Task force on LLCs sought
‘Shameless landlords’ targeted
Two Milwaukee aldermen are calling for the creation of a task force to look into how problem landlords use a corporate shield known as a limited liability company to protect them from paying property taxes and fines on dilapidated properties.
Creating a task force is “a crucial first step in improving the City’s game plan for dealing with the problems posed by unscrupulous landlords who hide behind LLCs while they exploit our most disadvantaged residents, and squeeze the last ounces of value from properties they own,” Aldermen Terry Witkowski and Michael Murphy wrote in letters sent to the heads of three city agencies and Presiding Municipal Court Judge Phillip Chavez.
“The refusal of these shameless landlords to adhere to even minimal standards of upkeep is aggressively blighting our neighborhoods.”
The letter was also sent to City Attorney Grant Langley, City Treasurer Spencer Coggs and Preston Cole, commissioner of the Department of Neighborhood Services. Officials from the agencies and Municipal Court have been asked to attend a hearing on the resolution Monday.
“We need somebody on this end who takes ownership,” Witkowski said Wednesday in an interview.
The call for a task force comes in the wake of a Milwaukee Journal Sentinel investigation into how some landlords game the system, avoiding paying property taxes and building code fines while continuing to buy new properties at the weekly sheriff’s sales of foreclosed properties. Some landlords intentionally don’t pay property taxes, knowing that after three years the city will seize the property — an action that erases the tax debt.
In December, the Journal Sentinel exposed how landlords create LLCs that allow them to hide their identities and assets from creditors — including the city and the Municipal Court — as well as tenants and the public.
A Journal Sentinel analysis showed that as of Nov. 7, LLCs owed the city nearly $3 million in past due fines for building code violations. At least $9 million more was owed in delinquent property taxes. The fines, involving 777 LLCs, were imposed in 1,927 court cases dating to 2004.
Landlords who have used LLCs include former University of Wisconsin basketball star Devin Harris, whose Divine Momentum LLC once owed more than $200,000 in delinquent fines — almost all of which has since been paid — and River Hills resident James H. Herrick, a high-ranking executive at Robert W. Baird & Co.
City officials did not know that Harris, who is now with the Dallas Mavericks, or Herrick were behind the LLCs until the Journal Sentinel stories.
Patrick Curley, chief of staff to Mayor Tom Barrett, said the administration would participate in a task force, though he questioned whether one is needed. Curley noted the city recently started a working group that is dealing with many of the issues the aldermen highlighted.
“A lot of the work is being done,” Curley said, noting city officials now attend the weekly sheriff’s sales and are setting up a meeting with state officials who deal with LLCs.
Murphy, who chairs the council’s Judiciary and Legislation Committee, said he is calling for a task force because the issues with central city landlords are greater than he realized.
“I didn’t realize the magnitude of people who are so sophisticated at averting the responsibility for taking care of the properties and being good businessmen — instead of milking the system, and taking advantage of loopholes,” Murphy said.
Witkowski said he also was surprised to learn the number of landlords who game the system. In fact, he said, he did not bring up the issues earlier last year because he was told by the city attorney’s office “that there was only one guy doing it.”
“I was incensed when I saw there was not only one,” he said.
Although the resolution is aimed at landlords who use LLCs, Witkowski and Murphy said it could be broadened to include other landlords.
“A small number of individuals are doing a great deal of harm in the city of Milwaukee, and causing a lot of pain and suffering to people who are tenants,” Murphy said.
In addition to the city action, state Rep. Evan Goyke (D-Milwaukee) has said he would bring in a package of legislation aimed at giving the city greater power to deal with problem landlords.
Among other things, Goyke said his bill would require LLCs that purchase properties at sheriff’s sales to disclose the names or all of their owners. In addition, Goyke said, his bills would require that all past due property taxes and city fines be paid before a person could purchase a property at a sheriff’s sale.