Scranton officials demand Lackawanna County reduce delinquent tax attorney fees

Jun. 16—Scranton officials demand Lackawanna County renegotiate an intergovernmental agreement to lower attorney fees charged to delinquent city taxpayers that they say are excessive.

A 2016 county ordinance authorizing the 10% "attorney lien fee" charged by attorney Joseph Joyce, of Joyce, Carmody & Moran, is referenced in the 2020 agreement that transferred delinquent tax collection to the county's tax claim bureau. City officials argue that the county did not clearly reveal the fee — an issue county officials vehemently deny.

The attorney fees are separate from the 5% commission the city pays to the bureau from its portion of the delinquent taxes collected.

County and city officials say they hope to resolve the dispute that has threatened to scuttle the agreement — a deal both sides agree has been a financial boon for the city.

As of last week, the bureau had turned over $2.8 million to the city, of which about $2.4 million came from delinquent taxes owed for 2019 and 2020, that were subject to municipal liens Joyce filed. The remaining $400,000 is proceeds from prior delinquent tax years.

The agreement also is a lucrative deal for Joyce, the tax claim bureau's solicitor. His firm earned $287,626 in April and May — more than 2 1/2 times the $104,537 it was paid for legal work done for the bureau for 2020, according to county records.

While city officials say they're pleased with the delinquent tax collection, they're troubled by the attorney fees — which are 10 times what some other similarly sized municipalities charge. They say they are overly punitive and burdensome on property owners, particularly in light of the economic devastation caused by the coronavirus pandemic.

"Post-COVID I think that's something that we should revisit now to make sure that we're not overburdening already struggling folks," Mayor Paige Gebhardt Cognetti said.

County records show hundreds of residential and commercial Scranton property owners were charged the fees. In some cases, the fees amounted to just a few dollars, and in one case a single dollar. But many delinquent property owners paid hundreds, even thousands, of dollars in attorney fees.

Alan Levy and Fay Sackstein, owners of a commercial property at 2201 Washburn St., for example, paid $4,324.42 in lien attorney fees, according to county records. They owed more than $40,000 in delinquent county, city and school taxes for 2019 and 2020. Attempts to reach them were unsuccessful.

In another case, Tarji Barnes, the owner of a residential property at 215 1/2 William St. who owed more than $2,000 in delinquent 2019 and 2020 city, school and county taxes, paid $229.49 in lien attorney fees. Attempts to reach Barnes were unsuccessful.

City solicitor Joseph O'Brien said city officials also question why the bureau is charging the fee only to Scranton property owners and why the contract to collect the fees was awarded to Joyce without being competitively bid or approved at a commissioners meeting. Bidding the contract might have resulted in lower fees, he said.

County Commissioners Debi Domenick and Jerry Notarianni and county solicitor Frank Ruggiero defended the county's handling of the matter. They contend the attorney fees are reasonable and dispute the city's claim that officials were not advised of them. They say Joyce's contract did not have to be bid out because it is a professional service, which is exempt from bidding requirements.

"They're (city officials) just sitting there collecting and cashing their checks and the lawyers that are generating that revenue for them are being crucified for doing a good job," Domenick said.

Notarianni said he is surprised at the amount of money the law firm earned in attorney fees, but stressed that the arrangement is more beneficial to city taxpayers than Scranton's prior arrangement with the firm formerly known as Northeast Revenue Service; the company is now called Elite Revenue Solutions.

The company's 15% commission was deducted from the money it remitted to the city. The 10% attorney fee earned by Joyce, Carmody & Moran is paid by delinquent taxpayers and doesn't reduce the delinquent tax revenue returned to Scranton, said Notarianni.

"The people that are paying the money are the people who are delinquent in taxes," he said.

Minority Commissioner Chris Chermak said he didn't realize how much money Joyce would earn from the fees. While he agrees the contract did not have to be bid, he said the county should have considered doing so given the amount of money involved.

"This is a big item, so maybe that should have been looked at," he said.

O'Brien said the city does not object to attorney fees, but they must comply with the Municipal Claim Tax Lien Act (MCTLA), which mandates they be "reasonable." The act does not set a specific limit, but says the fees should be based on the legal complexity of the case, the amount of taxes collected and be comparable to what other attorneys charge for similar work.

A review of policies in several other similarly sized area municipalities, including Bethlehem and Allentown, found they allow for attorney fees, but they limit them to 1% of the delinquent tax.

"Do they have a right to charge legal fees? Yes. But they do not have a right to charge excessive fees," O'Brien said. "You have a lawyer making $100,000 a month ... for what he previously did for $100,000 a year. It isn't right."

City officials also said Joyce was too aggressive in filing liens on taxes owed for 2020, which are just six months late.

The city is not the only one questioning the fees, O'Brien said. Lackawanna County Deputy Treasurer John Grzenda first brought the issue to the city's attention.

In a May 12 email to city Treasurer Mary Jo Sheridan, Grzenda said he wanted to alert her to an issue that was "bothering my conscience" after seeing the amount of money paid to Joyce in April and May.

Grzenda told the newspaper he alerted officials because he also believes the 10% fee is excessive and is concerned the Joyce contract was not bid out or publicly voted on at any commissioner's meeting.

Joyce defends the fees, saying the 10% fee is standard in the debt collection industry. Although the charge is listed as a "attorney lien fee," he said he does far more than just file liens.

"We are not just filing liens and letting them sit," he said. "We are contacting people, we do notification and make efforts to try to find people."

He said the fees, received only when taxpayers pay their outstanding bills, are his only compensation because he no longer receives a retainer and does not bill the tax claim bureau for any other legal work.

"We're conducting all the sales, we're sending out all the other notices, and providing that advice and guidance for the daily operations," Joyce said. "We provide that at no charge to the county."

As for why the fees are charged only to Scranton residents, Ruggiero said Scranton is the only municipality that authorizes the filing of liens, which is allowed under MCTLA. All other municipalities the bureau collects for fall under a different law, the Real Estate Tax Sale Law.

"It's not like we woke up one day and decided to deal with Scranton differently," Ruggiero said. "It is not applicable to any other municipality."

County officials also insist city officials were made aware of the fees during various discussions. Even if there was a miscommunication, Ruggiero said the intergovernmental agreement contains a section that references Lackawanna County ordinance 244 of 2016, which sets a 10% rate for "fees incurred in the collection of any delinquent account under the MCTLA."

"If they want to admit they didn't read it then that is on them," Ruggiero said.

Cognetti and O'Brien acknowledge the agreement mentions the ordinance but note the ordinance primarily deals with giving elderly taxpayers more time to pay delinquent taxes under certain conditions. The 10% legal fee is a single line in the last section of the ordinance.

"During discussions about the agreement county officials did not disclose an intent to use ordinance 244 as a tool for a 10% legal fee to charge all taxpayers based on a program that is intended for a ... subset of our elderly taxpayers in county government," Cognetti said.

While the county maintains the fees are reasonable, Ruggiero said county officials are open to discussions on reducing them. If that happens it likely would not be until next year.

Cognetti said she's confident an agreement will be worked out.

"I think it's been good for the city, and again, aside from a couple of communication breakdowns we've had a really good working relationship with the tax claim bureau," she said.

Contact the writers: tbesecker@timesshamrock.com; 570-348-9137; @tmbeseckerTT on Twitter; jhorvath@timesshamrock.com; 570-348-9141; @jhorvathTT on Twitter.