Feb 28
2023
City keeping $3.6M of other people’s money
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In 2019, the City of Buffalo sold 103 properties seized for nonpayment of taxes and fees.
The annual auction yielded $4.3 million that year, far more than the $700,000 the former owners of those properties owed the city.
Those former owners were supposed to be able to apply for their share of the surplus $3.6 million — which represents their remaining equity in those properties — through a program developed by the city’s law department and published on the city’s website in late 2021.
Many former property owners filed claims. None received any money, as Investigative Post reported in October.
In fact, their claims were never even acknowledged, let alone approved or rejected, according to Jonathan Pincus, a Rochester attorney who has filed 20 of them since last June.
In late January, a frustrated Pincus filed a lawsuit in state court, asking a judge to order the city to make a ruling — yes or no — on one of those claims, from the former owner of a Fargo Avenue property, the sale of which generated $131,000 in surplus.
The Brown administration’s response to the lawsuit: It pulled the plug on the whole program.
It did so without notice to those who have already filed claims or guidance on how future claims can be made.
The mayor didn’t even tell city lawmakers, who have been pushing the Brown administration for clarity on the program for four years, according to Common Council President Darius Pridgen.
“I have not been informed to this day that the program ended,” Pridgen told Investigative Post on Monday.
Just days after being served with Pincus’s Article 78 lawsuit, the city pulled the guidance on how to make a claim for surplus funds from its website.
And, in an answer to the lawsuit filed February 17, a city attorney argued the program — which was designed by city attorneys — violated city and state law. For that reason, the city could not be compelled to render decisions on claims made through the program.
“[The City of Buffalo] is not required to act upon requests not grounded in the law, or to which the law provides no support,” Assistant Corporation Counsel Carin Gordon wrote.
Gordon described the program as “under review,” even though it was published on the city website and solicited applications.
“It has since been determined that the City of Buffalo Equitable Claim Program lacks any legal basis as designed and is not supported by state law, and thus to the extent that a response is required, the application is denied,” Gordon wrote.
In his answer to the city’s filing, Pincus noted to the court that nowhere in the now vanished guidance did the city indicate the program was “under review.” He questioned why Gordon described the purported illegality of the program “as if it were produced by a third party,” rather than her department.
“I find it almost unbelievable that the City of Buffalo promulgated the program, and as soon as anyone started pressing them to pay out the surplus, they tried to make it vanish,” Pincus told Investigative Post last week.
“It’s like the city decided to take their ball and go home.”
According to the city comptroller’s office, the city took the money, too.
City Accountant William Ferguson told Investigative Post the $3.6 million in surplus was deposited into the city’s general fund back in the 2019-2020 budget year.
This, too, came as a revelation to Pridgen. The Council president said he’d expected the money would be “encumbered” — that is, committed to paying valid claims from property owners — rather than pooled with other miscellaneous revenues used to pay the city’s operating expenses and balance the budget.
“Because, from the Council side, we expected it to be paid [to former property owners],” Pridgen said. “If this was utilized in the budget, I’d be very disappointed to hear that — from the comptroller’s office or the administration.”
Neither Michael DeGeorge, the mayor’s spokesman, nor Cavette Chambers, the city’s lead attorney, nor Jason Shell, the city’s commissioner for assessment and taxation, would respond to these questions:
- What has become of the claims for surplus funds already filed?
- How do those who wish to file new claims do so?
- What is the status of the $3.6 million in surplus funds the city collected from the 2019 tax foreclosure auction?
DeGeorge cited “pending litigation” as explanation for the Brown administration’s silence, though he would not say whether he was referring to Pincus’s lawsuit or some other action. There is also pending litigation in federal court seeking surplus funds for a former Buffalo property owner. The attorney in that case — like Pincus, based in Rochester — hopes to turn that case into a class-action lawsuit.
Prior to 2019, surplus funds from the city’s tax foreclosure auction were turned over to the Erie County Comptroller. Former property owners could file a claim in Erie County Court to get their share of the surplus. Unclaimed funds were eventually turned over to the state.
In 2019, the Brown administration changed the tax foreclosure process, so that the city would hold the surplus instead of turning it over to the county. Former property owners — as well as their creditors — would make claims for funds through the city’s law department rather than in county court.
The change set off alarm bells at the Western New York Law Center, which provides legal services to people who cannot otherwise afford representation. The center frequently works with homeowners in danger of foreclosure. For the past four years, the center’s Kate Lockhart has been lobbying the Brown administration and the Council to create — and codify into law — a clear and equitable process for claiming surplus funds.
“We have seen firsthand the positive impact that surplus funds have on a family’s ability to rebuild after a tax foreclosure,” Lockhart told Investigative Post. “Families that have built equity, sometimes generations’ worth, in homes deserve to have that equity returned to them in the form of surplus funds.”
The procedure that the city quietly ended last month was imperfect, according to Lockhart and Pincus. For example, it required claimants to prove they were suffering financial hardship — that they needed the money. (“If someone lost their home, that usually indicates that there’s a problem financially,” Pridgen, the Council president noted.)
Further, the center was uncomfortable with the city being the arbiter of who deserved a share of the surplus, when it stood to benefit financially from rejecting claims.
But at least it was something. Now there’s nothing.
“The Law Center strongly condemns the City’s decision to remove its equitable claims process from its website and keep funds that should belong with struggling families,” Lockhart said.
Pridgen said he’d favor a return to the old process — sending the surplus to the county comptroller — if the city is unwilling or legally unable to get the money into the hands of former property homeowners.
“To be frank, I don’t want to hear a word about a new process. The former process got people their money — whether it took longer, didn’t matter,” he said.
“I was told that a new process was going to be a better process four years ago, and then [the administration] went to radio silence” as he and other Councilmembers pushed for information and action.
Pridgen — who will not seek re-election this year — said he’d use his office to prevent the city holding another tax foreclosure action until the problem was resolved to restore lost equity to former property owners.
“I will in no way vote for or participate on a legislative basis if the process is going to be the same,” he said.
Pincus’s Article 78 lawsuit is scheduled to be heard by New York State Supreme Court Justice Donna Siwek on March 10.
Lockhart said she’d forwarded “publicly filed documents” on the matter to the state Attorney General’s office for review.
Pridgen said he expected the Council would request a briefing from city lawyers as soon as possible.
“What the city cannot do, I feel, is be silent and shut down. Even with a lawsuit,” he said. “These people deserve their money.”
