Tayoun said he would contest the fine, but not the taxes.
"There's no attempt to beat the city out of anything," Tayoun said. ''I'll be proud to deliver a check (for the taxes and water bills) to the city after I settle on the sale."
The property, a vacant three-story brick building at 714 Reed St., is the site of the old YMCA Reed House. It was used in the 1960s and '70s as a social club for dances and neighborhood gatherings.
Tayoun, who bought the building for $75,000 in 1985, has agreed with a potential buyer on a selling price of $140,000. The buyer, Vincent Schiavone, said he wants to convert the building into luxury apartments and a health club and is now trying to obtain financing for the work.
The city's Licenses and Inspections Department has declared the building a public nuisance and cited the owners twice for failing to secure the building and once for failing to clear debris.
Both Tayoun and the building's neighbors complain that it has become a haven for drug addicts and rats. Tayoun blames the problems on vagrants and local vandals; many neighbors blame Tayoun for not maintaining the property.
Tayoun said he and DeFeo are partners in a corporation - called Reed Care Center Inc. - that owns the building. DeFeo is a real estate developer with offices in Media, Delaware County, the councilman said.
According to Tayoun, Reed Care Center Inc. was incorporated because he and DeFeo had hoped to develop the property as a nursing home. That plan fell through because of financing problems, Tayoun said.
Tayoun and DeFeo owe $23,677 in property taxes on the building and $2,699 in water and sewer bills. The councilman, who also owns a restaurant on Chestnut Street in Old City, has said he has not paid taxes or water bills for the Reed Street building because he doesn't have the money.
City records show that Reed Care Center Inc. took out a $600,000 mortgage on the property in May 1987 - far more than the building's value - four months after it had been declared eligible for sheriff's sale for non-payment of taxes.
Patrick Murray, enforcement chief for the city Revenue Department, said it can take up to four years to bring a property to auction after it has been declared eligible for sheriff's sale.
Further checks of public records showed that the firm that loaned the money for the mortgage - AIM Mortgage Company of New Jersey - is managed by Peter DeFeo.
Tayoun said DeFeo had arranged the mortgage and said he did not know details of the deal or what happened to the $600,000. He referred further questions to DeFeo.
DeFeo did not return repeated phone calls from the Daily News.
Campaign records show that DeFeo made two contributions of $1,000 each to Tayoun's successful 1987 bid for the 1st District City Council seat, one during the Democratic primary and one during the general election.
As for the $2,500 fine, Tayoun said he would appeal it in Municipal Court. The councilman said he did not appear for the July 3 hearing because he had never been notified that it had been scheduled.
"They should have at least called," Tayoun said. "Here I am in City Hall, so why didn't they call me?"
A Municipal Court administrator said a notice of the hearing was mailed to the Reed Street address.
Residents of the rowhouse community that surrounds the Reed Street building overwhelmingly approve of potential buyer Schiavone's development plan.
"It looks good on paper," resident Bernadette Grimditch said at a recent community meeting on the plan. "At this point, we just want to see that place cleaned up."