1391-99 Lafayette Avenue is located along a rumbling industrial strip of Hunts Point in the Bronx. Trains and trucks thunder by, making deliveries to the fish and meat markets right next door. From the road, you can only see the battered fence of what, from the 1950s until recently, was the Bronx Fur Dressing Company. Trains brought carcasses here, workers scraped flesh off the pelts, and the hides were cleaned and processed.
Today, the property isn’t much to look at–except for its view of the Bronx River. There, with the water quietly lapping against the land’s edge, you can forget for a moment that you’re in a crumbling industrial zone.
That’s just what Paul Lipson, executive director of the community development group The Point, dreams of–a place where Hunts Point’s young people can escape and embrace this little slice of the natural environment.
The Point’s dreams for 1391-99 Lafayette are expansive. Where carcasses once hung, Lipson hopes to build a boathouse, so young people can learn to row, and gain an appreciation of river ecology. Or even learn to build boats by hand. The organization wants to make space for local businesses, like a soul-food catering company. And room for arts classes–and studios for budding artists. On the 25,000-square foot lot, there’s room for all of it, with plenty of space left over–open space, a precious rarity in the largely redeveloped South Bronx.
The location couldn’t be more ideal for The Point–it’s just four blocks from the organization’s new headquarters, where about 100 young people already come every day for arts and other activities. Immediately to the east of 1391-99 Lafayette is a slice of vacant land that extends all the way to the water’s edge, which the city Parks Department is currently turning into a small park. Together, The Point’s leaders realized several years ago, these two pieces of land could be the natural anchor of a new Hunts Point.
There was just one problem: The Point didn’t own 1391-99 Lafayette. In 1998, Lipson first approached the property’s longtime owners, Namran Realty, asking to buy the old fur factory. Namran named $900,000, more than the Point could pay. So they negotiated on and off for several years, until late 2001, when Lipson and his attorneys found out that the property was about to be seized.
It turned out that Namran hadn’t been paying its tax bills, nor fines for various violations. In 1996, New York City had sold Namran’s $541,372 in back debt on the property–called a tax lien–to a private trust that immediately pays the city and then collects the debt. Under a city program that handles roughly 4,000 similar transactions each year, the trust, in turn, hires a Connecticut-based company that specializes in tax liens, called JER Revenue Services, to do the work of actually collecting the debt.
But, like the city, JER was unable to collect the back debt from Namran Realty. So in December 2001, JER offered the old factory at a tax foreclosure auction. No one bid enough to cover the total debt–which by then had reached more than $1 million–so JER bought the property itself, on behalf of the trust.
At first, the Point wasn’t unhappy with this turn of events, since it could now negotiate with a company that was eager to sell, plus they now had a commitment from Congressman José Serrano for funds to help buy it. Lipson and his colleagues assumed, remembers Gail Suchman, an environmental attorney at New York Lawyers for the Public Interest who does pro bono work for the Point, “that [tax lien sales] foreclosure was a program that operated in the public interest.” Looking back today, Suchman shakes her head. “Having been a lawyer for 33 years, it’s somewhat embarrassing to sound so naive.”
After buying the property, JER moved to sell it privately. Bronx real estate investor and landlord Jacob Selechnik won JER’s February 2002 sealed bid auction by offering $775,000. The Point was disappointed–it had bid $625,000–but the group quickly moved to contact Selechnik, to see if he would sell the lot privately.
He would–for $885,000. Although the price was much higher than it had hoped to pay, the Point reluctantly agreed.
However, Lipson and his colleagues soon discovered that their waterfront dream would be deferred–and maybe dashed. JER told The Point that Selechnik hadn’t actually paid for the property, even though a few months had passed since JER accepted his bid. (Selechnik now says that he did try to make good on his initial bid, but that JER “returned my check.”) Selechnik was actually looking to sell his winning bid to The Point–and clear $110,000.
The Point immediately backed out of its tentative agreement with Selechnik. In the meantime, 1391-99 Lafayette sat empty for months. And then, on June 19, a fire broke out in the factory. It was a big fire–three different Fire Department companies responded, the building’s roof was completely destroyed and five firefighters suffered minor injuries battling the blaze. The Fire Department later determined that the fire had been intentionally set, but it closed its investigation without naming any suspects.
Late last June, JER informed the Point that it was reopening bidding for 1391-99 Lafayette. Because the fire had damaged the building–and also brought to light that hazardous waste remained at the former factory, which would cost its new owner tens of thousands to clean–The Point decided to lower its bid to $525,000.
On Friday, June 28, The Point faxed and emailed its bid to JER property manager Michelle Lynch, who was handling the auction. They were confident they would win, since the Point’s January offer had been second only to Selechnik’s. Then, that following Monday, Lynch responded by email, asking if The Point was aware of the “fire at the property and…a spill of toxic substances? Are you sure you want to bid $525,000 under the circumstances?”
The Point reconsidered. Several hours later, via email, it changed its bid–to $200,000. Lynch immediately replied–“Thank you!”
Two days later, the Point found out who won the bid–Jacob Selechnik, who had offered $499,900. To Suchman, what happened was clear: “She induced us to lower our bid–so she could sell it to Selechnik.”
JER disputes this interpretation, saying that Lynch questioned the $525,000 bid because she believed that it had originated not from The Point, but “from a new bidder,” whom Lynch wanted to ensure knew about the fire and environmental issues.
However, copies of emails obtained by City Limits directly contradict JER’s claim. The original email that Lynch had replied to, which came from Suchman, explicitly states that the attorney was bidding “on behalf of The Point.”
For its part, The Point was furious. They couldn’t fathom JER’s blatant favoritism towards Selechnik. Why did JER wait nearly five months, after Selechnik made no payment on his initial $775,000 bid–which he was supposed to do within two days–before trying to sell the property again? Why did Michelle Lynch urge the Point to lower its June 28 bid? Why would JER then accept Selechnik’s second bid, after he hadn’t made good on his first one?
They didn’t know the answers to these questions–but they certainly had suspicions. “I really believe they have a special relationship with Selechnik,” says Lipson, still angry months after the event. “JER created every opportunity for him to buy the property to the exclusion of others.”
From his office on the Grand Concourse in the Bronx, Selechnik disputes the Point’s account of what went down with 1391-99 Lafayette last spring. “At no point did I ever renege on this deal,” he says. Rather, Selechink says that JER wouldn’t allow him to close it.
Lipson and the Point’s attorneys would have probably been even angrier with JER if they knew more about Jacob Selechnik–a Bronx real estate investor and landlord with a long history of mismanaging residential properties, battling tenants and alienating community groups.
Selechnik’s neglect of the buildings he owns has also caused the city of New York to sue him–not once, but twice. Most recently, the city department of Housing Preservation and Development filed suit last year against Selechnik and his daughter Ellen for more than a thousand outstanding housing code violations in 14 properties that the family owns in the Bronx.
None of this seems to have inhibited JER Revenue Services–if the company even knew about it. In its role collecting millions of dollars of debt owed to New York City, and selling off more than a thousand properties, JER has tremendous power–and operates with almost zero public scrutiny. The company is responsible for managing a program that is collecting nearly $1.4 billion in back taxes and unpaid fines on more than 42,000 properties in New York City.
Jacob Selechnik’s long history of antagonism with Bronx tenants can be best characterized by a flyer from an undetermined date buried in the archives of the Northwest Bronx Community and Clergy Coalition, a community development and advocacy organization. “BEWARE!” the poster reads in huge letters, “Selechnik Is Coming!!” The flyer accuses Selechnik of making “life miserable for thousands of tenants in Morris Heights, South Fordham and Kingsbridge Heights.”
The 1970s and 1980s were a tumultuous time in the Bronx. Hundreds of thousands of Jewish and Irish families were fleeing as minority families moved in. Abandonment and arson were common. Tensions between landlords and tenants were explosively high. Jacob Selechnik was one property owner in the midst of this chaos, accused of buying buildings cheap from their previous owners, squeezing every penny possible from the low-income tenants who lived there, and then either flipping the properties for more money to a new owner or walking away from the building.
Such actions were common enough that Northwest Bronx, then a nascent group with a skeleton staff, created a Selechnik Committee in the late 1970s to try and keep the landlord from buying more buildings. “We were very aggressive with any of his buildings,” says the group’s current executive director, Mary Dailey. “We would try to do anything to stop the sale.”
It wasn’t just community groups challenging Selechnik. In 1985, the city Department of Housing Preservation and Development sued him after he failed to provide tenants with heat and hot water, and the agency had to buy heating oil for about 40 of Selechnick’s buildings. The suit was settled for an undisclosed amount.
Selechnik returned to the public eye in the early 1990s, when he and a partner began buying Bronx apartment buildings from Freddie Mac, the national mortgage reseller, which had a stock of about 150 properties it had seized for mortgage default.
Northwest Bronx, which itself wanted to buy some of the properties, found out that Freddie Mac had sold several to Selechnik. Led by Dailey, the coalition immediately began a public relations campaign to stop the sale of buildings to a landlord with a reputation of treating tenants badly. They succeeded: Freddie Mac “declined to do business with” Selechnik, according to a 1993 New York Times story. (In response to questions from City Limits about why it decided to not work with Selechnik, Freddie Mac said it would not discuss events from 10 years ago.)
Today, Jacob Selechnik remains an active landlord and real estate investor, almost exclusively in the Bronx. A review of public records shows that Selechnik and members of his family, primarily his daughter Ellen, have had ownership interests in roughly 110 apartment buildings in the city over the past decade.
The records suggest that Selechnik’s primary tactic is to buy an interest in properties with big financial problems–whether Freddie Mac buildings that are foreclosed, or properties where the owner has difficulty paying the mortgage–then move in as the owner, run the property for a few years and finally turn around and sell it for a tidy profit.
Buying buildings and reselling them for much higher prices has worked well for Selechnik. For example, at 65 Jessup Place in Mount Eden, Selechnik bought a 38-unit apartment building in 1994 for $235,000–and sold it in 1995 for $560,000.
At least one Bronx housing activist says Selechnik can be a decent landlord. Scott Auwarter of the Citizens Advice Bureau, a nonprofit that assists youth, seniors and others from its office right next to Bronx housing court, says that his housing staff has found Selechnik and his staff fairly receptive when it comes to getting repairs done or preventing evictions. “As Bronx landlords go,” says Auwarter, the group’s director of eviction prevention, “our staff doesn’t think this is a bad guy.”
However, the city housing agency, fed up with thousands of outstanding housing code violations, is suing Selechnik for mismanaging his buildings. “We’ve initiated comprehensive litigation against Selechnik in 14 buildings,” an HPD spokesperson told City Limits. HPD is suing both to collect fines and to force Selechnik to make repairs.
One property that needs repairs is 1881 Grand Concourse, a 20-apartment, six-story building that HPD says has 72 code violations, for everything from roof leaks to mold to a collapsing ceiling. The building’s owner, according to HPD, is Ellen Selechnik, Jacob’s daughter.
“Ever since they took over,” says Minerva Melendez, who with her son has lived at 1881 Grand Concourse for 12 years, “they’re letting this building get abandoned.” She wearily recites her building’s problems: common spaces are “filthy”; the buzzers and intercoms don’t work (which she blames for a recent robbery at gunpoint in the building); ceiling plaster is collapsing; the elevator rarely works.
Despite HPD’s litigation, Selechnik denies that his buildings are in bad shape. He says that many of the outstanding violations are “old stuff. I try to do the right things,” he insists. “But they don’t come around and reinspect.”
To the Bronx watchers familiar with Selechnik, buying buildings from JER fits perfectly within his model of acquiring troubled buildings. “It just make sense that he’s connected with tax lien sales,” says Dailey. “He’s that kind of operator–he finds a way to squeeze in some place in properties with money problems.”
If evaluated by dollars and cents alone, tax lien sales has been a successful program for the city. Since 1996, the sales have generated more than $1.4 billion in revenue for New York–under the city’s old tax collection program, much of that revenue might have gone uncollected, or at least taken longer to collect.
In addition, the specter of JER’s higher interest rates–the debts grow by 18 percent a year, as compared to 9 percent before the lien is sold–has led property owners to pay off their tax bills more quickly. In 1995, 4.8 percent of property owners didn’t pay their initial tax bills. As of last year, that number had dropped to 2.5 percent.
Under the tax lien sales program, after property taxes go unpaid for two years (three years for residential properties) the city packages the unpaid debt and sells it to a trust created by the Bank of New York, at a slight discount. The debt is primarily made up of property taxes, but also includes unpaid water and sewer charges, environmental and health bills, and charges for emergency housing repairs performed by the city. The trust issues bonds to pay off the city, and then hires JER Revenue Services to collect the debt.
As JER collects the debt, it pays off the bondholders–and collects fees for itself. Since tax lien sales have begun, JER has managed to collect most of the debt without resorting to auctions. Of the roughly 42,000 liens sold so far, JER has only had to resort to auctions for 1,457 properties. It may not be the original property owner who actually pays off the lien and avoids foreclosures. Anecdotal evidence and samplings of public records suggest that many owners sell their property–and their debt–to new owners.
Auctions are JER’s policy of last resort. However, there will almost certainly be more in coming years, because of the length of time the legally complex foreclosure process takes. For example, for 1391-99 Lafayette, it took more than five years.
All of this earns JER, a division of Virginia-based JE Robert Companies, a pretty penny. In response to questions from City Limits, the company says it has earned “less than 5 percent” of the total amount it collects. So once JER collects all of the $1.4 billion in liens, it will have earned up to $70 million.
JER’s success at collecting debt for New York City is bringing the company a windfall of business elsewhere–most recently in upstate New York. Five different upstate cities and one county–Syracuse, Buffalo, Schenectady, Binghamton, Plattsburgh and Erie County–are joining together to sell their unpaid tax debt to a state agency, the Municipal Bond Bank Agency, which will in turn hire JER to collect the debt.
The potential for JER’s business to expand further is rosy–nationally, property owners fail to pay $12 billion in taxes each year. That explains why the company has recently hired lobbyists in New Mexico and Texas.
Despite the massive scale of New York’s tax lien sales program, it has so far received very little attention from the press or policymakers. What’s perhaps the most remarkable is that, a full seven years after it began, no one has even asked fundamental questions about the program’s impacts.
What happens to properties that go through tax lien sales? If they’re residential, are they more likely to be fixed up? Are tenants who live in those buildings better off? In single family homes, where thousands of liens have been sold in neighborhoods like those in southeastern Queens, are desperate homeowners being driven to take out predatory loans, as anecdotal evidence suggests? Do tax lien sales feed the wave of home foreclosures that has swept New York City in previous years? For vacant lots, or abandoned factories or warehouses that have gone through tax lien sales, is any new development happening? Or is there just speculation, which is driving up land prices but not leading to community development?
“We’d like to think that cities would look at tax lien sales and the auction process as an opportunity to promote community revitalization, and not only recoup taxes,” says Carey Shea, a program officer at the Surdna Foundation who has studied property tax policies in various American cities. “It seems like a real missed opportunity to look at these properties in tax arrears as only a chance to increase tax revenue, as opposed as to an opportunity to look at issues like the shortage of housing and land we have here in New York City.”
JER, for one, publicly trumpets tax lien sales–and even auctions–as good public policy, regardless of outcome. JER staffer Linda Scanlon, in an essay for the magazine Public Management, writes that in New York City, tax lien foreclosures have “significantly decreased the number of boarded-up and abandoned buildings.” Yet when asked by City Limits what proof the company has for that statement, JER says it has no empirical data.
After the July bid fiasco, The Point flipped out. Convinced the bidding process had been rigged in favor of Selechnik, Lipson sent angry letters outlining the unsavory story, with a particular emphasis on the “winning” bid that Michelle Lynch had asked them to lower, to everyone from Mayor Bloomberg to the president of JE Robert Companies, Joseph Robert.
Their outrage–and threats to sue–bore fruit. While never addressing questions about the July bid, JER told The Point it would open up the bidding again in August. This time, The Point bid $625,000–and won.
But JER’s love affair with Jacob Selechnik didn’t end there. When JER sent The Point a sales agreement via email, it included language that demanded that The Point “hold harmless” Jacob Selechnik for “any and all claims, causes of action, of any kind whatsoever, arising from the subject property, including without limitation, fines, fees, costs and penalties associated with the environmental clean up.”
When Paul Milmed, a private attorney working for The Point, refused–“The Point is not prepared to indemnify Jacob Selechnik under any circumstances, and frankly we do not understand what interest the Trust and/or JER could possibly have in requesting such an indemnification,” he wrote–JER backed down, and the sale went through. On September 17, 2002, the Point officially became the owner of 1391-99 Lafayette Avenue.
For his part, Selechnik is flabbergasted that The Point thinks he has a special relationship with JER. After all, he points out, JER did ultimately sell the old factory to them–not him. “The people from The Point used political muscle,” Selechnik says. “They have means and ways of getting city agencies to do what they wanted.”
Nonetheless, Lipson and The Point’s attorneys aren’t the only ones who are currently questioning JER’s tight relationship with Selechnik. The city’s Department of Investigation is looking into the matter, collecting documents and interviewing witnesses, but as of press time had yet to finish its investigation.
Although it got its property, The Point’s not in much of a celebratory mood. After the group closed the deal in September, it entered a frustrating period of negotiation with the city Department of Environmental Protection over fines for the environmental contamination that was discovered after the fire [see “Brownfield Blues,” April 2003]. A still-angry Suchman calls DEP’s actions–which resulted in more than $50,000 in fines for The Point–“overzealous, misplaced enforcement.”
Lipson has little ire toward Selechnik, whom he figures was just trying to make a buck. It’s JER’s actions that anger him. “I expect Selechnik to behave the way he did,” he says. “But people in government, or companies that have government contracts, shouldn’t be in bed with guys like him.”
The irony is that Selechnik should have never been allowed to even bid on 1391-99 Lafayette. After the City Council raised concerns when the tax lien sales program was first created, JER began to require any individual or company that buys a property at an auction to sign an “affidavit of responsible purchaser.” The affidavit, among other things, requires that the purchaser certify that neither he nor affiliated parties (including immediate family) owns a property that has an average of five or more “hazardous or immediately hazardous” violations of the city’s housing code per unit.
But, according to HPD records, two buildings in Jacob’s or Ellen’s names have far more than five immediately hazardous violations per apartment. For example, 16 East 177th Street, owned by Ellen Selechnik, has 58 in 11 apartments.
This fall, the City Council and Mayor Bloomberg will have an opportunity to raise questions about the tax lien sales program–if they have any. The entire tax lien sales program, also known as Local Law 36, expires on October 31.
One Councilmember whose opinion matters–David Weprin of Queens, who chairs the Council’s finance committee and will be charged with taking a look at the program–says he has no concerns about tax lien sales, although he did tell City Limits that he hasn’t had much chance to study it yet. “I think it’s a good program,” Weprin said. “Something we want to extend.”
About the only council member who has shown any interest in tax lien sales is David Yassky, who represents Brooklyn waterfront neighborhoods that include Williamsburg, Greenpoint and Brooklyn Heights. Yassky is planning to propose that the council create several pilot “exclusion” programs for waterfront and industrial properties, similar to what HPD does now with troubled apartment buildings. The idea is to pull a handful of properties out of the lien sales each year that, like 1391-99 Lafayette, might be good candidates for waterfront housing or parks development, or for manufacturing buildings that could work as incubators for small businesses. Then, the city would donate or sell these selected properties to interested developers, like HPD does with third party transfer for housing.
The Council may tinker with the program, but neighborhood activists like Jim Buckley, executive director of the University Neighborhood Housing Program in the Bronx, say that what bothers them the most is how little they know about tax lien sales–even when its impacts are happening right under their noses.
“It’s something we’d love to take more of a look at,” says Buckley. When he asks city agency officials what they know about the impact of tax lien sales, “everyone agrees they’d like to know more, too.” That knowledge is critical, he argues, so that together, activists and bureaucrats can ask–and answer–a key question: “Can some of these pieces of land be used to make our communities better?”