be a higher priority to the government (one would hope) than spending $99,500 to get $500.

I�m not yet sure what Governor Carcieri�s full package of tax-lien reforms will look like, but whatever it is, it should include a strong rejection of the idea that the government owns your home and you just live there.

Senator Montalbano Shouldn't be Offended Because People are Paying Attention to the Legislature

According to a Mark Arsenault article in today�s Projo, Senate President Joseph Montalbano is looking out for your best interests when he protects the government�s authority to seize your home in a tax-lien sale�

Senate President Joseph A. Montalbano says he would support a proposed overhaul of the way liens are sold for delinquent property taxes if he could be sure the legislation would not hurt the tax collection rates of Rhode Island municipalities�.

Some supporters of the legislation have grumbled about a similar bill that was filed last year, blaming the Senate for taking out a provision to allow Rhode Island Housing to buy liens in bulk. Montalbano, a lawyer who has conducted tax sales for several cities and towns, said he takes offense at the suggestion that the Senate "watered down" last year's bill.

I am not sure what exactly Senate President Montalbano finds offensive. There is no doubt that last year�s tax-lien reform bill was �watered down�. Provisions giving the Rhode Island Housing and Mortgage Finance Corporation the right of first refusal in tax-lien sales, tightening up procedures relating to the notification of delinquent owners, and involving the Department of Elderly Affairs in cases involving elderly citizens were all present in the tax-lien reform package introduced in the legislature last year. All had vanished by the time the final bill was voted on. Is Senator Montalbano offended because he wants us to know that it was the House, and not the Senate, that initiated their removal? (Incidentally, all three provisions have already been reintroduced to the legislature this year.)

Attention may be focusing on the Senate, in part, because of campaign contributions made from people actively involved in tax-lien sales to Senator Montalbano. John E. Shekarchi, a direct participant in the purchase of Madeline Walker�s house out from under her because of an unpaid sewer bill, gave $200 to Montalbano last year. Patrick T. Conley, described by the Projo's Katherine Gregg as one of the most prolific tax-lien purchasers in Rhode Island,

Conley has also figured -- and is likely to figure again this year -- in State House efforts to rewrite the state's ever-controversial tax-sale laws.

One of the busiest players in this field, Conley recently estimated having bought titles to 8,000 pieces of tax-delinquent property in Providence since 1979. About 5,700 were redeemed by their owners.

By his own estimates, he took ownership of the remaining 2,300 when the owners didn't pay their debt,

...gave $1,000 to Montalbano.

Both Mr. Shekarchi and Mr. Conley gave their contributions in March 2005, after the tax-lien bill was introduced to the Rhode Island Senate (February 2005), but before it was voted on by the full Senate (June 2005).

Tax-Lien Reform Reintroduced in the House

The bill making it more difficult for the government to sell a house out from under its owner without the owner knowing it was re-introduced to the RI House yesterday. Representatives Joseph Almeida (D-Providence), Grace Diaz (D-Providence) and Thomas Slater (D-Providence) introduced House Bill 6704 which, if passed, would make 3 major changes to the process of tax-lien sales.

1. The bill would give the Rhode Island Housing and Mortgage Finance Corporation the right of first refusal in tax-lien sales involving residential properties of up to 4 units and asks RIHMFC to develop regulations that give delinquent owners an opportunity to buy back their homes...

Where the property subject to tax sale is residential and contains four (4) or less units, the Rhode Island Housing and Mortgage Finance Corporation shall have a right of first refusal to acquire the tax lien, and may assist the owner to discharge the lien or take title and acquire the property in its own name pursuant to regulations to be developed by the corporation, consistent with its purposes.

2. The bill would require at least two rounds of notification of the owner, one by registered mail and one by certified mail, before a tax lien sale...

Whether or not the person or general partnership to whom the estate is taxed as of December 31st prior to the tax sale is a resident of this state, the collector shall, in addition to the foregoing, notify the taxpayer of the time and place of sale first by registered mail not less than sixty (60) days before the date of sale or any adjournment of the sale, and again by certified mail not less than forty (40) days before the date of sale or any adjournment of the sale...

3. The bill would require notification of the Department of Elderly Affairs in cases involving owners who had received tax abatements due to their age. Failure to notify Elderly Affairs in these cases would nullify a tax-sale...

In the event the person to whom the estate is taxed is listed in the records of the assessor and/or collector as having applied for and been granted a property tax abatement based wholly or partially on the age of the taxpayer, then the collector shall also notify the department of elderly affairs by registered and certified mail as described herein. Failure to notify the department of elderly affairs shall nullify any tax sale.

The bill has been referred to the House Finance Committee. All of these provisions were included in a similar version of the bill last year, but were removed sometime in the committee process. We'll see if they survive this year's session.

Yet Another Madeline Walker Coincidence

According to Providence Probate Court Judge John Martinelli, cases similar to the case of Madeline Walker, the 81 year old Providence woman evicted from her home for failing to pay a sewer bill, are more common than they should be...

At a Providence Probate Court hearing yesterday, Judge John Martinelli looked out into the packed courtroom of lawyers, reporters, and community activist groups and noted that while the crowd was unusual, such a case was not.

"I'm happy everyone's on board now, but I must tell you, there are numerous cases like this," Martinelli said. "I'm disappointed this case has gone this far without any activity by this court."

The report comes from Amanda Milkovits in the Projo, who also provides a quick summary of the inintial tax-lien sale of Ms. Walker's home...

The lien was sold for [$836.39] in November 2003 to Cobble Hill Development LLP, whose managing member is John E. Shekarchi.

Private companies or individuals can buy the tax liens on properties. They pay the lien and seek to recoup their expenses, plus interest, from the homeowner. If the homeowner doesn't repay the buyer within a year and a day, the buyer can charge legal fees as well and file a court petition for ownership of the property.

At the start of last year, several Rhode Island legislators proposed adding at least one additional step to this procedure. In mid-February (Senate)/early March (House), a bill was introduced that would have, among other things, made notification of the Departement of Elderly Affairs a binding requirement in certain tax-lien sales involving senior citizens. However, sometime between the bill's introduction and its passage through committee, (late June in the Senate, early July in the House), the binding notification requirement was removed.

Something else happened in that time period, perhaps just a coincidence. On March 31, 2005 -- during the interval of time when the strong protections in the tax-lien bill morphed into weaker ones -- the aforementioned John E. Shekarchi gave a $200 campaign contribution to Rhode Island Senate President Joseph Montalbano. In other words, an active tax-lien speculator gave a campaign contribution to the Rhode Island Senate President at the same time the Rhode Island Senate was considering imposing tougher rules on tax-lien speculators. Do you think that Senate President Montalbano will be touting Mr. Shekarchi's support in his upcoming election?

Other recipients of Mr. Shekarchi's campaign cash include Rhode Island Attorney General Patrick Lynch, the State Democratic Leadership Committee, and Warwick Mayor Scott Avedisian.

A Madeline Walker Irony -- or Coincidence -- or Something Worse

Madeline Walker is the elderly Providence resident who lost her home for failing to pay a $500 sewer bill. A law proposed in the legislature earlier this year would have given Ms. Walker and others in similar situations a better chance to learn that their houses were being sold out from under them. House bill H6020 and its companion, Senate bill S478, would have required mandatory notification of the Department of Elderly Affairs during tax-lien sales involving residents with elderly abatements and explicitly invalidated tax-lien sales if Elderly Affairs was not notified.

Here's the irony, or coincidence, or maybe something worse. In the Senate, the first Representative listed as a sponsor on the mandatory notification bill was State Senator Harold Metts. Senator Metts represents District 6 -- the Senate district where Madeline Walker lived (122 Chester Ave, Providence).

In the House, the first sponsor listed on the mandatory notification bill was State Representative Joseph Almeida. Representative Almeida represents House District 12 which is, yes, that's right, the House district where Madeline Walker lived.

This is quite a coincidence. Apparently, Senator Metts and Representative Almeida had reason to believe that their elderly constituents needed some extra protection from tax-lien sales. And, it turns out, they were right.

So, what was it exactly that motivated Senator Metts and Representative Almeida to press for changes in tax-lien sale procedure at the start of last year? And who in the legislature convinced them to water down their changes, making taking advantage of an elderly citizen like Madeline Walker much easier than it should be?

How the Rhode Island Legislature Failed Madeline Walker

Madeline Walker is the Providence woman evicted from her home for failing to pay a sewer bill totaling about $500. According to a report from WJAR, lawyers for the evictors are saying that proper procedures have been followed...

The law firm that handled the eviction told NBC 10 everything was done by the book and that after the eviction notice was sent in September, there was no response whatsoever from Walker or her family.

The "book", however, has a non-binding provision I have yet to see mentioned; according to section 44.9.10(d) of Rhode Island law, under appropriate circumstances, �the collector� is supposed to notify the state Department of Elderly Affairs in the event of a tax lien sale�

In the event the person to whom the estate is taxed is listed in the records of the assessor and/or collector as having applied for and been granted a property tax abatement based wholly or partially on the age of the taxpayer, then the collector shall also notify the department of elderly affairs by registered or certified mail postage prepaid not less than twenty (20) days before the date of the sale. Failure to notify the department of elderly affairs shall not affect the validity of a tax sale.

According to a WJAR report from yesterday, Ms. Walker did have an elderly abatement on her taxes�

The city of Providence told NBC 10 that Walker was given an elderly exemption on her property taxes for at least five years. The Narragansett Bay Commission said it had no record of that, and said its title search turned up no indication of Walker's age when it sold her lien.

�so notification appears to have been appropriate. Was the Department of Elderly Affairs notified by the tax collector?

Here's what may be the worst part. Legislation introduced into the Rhode Island legislature last session would have changed courtesy notification of Elderly Affairs into a binding requirement. Original versions House bill H6020 and Senate bill S478 would have changed section 44.9.10(d) to read�

In the event the person to whom the estate is taxed is listed in the records of the assessor and/or collector as having applied for and been granted a property tax abatement based wholly or partially on the age of the taxpayer, then the collector shall also notify the department of elderly affairs by registered and certified mail as described herein. Failure to notify the department of elderly affairs shall nullify any tax sale.

From the information available online, sometime between introduction and approval at the committee level, this legislation was amended to remove the mandatory notification provision. In the final version of the tax-lien bill passed by the legislature and signed by the governor, section 44.9.10(d) was left untouched.

The House Committee involved was Finance. The Senate committee involved was Judiciary. Shall we put it upon the Committee Chairmen -- Steven Costantino in the House and Michael McCaffrey in the Senate -- to explain why they thought removing the mandatory notification provision was a good idea? Or would another legislator like to come forward and take the blame?

Too Late for Early Housing

While we're in the midst of our first weekend content lull, it seems as good a time as any to republish a vlog post of mine from January 2003 (mostly so it'll be in the archives here). In the surrounding weeks, I made a few short blog-like videos, but the time it took to make them became too costly for the payoff in viewers. It is, however, something that I'd love to take up again if the fruits of blogging begin to cover the expense in hours.

---

This time around, the vlog goes on the road... literally. (And the vlogger realizes that, if he's going to make these things on a regular basis, he's going to have to begin getting his hair cut more than once a season — like he did when he was single and didn't work at home.) I've used some new tricks, so please feel at liberty to let me know what you thought and to offer suggestions.

Click the picture for the interactive RealMedia version that makes my head look wide (for which you'll need the free RealOne player available on the right side of this page). Click here for the plain ol' high-bandwidth, thin-headed Windows Media file, and here for the low-bandwidth Windows Media file.

Transcript

I don't know if this holds true for others at the tail end of Generation X, but it seems as if I've frequently been just a bit too late or a bit too early. And I mean more than being born just in time to model plaid bellbottoms for the family photo album.

In grade school, renovations were just beginning while traditional activities were being canceled. In high school, dances and proms had become shadows of the glory days pictured in teenybopper movies. The University of Rhode Island, when I attended, was in the process of shedding its party-school image but had barely begun its efforts to improve its academic reputation.

Out in the "real world," the economic boom began to contract just as I entered the job market, and the teacher shortage that promised to land my wife a job has yet to materialize. Now, we're beginning to look into buying a house just as rising property taxes are forcing residents of our income level to sell, while the healthy real estate market has kept the prices out of our reach.

Mackey Ervin of Midland, Texas, recently made news by trying to sell a $100,000, four-bedroom house once inhabited by the Presidents Bush on eBay for $250,000. Within the past few years, real estate in my neighborhood has jumped that much even for cramped homes with no presidential history: $200,000... $269,000... $325,000... $449,000.

And I live on the less-expensive side of town. I don't even want to know how much these houses go for. Back in New Jersey, we used to call such areas "yuppie developments." They always remind me of the firstPoltergeist movie.

But that's midtown. The jaw-droppers are in Congressman Patrick Kennedy's neighborhood. Combining prices in the multiple millions for these houses and the fact that I can't even afford to live on the "wrong" side of the tracks, a natural impulse is to cry foul. Somebody of Kennedy's ideology might feel the need to "do something" about it.

Maybe it's a result of conditioning, but I can accept that this is just the way it goes. The rich have a right to raise the level of the municipality. Personally, I'd prefer to see property taxes arranged in such a way that locals wouldn't be thanked for helping to build the community by being forced to leave town. But that wouldn't help me; I came too late to grab a plot of land back when prices were in the five digits.

People in my position will have to do what we've always had to do: forge on. We can rent sheds with plumbing and enjoy the waterfront... only below the mean high-tide line. Or maybe we should move across the river, where the land is more reasonable, and build communities there, perhaps one day to sell our houses for many times our investment.

The world changes, often cyclically. Just as nature reclaims abandoned land, perhaps this town will once again be accessible to new families and regular folk. Change always brings as well as takes, so maybe you're never too late. As for being chronically early, the remedy is as simple as having patience.