Overcoming Obstacles to Maximize Revenues

Case Study: How Performance Measures - and Lawyers - Added to Our Bottom Line

After discovering that occupational tax compliance was lower for lawyers than for any other profession, the City of Decatur took significant process improvement steps. In this interactive session attendees will learn how to apply performance measures to their own situation and increase your bottom line.

Presented by Russ Madison • Shaun Shabazz • Linda Harris • Peggy Merriss

The Strategy

“Expand and diversify the City’s revenue base”—2010 Strategic Plan, City of Decatur

“Pursue delinquent tax accounts on a regular schedule”—Administrative Services Department, Strategic Plan, 2010-12

“The City shall follow an aggressive policy of collecting revenues”—Decatur Financial Policies

The delinquent lawyer collections project began with strategy and related goals…

Background

In addition to collecting real and personal property taxes, the City of Decatur Revenue Division collects occupation taxes from businesses and professionals.

Each attorney practicing law in Decatur is required to pay a $400 occupational tax plus a $25 administrative fee annually.

Up until 2012, our exact occupation tax collection rate was unknown, but anecdotally weak, especially for lawyers.

Attorney occupation taxes

Problem Definition

For property taxes, we knew our exact collection rates for real and personal taxes and sanitation fees.

But we had no good tools prior to 2012 to assess occupation tax collection rates.

We could only run a list of delinquent businesses and professionals and a grand total owed.

Was there really a problem?

Performance Measures Confirmed the Problem

In April 2012 we obtained a new custom collections report from our vendor.

It showed that only 43% of lawyers had paid their 2011 tax by their deadline.

By the end of their 90 day grace period, only 69% had paid.

Factors Behind the Problem

Bad data Billing errors stemming from lawyers

being a unique tax type in our software Unwillingness of some lawyers to pay Legitimate reasons for nonpayment Miscommunication Uncertainty about the consequences

for nonpayment

Process Improvements

1. Software reprogramming to produce a more thorough attorney billing

2. Collaborate more with the City attorney

3. Launch a new communications tool for reaching lawyers

4. Use more rigorous revenue collections techniques

5. Measure performance throughout the billing cycle

The Obstacles

Several lawyers in Decatur and statewide in Georgia have asserted that they cannot be forced to pay this tax.

There has been a long-standing belief among Revenue staff that “lawyers never pay.”

Real and imagined

Some lawyers may think there are no consequences for nonpayment.

The obstacles boiled down to mindset.

Changing the Mindset

Tough ≠ effective. Assume that most taxpayers have a good faith desire to pay.

Start out positive. But prepare for the worst just in case.

Getting Outside Help and Resources

Partnered with City attorney to improve communication style with lawyers, and to confirm consequences for non-payment. Used temporary reassignment of Public

Works employee to assist with data clean-up.

Worked with software vendor to make custom report and new setting for improved billing.

The collection rate data helped make the case and build momentum

Technology

Some lawyers in our system weren’t even being billed due to:• System glitches•Data entry errors• Inconsistencies in how charges were added

Vendor created a new, separate “attorney” license type in the software to help with billing and adding penalties and interest

Communications: A New Tack

The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing

—Jean-Baptiste Colbert, 17th Century French finance minister

Communications: A New TackBEFOR

EAFTER

Stepping up our collections methods

Began sending unpaid balance notices immediately after deadline rather than waiting till the 90-day grace period ended

Followed up with monthly reminder notices and letters for unpaid accounts

Made phone calls to delinquent law offices

Conducted site visits Personalized contact Added penalties and interest

Setbacks and Challenges

We actually experienced a collection rate decrease by the payment deadline from 43% in 2012 to 32% in 2013

Traditional reasons for nonpayment including, “I never got a bill,” and financial hardship

Balancing this project with our primary focus on property taxes

The Results

The collection rate in 2013 for lawyers’ 2012 occupation tax by the end of the 90-day grace period reached 86 percent compared to 69 percent the prior year.

Revenues for this tax type had hovered around $42-48K the prior three years, but increased to $72K in 2013.

Relations with some local attorneys seemed to improve slightly.

Takeaways

The revenue increase reaffirmed that value of departmental strategic planning that took place in 2009

The project showed the usefulness of performance measurements in identifying a specific area for improvement and in indicating our progress

5 Questions to Consider for Plucking More Feathers

Are invoices clear & understandable? Do you accept multiple payment

methods? Is there a consistent system for

sending past due notices? Do you add late fees? Is returned mail re-sent to a better

address using a skip tracing service?

While setting liens or seizing assets may be suitable for some tax categories and communities, there may be gentler opportunities for improvement:

Resources

Council for Electronic Billing & Payment cebp.nacha.org/

Skip tracing services: Accurint.com, Experian.com, CoreLogic.com, & many more

Data from other departments (bus- iness listings, vacant property registries) Your own attorney!

Exercise

Overcoming excuses for nonpayment