Robert M. La Follette School of Public Affairs
Wednesday, June 19, 2013

Students suggest ways Milwaukee can ease tax foreclosure crisis

Available online

Strategies for Reducing In Rem Foreclosures in the City of Milwaukee
Prepared for the City of Milwaukee, Department of Administration, Budget and Management Division by Bryan Mette, Joe O'Connell, Michelle Prost, Erika Schoot and Elizabeth Silverstein

City of Milwaukee staff have a few new ideas for managing the tax foreclosure crisis the city is experiencing as a result of the downturn in the economy and the housing market.

La Follette School students recommended several policies in a May presentation to Mayor Tom Barrett and his top staff as part of their Workshop in Public Affairs taught by professor Andrew Reschovsky.

"The weak economy has contributed to an increase in property tax delinquencies," says Bryan Mette, one of the report's authors. "To collect delinquent property taxes, the city pursues a three-year process that can end in tax foreclosure. The result is that the city takes ownership of a property in lieu of receiving back taxes."

In 2012, the city's inventory of tax-foreclosed properties was 10 times higher than it was in 2008. This situation has led to two problems. One is the high cost to the city associated with owning and maintaining these properties. Second, many of the properties are worth very little, limiting the city's ability to sell them.

The students examined the characteristics of the foreclosed properties; the assessment, taxation and foreclosure processes; experiences in other cities that are facing rising tax foreclosures; and the legal constraints Milwaukee faces. They also developed a statistically based early warning system to identify delinquent properties that are at especially high risk of ending up in foreclosure. "We find that the type of property, aldermanic districts, assessed value and whether the property is owner-occupied all affected the probability of tax foreclosure," says another author, Elizabeth Silverstein.

Mette, Silverstein and coauthors Joe O'Connell, Michelle Prost and Erika Schoot made four recommendations. They suggest the city of Milwaukee implement an early warning system to identify at-risk delinquent properties, allow property owners to spread special charges that have been added to the tax bill over several installments, and allow installment plans for property owners who use credit cards to pay their taxes.

"Our final recommendation is for the city to create a hardship loan fund, modeled on similar programs used elsewhere, that allows taxpayers to apply for microloans to satisfy delinquent taxes," Mette says. "These policies should help the city reduce the number of tax foreclosures in Milwaukee."