Conventional wisdom should state that in tough economic times, Massachusetts municipalities would have a tougher time collecting property taxes.

But in cities across the commonwealth, collection rates have risen instead of receding. Some cities have started working closer with banks and mortgage companies; others have contracted with private companies to collect their debts.

The engine driving all that cooperation is the fact that property tax liens stand first in line for payment when a property is sold, whether under normal circumstances, short sale, foreclosure, or bankruptcy. Banks don’t want to have outstanding charges ahead of repayment of a mortgage; that’s exactly where third-party investors want to be.

That’s why the city of Worcester has started auctioning off collector’s deeds. Worcester sells the right to the city’s lien position for taxpayers in arrears, or in extreme conditions the right to foreclose on the property, to lenders and other third-party investors.

Worcester has held a collector’s deed auction of the last two years. Last year’s auction, which featured payments for fiscal ’07, generated $1.8 million in payments; this year’s auction, held in May, featured 665 properties and will generate more than $2 million for the city.

Another bonus for Worcester: The lenders and investors must pay the current year’s taxes on the property to secure the lien position on the back taxes.

“It’s just good business practices being put into place on the municipal level,” said city Chief Financial Officer Thomas Zidelis. “It’s not like we totally wipe our hands clean of the tax lien. The statute does allow for the taxpayer [to get current], and the redemption can still be processed through the city.”

If the taxpayer does pay the city after the fact, Worcester simply settles the debt with the third party, Zidelis said.

As a result, Worcester has seen its collection rates rise the last two years, from 96.9 percent in fiscal ’07 to 97.35 in fiscal ’09.

All About Communication

For the cities of Boston and Brockton, it has been as simple as increasing their relationships with the local financial institutions. Lisa Signori, chief financial officer and collector treasurer for the city of Boston, said instead of contacting banks quarterly to inform them of tax charges, the city now sends monthly communications to receive timely payments.

Many lenders hold property taxes in escrow for their mortgagees, collecting them monthly and dispersing them quarterly to municipalities. But Boston sends notes to lenders for taxpayers who do not take advantage of escrow payments, too. In Brockton, according to Assistant Treasurer and Collector Martin Brophy, lenders have shown a lot more appreciation for tracking tax payments since foreclosures have become a more common occurrence.

“We’ve seen a lot more banks that are interested – even if there is no escrow account – they are more interested in whether the taxes are being paid,” Brophy said. “They don’t want to lose out on their interest in the property.”

Kevin Kiley, executive vice president and chief operation officer of the Massachusetts Bankers Association, said any increased communication, and subsequent increase in efficiency, saves both the lender and the city time and money.

“Any local community bank is going to want to work with the municipalities to do whatever they can to identify how to make tax payments work more efficiently,” said Kiley. “We don’t want penalties at 14 percent to accrue. We’re going to make sure that gets paid and go back to the delinquent homeowner and work things out.”

For Boston, the result has been an increase in the percentage of property taxes collected, rising from 98.7 percent in fiscal ’08 to 98.8 percent in fiscal ’09.

Hired Help

Springfield has taken a different approach for the last five years. Previous to fiscal ’04, the city had more than $40 million in back taxes, spanning 3,100 properties, with some delinquencies stretching back to the 1950s, according to Thomas Walsh, the city’s communications director.

Since then, the city has hired a company called Revenue Services to assist them with their property taxes.

“The city began a very targeted and aggressive tax collection effort,” Walsh said.

Since then, the city’s collection rates have skyrocketed, collecting 98.8 percent of the taxes owed in fiscal ’08. Walsh said the city has not yet calculated their percentage from fiscal ’09.