Editorial: Murphy's Law with Schenectady nonprofits
What a mess.
A handful of Schenectady’s nonprofit charitable organizations are in danger of foreclosure because once, a few years ago, they failed to file for tax-exempt status, they failed to pay their due tax. Then they did it again, at least once more.
Nonprofit charitable organizations are tax-exempt, but the law requires them to file accordingly every year. As with so many laws in Schenectady, city officials were often willing to look the other way when it came to organizations renewing their longtime tax-exempt status, and there were no problems until Patrick Mastro became assessor. He was a stickler about the law, and in 2007, after warning them, arranged for a dozen longtime nonprofits to be sent tax bills. Among them were several churches, the Carver Community Center, Schenectady Civic Players and the Loyal Order of the Moose fraternal organization.
But the organizations thought the bills were a mistake and didn’t pay them; and the city eventually got the state Legislature to hold the organizations harmless.
Except the liens were never formally satisfied, and city finance officers bundled them with other liens and, in a deal that got approved by the City Council, sold them to American Tax Funding, a private buyer with whom the city had been doing business for years. To further compound matters, the nonprofits largely ignored ATF’s demands for payment, so ATF now has begun foreclosing.
As we said, a real mess.
Mayor Gary McCarthy says the city has been trying to trade some of the liens with others in its stockpile, but ATF apparently hasn’t liked the bait and is holding out for sweeter offers. It has the city over a barrel and knows it.
Unfortunately, the city has little choice — it can’t let ATF foreclose on these organizations, many of which are integral to the city’s social framework. But the city also has little money — one of the reasons it had to do business with a shark like ATF in the first place.
Still, McCarthy needs to get this ironed out in a hurry, with the fairest solution requiring all parties to contribute something. After all, the nonprofits were hardly blameless in this mess, but neither were the city officials who carelessly approved the lien sales.