Buffalo’s tax auction limbo

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Delaware District Common Council Member Joel Feroleto.

Last September Delaware District Council Member Joel Feroleto held up the city’s sale of a house on Amherst Street because he knew the city had acquired the property through a tax foreclosure. He wanted to be sure the children of the former owner, who died, got any surplus funds generated by the sale.

Feroleto had reason for concern.

In 2019, the Brown administration changed its process for handling the money generated at tax foreclosure auctions so that the city could keep more of the proceeds. As a result, millions of dollars that in the past might have been returned to former property owners has instead landed in city coffers. That has precipitated protests from good government groups, debates on the floor of the Common Council, and lawsuits.  

The upshot: The city hasn’t had a tax foreclosure auction in four-and-a-half years.

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At first the auctions, which used to happen annually, were canceled due to the pandemic. But concerns about legality and ethics of the Brown administration’s policy contributed, too. 

Investigative Post has reported on the issue over the past two years:

• In 2019 the city changed the program so that it could be custodian of the money generated by tax foreclosure sales. Previously the city took what it was owed, then sent the rest to the county comptroller. Former homeowners and creditors could apply through the courts for their share of any leftover money.
• The new policy that year resulted in the city keeping $3.6 million above and beyond what it was owed in taxes and fees.
• Good government groups clamored for the Brown administration to create a process by which former homeowners could apply for their share of the proceeds, as they were able to do under the old process. So did city lawmakers. Two years after the 2019 auction, the law department finally did so.
• However, those who applied for their share of the proceeds received no response. Finally, one of them sued to force the city to say yes or no to his application.
• The city then canceled a process it created, claiming in court proceedings that returning the equity to former homeowners would be an illegal gift of public funds. The city’s lawyers claimed the application process they created and published on the city’s website had never been approved by the Common Council.

A judge ordered the city to respond to the plaintiff’s application anyway. The city rejected the application. In a subsequent challenge, a court sided with the city. There’s another lawsuit, with different plaintiffs, pending against the city in federal court. 

Last May the U.S. Supreme Court ruled that governments could only recoup what they were owed through tax foreclosure auctions — that keeping the so-called “surplus funds” from a sale, as Buffalo did in 2019, was an unconstitutional taking of private property. 

The decision, which arose from a case in Minnesota, has led to a pause on tax foreclosure auctions across New York State — at least among those municipalities that handle them as Buffalo does.

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The Brown administration’s lawyers have yet to put forth a new auction process to replace the one they devised in 2019. Former Council President Darius Pridgen said last year he’d favor a return to the old process — sending the surplus to the county comptroller — if the city is unwilling or believes it is legally unable to get the money into the hands of  former property homeowners.

Pridgen told Investigative Post the Brown administration “went to radio silence” when he and other Council members pushed for information and action.

“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.

1475 Amherst St.

Mable Tipps bought the property at 1475 Amherst St. in 1975. She died in 2011. The taxes stayed current until 2017, according to county records, but the city took title to the property in October 2019 for unpaid water and sewer bills. 

The house has languished, according to Feroleto — unoccupied, uncared for, on the path to demolition.

The house didn’t sell at the city’s 2019 tax foreclosure auction. But a potential buyer came before the Council in September, prepared to pay $155,000, about half the property’s taxable value. Feroleto said then that the price was fair, given the amount of work the house required.

But Feroleto said he wouldn’t vote to approve the sale until he’d been assured the Tipps family would get their share of the proceeds. Because the house is in Feroleto’s district, the rest of the Council agreed to table the matter.

That was six months ago. Feroleto told Investigative Post this week that he has made “zero progress” with the city’s law department in finding a way to ensure surplus funds from the pending sale go to the Tipps’ heirs.

This week, in the interest of saving the house from further decay, Feroleto decided to lift his hold on the sale. 

But he’s placed a condition on his approval: The city must deposit any surplus funds into an escrow account. 

The money will be parked there, Feroleto said, for however long it takes for the city to figure out a way to give Mable Tipps’ family their share of the proceeds.

“Could be 10 years, 12 years, whatever it takes,” Feroleto said.

Geoff Kelly