For Sale: Nonprofits

It’s a twelve-block walk up Rogers Avenue to my daughter’s school in Flatbush, where I’ve lived for the last two years. There is a church on every single block. Most are small storefronts with fluorescent lights, like the barbershops and jerk chicken counters that also dot the avenue. During worship, some of the churches leave the front door open so liturgy and music pour out onto the street and it’s easy to see the dozens who have gathered inside. There are services in French and Spanish, a lot of Pentecostals, and it’s not uncommon to see a barbecue pit chained up outside the entrance. I often wish I could share these blocks with friends from Texas and Kansas and Louisiana, deeply devoted Christians and grill masters who have written off New York City as Sodom and Gomorrah. Jesus is everywhere in Flatbush. So are these thriving communities that provide not only worship services but also food pantries and after school care programs.

Another mile up Rogers Avenue in Bedford Stuyvesant, Grace Baptist Church is selling its building. The baby blue façade is faded; only flaking paint remains. The congregation hasn’t gathered in the building for over a year, and the benevolence that allowed homeless New Yorkers to sleep on two empty stoops even after the doors shuttered has finally ended: just weeks ago, both stoops were encased in green plywood.

The church’s decision to put the building on the market was made after the city of New York sold tax debt it was holding on the property to private investors. The debt was part of a tax lien sale conducted by the City of New York in May — an event that happens once a year with little fanfare but significant consequences for some city neighborhoods already in the midst of dramatic change. As gentrification encroaches with more tasting menus and bank branches, not only affordable housing, but crucial community services are being lost.

A tax lien is a legal claim to debt owed on a particular property, mostly unpaid taxes but also other mounting charges like water and sewage. Each spring, the Department of Finance oversees the sale of debt that New York City holds on property across all five boroughs. This debt can be purchased for around 73 cents on the dollar and the buyer can charge up to 18 percent interest. If the debt is not paid off within a determined time frame, the property is subject to foreclosure. What’s more, in the state of New York, there is only one authorized buyer for the debt, a trust which only does business with accredited investors who have the prerequisite expertise and deep pockets.

The tax lien sale program was created in 1996 by Rudolph Giuliani’s mayoral administration, largely as a long tail response to the city’s fiscal crisis of the 1970s. Widespread private property desertion and subsequent tax foreclosures meant that by the early 1980s, the city itself was the largest landlord in the five boroughs. Giuliani saw an opportunity for the city to make money by selling the debt — and the right to foreclose — on all of these unwanted buildings.

But now the pool of city-owned land has dried up because the city has been selling off debt associated with these buildings for so long. Over the years, many tax lien sale properties, like Grace Baptist Church, have been sold or auctioned off to private developers. The process continues, ironically, in parallel to Mayor de Blasio’s pursuit of vital services and affordable housing for rapidly changing neighborhoods.

At first glance, it seems unexpected that the church would accrue property tax debt at all, because nonprofit organizations are eligible for exemption from these taxes. Yet in 2016, no fewer than 89 nonprofit organizations across New York City were included in the tax lien sale. It should be noted that this figure might not be comprehensive but it is all that is available — and was produced by a team of students at Fordham University, not the city, which does not keep track of this information.

Many of the properties owned by nonprofits that were included in the sale are just like the small, diverse churches that help define Flatbush and Bedford Stuyvesant — like the Bukharian Jewish Congregation of Jamaica Estates and the Jama Masjid mosque in Ozone Park, both of which were included in this year’s tax lien sale. And it’s not just religious nonprofits. A range of community organizations now face an uncertain future because of this year’s tax lien sale, from the Black Lady Theater (a.k.a. Slave II) in Bedford Stuyvesant to the Mayfield Nursery School in Harlem, and the Afrikan Poetry Theatre in Jamaica, not far from the Elks Lodge on Sutphin Boulevard. After a hasty sale is made to pay off debt, or the epic timeline of a foreclosure has finally played out, the communities that are served by these organizations — by the hot meals and the pre-K, the fabric and the pulse — are left to cope with the loss.

Haven Ministries, a nondenominational Pentecostal congregation, has been worshiping together for nearly 20 years on Beach Street in Far Rockaway, Queens. The church moved into the building, built in 1921 as a Jewish synagogue, in 2002.

Haven Ministries previously met in the home of one minister’s mother, and so the 5,000 square foot property allowed the church to grow and become a more visible part of the community. The airy white sanctuary includes a wrap-around balcony that holds hundreds for choir concerts and well-known guest speakers. The building is central to Haven Ministries’ identity today — and is historically important to the neighborhood as a place of services. Inside the brick and iron building, dressed with stone trim, each Star of David carved into a banister or threshold remains. In the church’s application to the National Park Service for designation as a Historic Place, minister Desiree Maple wrote: “The new congregation chose not to make significant alterations to the former synagogue out of their respect for the history of Jewish faith.”

Acting as stewards of the building is clearly a charge this congregation takes seriously. Yet when I talked to Desiree Maple about the tax debt the church was carrying — and the city’s sale of that debt to private investors — she was emphatic: “That can’t be right.” When I sent her the tax lien sale documents from the city, listing the $190,000 of debt (plus fees) that the city sold on the church property in May, she was in disbelief. “We are a nonprofit,” she said. “We should be exempt from paying those taxes.”

Should is the operative word. Nonprofit organizations are eligible for exemption from property taxes but they must file an application to renew this status every year. Some organizations forget to re-file for the exemption or are unaware of the requirement — or unaware that the requirement is annual — and the properties owned by these organizations wind up in the city’s tax lien sale. Providing what might be the understatement of the year, Desiree Maple said, “There definitely needs to be more outreach for community based organizations.”

It’s easy to see how communication breaks down, considering the staggering number of properties included in the tax lien sale process every year. In 2016 alone, debt was sold on over 3,600 properties, after the city sent out 90-day warning letters to over 24,000 properties that were behind on their taxes. Jeffrey Shear, Deputy Commissioner for the Department of Finance, notes that the numbers both of tax lien sales and tax delinquent properties are down in the last year, and that considerable effort is made to resolve issues without selling debts.

Shear underscores that proactivity is required on the part of nonprofits that have been duly warned by mail. But many organizations don’t respond to letters of warning — or don’t respond quickly enough — because they assume, not unreasonably, that property tax exemption is inherent once nonprofit tax exemption status is granted by the I.R.S and the State of New York. Indeed, this comes up again and again when talking with nonprofits affected by tax lien sales: a lack of clear information from the city and endless paperwork. Shear acknowledges there are potentially devastating consequences if these organizations do not understand the bureaucracy — but he suggests that, in the bigger picture, the risk of foreclosures on these properties is overstated. “We did some tracking of past liens that were sold,” he said, “and fewer than two percent of the liens that were sold resulted in foreclosures.” But the methods for arriving at this two percent figure remain murky. And, of course, there is no way for the city to know how many properties, like Grace Baptist Church, decide to pay off tax debt by selling before the process of foreclosure starts.

Paula Segal, co-founder of 596 Acres, which does land use advocacy throughout New York City, led the effort at Fordham University to collect data on this year’s tax lien sale. Segal questions the two percent figure provided by the city: “Some of the foreclosures take over a decade,” she said. “If they’re looking at one or two years, I believe that number — but that’s not how long foreclosures take.” Segal adds that foreclosure is not the only risk that comes with including nonprofits in the tax lien sale, pointing out, “The whole system opens smaller organizations up to having to pay off the tax lien trust in order to protect their property, spending money that should be spent on programming. They pay property tax bills — sometimes sent erroneously by the city — because the risk, if they don’t do it, is that they are going to lose their property.”

Segal is working with the Department of Finance to host a November 10 outreach event for nonprofits, and for the past several weeks, she and her students have been calling organizations affected by the sale to encourage them to reach out to a council member or the city’s Taxpayer Advocate. Most of the organizations she contacts do not know there is debt on their property, much less that it’s been sold to a trust of private investors. “It sounds so incredibly unreal and unreasonable that this keeps happening that people don’t believe me,” Segal said. “And I can’t help them. It’s incredibly frustrating. All I can do is say you need to seek help. This is a real thing that could put your property at risk.”

Perhaps no organization exemplifies what stands to be lost more than Black Veterans for Social Justice in Bedford Stuyvesant. The organization, founded in 1979, is housed in a three-story building on Willoughby Avenue. Support and optimism are offered before you even walk in. A mural covers much of the brick façade: a uniformed veteran sits at a desk, writing under a blue sky.

Beginning with those who fought in World War II, Black Veterans for Social Justice has helped fight racist policies and other challenges that greet those re-entering civilian life. The organization provides a range of services including help with securing housing, establishing businesses, getting vaccinations, and preparing taxes. It runs a food pantry and computer lab, hosts community breakfasts and provides retirement planning. The organization’s stated vision is that “all veterans will be able to solve their problems and have the opportunity to be contributing members to their families, community and society.”

Black Veterans for Social Justice received funding from several city agencies — the Department of Homeless Services, Department of Housing and Preservation, Department of Social Services — as meanwhile, ironically, the Department of Finance, another city agency, sold tax debt on the nonprofit’s building in May. The organization was not aware of the sale until Paula Segal called them. After speaking with Segal, Jermaine Howard, who serves as the organization’s property manager, contacted the city’s Taxpayer’s Advocate to get help. He is trying to confirm if the organization’s application for property tax exemption has been properly filed with the city. Just like most small nonprofits, the staff is stretched thin, underpaid, and reliant on volunteer support.

The vast majority of the 89 nonprofits included in the 2016 tax lien sale are in neighborhoods at various stages of gentrification: Harlem and Williamsburg, where so much change has already happened; Bedford Stuyvesant and Crown Heights, where cranes pepper the sky; and Jamaica and the South Bronx, where land grabs are underway. The nonprofit organizations in these neighborhoods should not risk closure because of a bureaucracy that entangles those who encounter it — and wears down the government officials who run it. Does anyone in the de Blasio administration actually believe that nonprofit organizations providing the most fundamental services to a neighborhood should be closed because of incomplete paperwork? Or an erroneous tax bill sent from a bleary-eyed government worker processing thousands of properties?

The rules for the tax lien sale program are up for renewal next year, and the de Blasio administration has set up a task force to reevaluate the policy. The timing is perfect to address the bureaucratic inertia that is eroding so many of the vulnerable communities in gentrifying neighborhoods. While doing away with the tax lien sale altogether might be advisable, it is likely politically impossible: it generates revenue and is not yet widely included in New York City discourse about gentrification. But if the de Blasio administration were willing to reconsider the program, the city could use the tax debt as leverage, rather than selling it, and work with community groups that specialize in rehabilitation, third party transfers, and organizing tenants in order to create affordable housing in buildings that are already vacant. The Urban Homesteading Assistance Board estimates that this could help preserve and restore as many as 4,000 affordable housing units in a single year.

Even small changes to the tax lien sale program could go a long way toward addressing its structural problems. What if nonprofits like the churches that line the walk to my daughter’s school were excluded from the sale altogether? Such a move would ensure that communication breakdowns and bureaucratic failures would not so easily force community organizations to leave a gentrifying neighborhood.

When I asked Jeffrey Shear about the risks and potential consequences of including 89 nonprofits in the 2016 tax lien sale, he returned to the staggering size of the program: “Considering the thousands of warning letters we send out, it would be really hard for us to track a trend relating to 80-some-odd properties owned by nonprofit organizations.”

The problem is that one foreclosure — just one — has an impact on a neighborhood, particularly if, like Flatbush, it’s already underserved and vulnerable. For any individual who relies on one church’s soup kitchen or another church’s childcare, the risk is real, and the consequences immediate. But still a dated policy like the tax lien sale sputters along, challenging government officials charged with running it while shuttering community organizations that get lost in the paperwork. The city should amend or, better yet, eliminate the program to stop the slow bleed of vital services in rapidly changing neighborhoods.