City's $165m success story.

Compared to previous years, 2004's tax lien sale was one of the smallest ever, due in part to efforts by the New York City Department of Finance to increase debtor awareness and collect during the presale period.

Of the 13,000 properties originally listed on the department's lien list owing cither property tax and/or water charges, 9,000 paid during the presale, which ended July 28, the day of the lien sale.

According to preliminary department estimates, $165 million has been collected during the presale period, a figure nearly $10 million more than the previous high in 2000 and almost double the amount collected during the same period last year.

Community outreach sessions, posting the list online and providing online payment methods as well as broadening debtor eligibility to enter into financing arrangements are some of the more effective steps the department has employed in recent years to increase payment during the presale period--when interest on the debt is still a relatively tame 9%.

"We're really seeing results from these methods that we've begun to institute to encourage more timely payments," said Martha E. Stark, Commissioner for the New York City Department of Finance.

Properties that failed to pay their debt or enter into a financing agreement during the presale period were sold on July 28 to a trust run by three city government agencies: the Department of Finance, the Office of Management and Budget, and the Law Department. The trust is owned by the city and issues double-A bonds--typically bought by institutional investors such as pension funds--that allows between 80-90 cents on the dollar to be collected by the city in short order.

The rest of the debt is recouped over a period of time, typically between two to three years. Private debt servicers are contracted to collect the debt.

"It's clear that the servicers do a better job on the collection side than the city did," Stark said. "They are in constant contact with those who owe. We have an agreement with them that they have to do it as responsibly as possible. They've been doing a good job."

"One of the things that we're always trying to look at in government is to do the things that we're really good at and try to purchase what we're not good at. Efficient, smart government is what we're trying to practice here."

Although the trust charges debtors a 19% interest rate, foreclosure on properties is rare.

"The economy has been such that people have been able to pay," Stark said. "As we do more and more lien sales, you're picking up people's debts that are newer so it's not as much as it had been before the lien sales were started 1996."

"When we did the first couple of lien sales, we had people who owed for five or six years. It became much harder for those people to redeem that amount and so we ended up foreclosing on their properties.

"What happens now is that we catch commercial property owner's debt when it's a year old and so they are better able to make those payments."