Mayor Pawlowski's "Pay to Play" Pal of the Week: Portnoff Law Associates

Portnoff Law Associates is a law firm that specializes in sucking the blood out of taxpayers in 75 municipalities throughout Pennsylvania. Portnoff is "tax farmer" - privatized tax collector - for seventeen municipalities in Northampton and Lehigh County, including Allentown.

Condemning Portnoff's "cavalier attitude towards the Rule of Law," A Montgomery County judge has ordered this firm to pay $5.2 million in damages to more than 16,000 state residents being charged illegal fees.

If Portnoff has a cavalier attitude when it comes to overcharging taxpayers, that's only because it's in the "pay to play" game, too. During a nonelection year, on 1/6/06, Michelle Portnoff dumped $1,000 right into the coffers of Allentown Mayor Ed Pawlowski.

And in the past two years, Allentown has paid Portnoff $89,848.86 for its tax collection services, according to Allentown's vendor list. Everyone wins but the taxpayer, whose home security is often threatened by a predatory collector motivated by a profit margin instead of the general welfare of a resident who may have fallen on hard times.

Portnoff's Tax Collection Tactics Ruled Illegal

Today's Morning Call reports that Portnoff Law Accociates has been ordered to pay $5.2 million in damages to more than 16,000 state residents being charged illegal fees. In doing so, a Montgomery County judge has condemned Portnoff's "cavalier attitude towards the Rule of Law."

That ruling is no surprise to many of us. I first told you about Portnoff's tactics long ago - on November 2, 2006. hey actually make the dreaded IRS look reasonable.


This privatization of tax collection, called tax farming, has historically been quite unpopular. It led to civil war in ancient Egypt, and was a grievance before the French Revolution. In 17th century England, privatized "chimney men" were allowed to enter homes at will to collect a chimney tax. "There is not one old dame in ten,/And search the nation through,/But, if you talk of chimney men/Will spare them a curse or two."

Rather than taking a lesson from history, state and local officials have passed laws and signed contracts with profit-driven private tax collectors. Property owners now face the predatory practices of Pennsylvania's very own chimney men. The most prominent of these? Portnoff Law Associates, a law firm that specializes in sucking the blood out of taxpayers in 75 municipalities throughout Pennsylvania. Portnoff is the "tax farmer" for seventeen municipalities in Northampton and Lehigh County.

How did this happen?

The way our real estate tax laws are set up, a person behind on property taxes ordinarily has two years before he has to worry about his home being sold at tax sale. The county conducts annual tax sales for properties two or more years delinquent, giving a homeowner ample opportunity to set up payment plans with no attorney fees. And if a municipal lien is filed for an unpaid garbage or sewer bill, the lien must be paid before the property is sold. A municipality will always get its money. But that wasn't good enough for many local officials, who wanted their money right away.

This is where tax farmer Portnoff enters the picture. It lobbied state legislators to modify tax sale laws in 1996 so it could stick taxpayers with court costs and its "reasonable" attorney fees. And all was well for the chimney men, who made money hand over fist. But then something terrible happened. Pennsylvania's Supreme Court, in an uncharacteristic nod to the little guy, concluded in 2003 that the procedure was all wrong. So Portnoff went back to the boys in the land of midnight payraises. Five months later, a brand new law not only cured these procedural problems, but was even made retroactive all the way back to 1996. That way Portnoff wouldn't lose a dime. The vote was unanimous in the senate, and only three house members opposed this draconian law. No Lehigh Valley legislator spoke against it. It's amazing what you can do with a lobbyist like Malady and Wooten!

The net result is explained quite well by the Commonwealth Court's Judge Pellegrini.

"Imagine your credit card company has consistently charged you unlawful fees - tripling your bill. Upon realizing that illegality, you sue the credit card company to recover those fees. A month later, a law is enacted that says the credit card company cannot only charge those fees in the future, but can recover those fees it illegally imposed in the past. If that legislation is constitutional, what is the result? The credit card company receives a windfall, and you are left without a remedy to be reimbursed for illegally charged fees that tripled your monthly credit card payment."

And that's precisely what has happened. Portnoff's "reasonable" attorney fees tripled most tax bills. When it was discovered they were illegally imposed, the legislature not only made everything legal for private tax collectors, but also said that everything that had been illegal in the past is now wonderful.

Thanks to our pals in the state legislature, Portnoff can now soak us. Some tax reform.

Whoopee!

Lehigh Valley communities have quickly jumped on the Portnoff Express. Said Bethlehem's Tax administrator Timko: "Are we happy? Oh yes, deliriously happy." Lehigh and Northampton County municipalities on this bandwagon include Allentown Downtown Improvement Authority, Allentown School District, Catasauqua Area School District, Allentown, Northern Lehigh School District, Northwestern Lehigh School District, Parkland School District, Salisbury Township School District, Whitehall-Coplay Area School District, Whitehall Township, Bethlehem Township, Freemansburg, Bethlehem, Easton, Lower Mount Bethel Township, Northampton Area School District and Wilson Area School District. If you live in any of these places, expect no mercy. Don't get sick. Check your mailbox every day.

Under our privatized tax collection laws, chimney men like Portnoff can collect "reasonable" attorney fees. But what Portnoff thinks is reasonable is outrageous to the rest of us. To open a file and send a demand letter, the charge varies from $150 to $200. And every breath they take after that ends up costing homeowners even more money. A title company can't even get a Portnoff employee to talk to them without a check for $25. But where privateers make the really big money is when they list your property for sheriff's sale, sometimes for ten times as much as the original lien. In September alone, Portnoff listed twenty properties for sheriff's sale in Northampton County.

Liens are filed only if a homeowner fails to respond to a demand letter that includes both bill and a $150-200 attorney's fee. Obviously, most people pay up quickly. But a lien analysis in Northampton County for the first ten months of 2006 is staggering: Easton, 271 liens ($81,300 for Portnoff); Bethlehem, 201 liens, ($80,400 for Portnoff); Northampton Area School District, 273 liens ($81,900 for Portnoff); Wilson Area School District, 69 liens ($20,700 for Portnoff); Northern Lehigh School District, 17 liens ($5,100 for Portnoff); Freemansburg, 19 liens ($5,700 for Portnoff); Lower Mount Bethel, 19 liens ($5,700 for Portnoff); and Bethlehem Township, 27 liens ($8,700 for Portnoff). In the first ten months of 2006, Portnoff snapped liens against 896 Northampton County taxpayers and has charged fees totaling $288,900.00.

Is this reasonable?

Wait, it gets better. For those sorry bastards who don't pay up, Portnoff's next step is to sell your property. To collect a tax bill totaling $465.77, Portnoff will sell your property unless you pay them $3,626.57! This is totally unconscionable. Attorney fees like these are neither reasonable nor bear any relation to the original bill. Portnoff listed 40 properties for sale in 2005, and walked away with $144,000 in its pocket.

What's interersting about all of this is that Portnoff makes a great deal of money, delinquent taxpayers lose a lot of money and become very disenchanted by our government, but municipalities make no more money than they would if they simply permitted the counties to collect these late taxes. Municipalities do not benefit from this privatization in the long run. And the homeowner always suffers.

Larry Kistler, Lehigh County's Tax Claim Bureau Director in 2002, told The Morning Call, "I can't speak to the reasons why municipalities have gone to Portnoff, but I've always thought the county system worked well. We work to keep people in their homes, and we recover 99 percent of the money within three years."

We've privatized just about everything being done in Iraq, and look at how that has turned out. And now we're doing exactly what Benjamin Franklin sarcastically predicted would guarantee revolution - entrusting tax collection to a group "composed of the most indiscreet, ill-bred, and insolent [men] you can find. ... Let these have large salaries out of extorted revenue. . . . If any revenue officers are suspected of the least tenderness for the people, discard them."