Travis County Commissioners Court
July 26, 2005
Item 33 - Part 1: Report Presentation
Number 33. Discuss report on collection of delinquent taxes at Travis County. By the way, this is posted for discussion today, not action. After the staff presentation, we will give the proposing firm an opportunity to make their presentation. And should the court just jump in and ask questions whenever we see fit or should we wait until the end of the preparation?
>> I guess I would prefer unless it's a burning question you wait until the end because I think a lot of your questions will be answered in the presentation. But if you have a burning question and you just can't go on, feel free to do that.
>> you promise not to make your presentation and leave, right? [laughter]
>> that's good enough.
>> get our stuff here. We're heavy on stuff. Well, thank you very much for your time. This has taken a little longer than we thought. But just for the people that are watching television in here, the Commissioners court voted to bench mark Travis County's in-house current and delinquent property tax collection system. The purchasing office issued an r.f.p., and that r.f.p. Contained questions, and I知 going to put that up on the screen in a minute. The questions that the Commissioners court wanteds to ask and wanted the firms to respond to. And then also the Commissioners court appointed a review committee to look at the proposals. And I will give you some more detail on that. There were four firms that did submit proposals in response to your request. We were very specific what we wanted in that proposal and I知 going to get that up in a second. And two of the firms provided enough information in the format that we needed that we felt we could make a comprehensive and factual analysis of this. Property taxes are the primary revenue sources of Texas counties and certainly Travis County. This is an extremely significant issue. It's extremely significant because 86% of the expenditures in the general fund roughly in Travis County are paid for by ad valorem property taxes. And government-wide, about 68%. And Travis County has a uniform collection system which was instituted in the mid-'80s. We are very different from any other county in Texas because what we do is we have a consolidated collection system where the tax office and the county attorney's office collects for 80-plus jurisdictions in Travis County. And so all of those jurisdictions that get a property tax, there are about 80 of them that we collect for. This project consumed well over 2,000 man-hours of county staff time. And that's why it took so long. I have to tell you at the good evening I didn't contemplate that. But as we started looking at the data and the importance of it, we felt that it warranted that level of analysis. One of the roles of the county auditor in this very decentralized government is that the county auditor certifies the revenue for the Commissioners court for the next year. So regardless of what you -- decisions you all make in terms of who collects, the amount of on money that comes in my office by statute has to estimate. And so we did want to do the kind of research where I felt real comfortable with the numbers and could do a good job. You know, the revenue estimate joke which you've heard, i've been here a long time, saying revenue is going to come in doesn't make it come in. So we try to be right as close as we can to that estimate. And so it is a very important process for my office as well as for you. An indepth analysis of the system this size is rarely simple and this is no exception. To the best of our knowledge and efforts, this report is independent, fair and factual. We prepared an executive summary as well as a comprehensive report, and in the back of that report are our calculations. That report, for anyone that's interested, is posted on the county's website. So if you do not have a report and you would like to have one, you can access the county's website and get all or part of the report if you want. . E first thing that I wouldlike m was put together and who analyzed what. The people that worked on this report as we started writing it, we had a lot of people that worked on this report. It's a 2,000-hour report. It is significant. Obviously I worked on it. I知 the county auditor. And my first assistant worked on it as well. Our revenue and internal controls auditing division is the division that goes out and audits revenue throughout the county. And that group all worked on this project, the people that are listed here. In blue, you see mr. Wicker, and he is a lead in this analysis and i'll talk about him in a minute. In the financial reporting and consolidations department, nickie riley, who is sitting to my right, and chris bye browning, who is sitting to my left, also worked on this and i'll introduce nickie because she is a prime player. Carolyn dameron from financial services division worked on this because she's the one that does the revenue estimate for the auditor's office for property taxes so she's extremely knowledgeable in that area. Our administrative people of course helped. There's a lot of administrative work in a project like this. And our systems people converted it so that everyone could get it on the website and made everything work. That is a list of the people that worked in this office, and I would like to say in the planning and budget office, christian, would you like to say anything about your people? And then I知 going to introduce the three that really did most of the analytical work.
>> from the planning and budget [inaudible] along with alan miller who are analysts, and I chipped in when I could to help guide the process.
>> you know, in our department, because of the depth of this project and the importance of it, the two key people that worked on this project, I want to give a little background on because I know you wanted a thorough job, you wanted an independent job, you wanted to know that the data was analyzed correctly and I want to give the kreurbg the assurance that's what happened. Mike wicker is sitting there between nickie and christian. He's the chief assistant county auditor in the auditor's office over our two major divisions and heads the revenue and internal auditing division and the systems division. In our office we staff on the basis of core come pen cyst. He brings financial auditing, statistics, mathematics systems, and investment in banking. He's the person that primarily worked with leroy nullis to define did analytical model and design that model. Nickie riley is sitting to my right. Nickie is a cpa. She's a financial analyst, one of the positions we brought on a couple years ago and writes and prepares the m.d.n.a. For our cap. You may not know her but you know her work. The core competencies are general ledger and financial statement preparation, s.e.c. Reporting, balance sheet and income statement analysis and reconciliation, consolidations, cash flow, management and forecasting. So basically the two lead people in our department brought the skills together and the experience to analyze the kind of project that this is and to provide to you the analysis that you hoped that you would get. Moving right along, the data used in the analysis. The data used in the analysis was the data that you approved in the request for information. And what we asked for the firms was basically outlined there in question 5 which is up on your screen in page 5 of the executive summary for those who are following. And that data, we wanted everyone to send the same data in the same format. And some of the data did not come in quite in that format and there were communications with the firms in writing through the purchasing office to ask them for any data that we thought was needed so that we could do an objective analysis and everyone's data would be comparable. That's where we started with data. Data from the law firms. The data submitted by the law firms was assumed to be accurate. The committee had no way to verify the raw data. Conclusion that appeared questionable were examined. When we saw something that didn't look good or looked out of place, then we communicated back with the firms. The data from Travis County was really viewed somewhat differently. The tax assessor-collector's office and the office of the county attorney provided the in-house data for Travis County's collections. The revenue data was examined by the county auditor's office and the expenditure data was examined by the county planning and budget office to provide assurance that the in-house data was reliable and independent. Both the tax assessor office and the office of the county attorney -- data was gathered from ez tax system and tied to the information in the county's h.t.e. Financial system. I would like to thank when I talked about the people that worked on this, I would like to thank the tax assessor-collector, her first deputy dusty knight, the tax collection division chief renee deckered, and if those who worked for the tax office would stand up or raise their hand out there. Thank you very much for the work you did. We asked them for lots of stuff and kept them busy, and they were always good natured about it. The county attorney, I want to thank david and his chief for delinquency tax collections elliott beck and the people who work in that division, if you would raise your hands out there. And finally I want to thank the firms because they went to a lot of trouble. They presented a lot of data. They were very courteous in things that we wanted and so we are very grateful to the cooperation that we saw from the firms. Let me give you a little bit of foundation background as we go into this because the tax collection system is somewhat complex. And there really needs to be kind of a theoretical foundation, and for those that are watching television and aren't real familiar with our tax collecting system, it would be good to have a brief background. I know, Commissioners, that you already know this, but perhaps some of our people do not. Again, Travis County has a centralized collection system. We collect basically $1.16 billion for jurisdictions other than Travis County. And when we collect that, the fee that we get is about $935,000. That includes the money we get for current tax collections as well as delinquent. And just to put that into perspective, that represents about .08 of one percent. This is a system very cost effective for the governments in Travis County and therefore the people that pay for those governments because what we have is a centralized collection system where duplication of effort is not a problem and people are not paying for that. Travis County enters into an interlocal agreement with each of those governments. And we charge them the parcel rate. And in total that rate is $935,000. The elected tax assessor-collector directs the tax collection activities and that is by statute in the state of Texas. She tkrebgtsdz her staff to send out as many delinquent notices as she sees fit, make phone calls and negotiate payment plans to collect all delinquent taxes. If the tax assessor-collector terms at some point in the process that legal action needs to be taken, the tax assessor files a lawsuit and turns it over to the county attorney to bring that suit to a judgment and collect the taxes. Penalties and interest are set by state law. If you do not pay your taxes on time, and in county government you do not pay your taxes on time if you have not paid them by January 31st, there is first a very significant penalty that is charged, and you have that in a chart up there, Commissioners, and we're putting it up on the screen. I don't think you can read that screen very well. What it shows is first of all there is a 6% penalty immediately at another 1% a month up until July in which case it increases to 2%. So there's 12% of penalty if you don't pay your taxes until July 1st. Interest accrues at 1% a month and that goes on until taxes are paid. So the penalty for not paying your tax by state law no matter who collects your taxes is very significant for the delinquent taxpayer. Whether the tax collector files a lawsuit, the state statute aloss the county attorney's office to collect attorney fees on litigation, and that's a 15% of the amount of total taxes including accrued penalties and interest. As with all other civil judgments, the delinquent taxpayer must also pay the court costs. Since the county come pen says it the county attorney staff, all attorney fees are deposited in the county treasury. The county assumes the risk of recovering the cost of litigation, court costs are assessed, collected and disbursed by the district clerk or the j.p. In the same manner all other government-filed civil court cases had handled. In terms of public policy, both the tax assessor office and the county attorney's office has followed the premise that all property tax owners must follow the law and pay their taxes. The tax assessor assists taxpayers in working out a payment plan if possible. If such a plan is unfeasible or if the taxpayer refuses to pay, the tax assessor and the county attorney at the direction of the tax assessor aggressively pursue collection. There's an alternative process and that's what we're looking at today. Under the law, and I want to describe that alternative process so people can understand what we're doing now and what is analyzed in this project. State law allows governments to bifurcate the tax collection process and outsource delinquent tax collections to private law firms. The law firms can send letters, make phone calls and/or file lawsuits. Law firms can attach attorneys fee when they file a lawsuit up to 20%, although the firms that submitted proposals here submitted proposals for 15%, not 20. So they could charge 20, but they are proposing 15. Of the amount of delinquent taxes including penalties and interest on all taxes paid after July 1, without filing a lawsuit. Because these collectors are privately employed, the private firms retain these fees as compensation for their services. The law firm operates as an agent for the tax assessing entities. If the law firms file successful lawsuits, court costs are assessed, collected and disbursed by the district clerk or the j.p. In the same manner as all other civil court cases. There are some major differences between those two processes and the financial analyst is going to focus on those. The first difference, and this is in your executive summary, as you know, there's real notice reason to look at it, but I want if you want to look at that.
>> what page?
>> page 7. There are executive summaries in the back there. If there is anyone that would like one, feel free to go and pick one up. The first major difference is the purpose and the time frame for which attorney fees can be assessed. In the county under law, we can assess our 15% attorney fees when an attorney is pursuing litigation. Whenever that is. With the law firms, the law allows them to assess for litigation, but also to assess for all delinquent taxes that are paid after July 1st. So that is a very -- that's a big difference, and you'll see analysis that's going to hinge on that difference. The amount of attorney fees that could be assessed, that's different. Not relevant in this conversation because they are bidding 15% and we charge 15%. So that is not a difference in this environment. And the third one is the entity that retains the attorney fees as revenue. When Travis County assesses the fees, it goes into the county treasury. When the law firms assess the fee, that becomes part of the profit for the law firm. So that's kind of a background of how the tax system works. The other -- there's just a few more things that I want to say and then you are going to get into the financial analysis. An important concept is the adjusted levy. That is the levy changes all year and that's a complication when you are calculating collections. Adjustments are made so at any point we analyze add comparison to the levy it was the adjusted levy at that point. So is the tax levy changes. The other point I wanted to make is that this is a government and analyzing a government process has to really be analyzed within the confines of public policy ashupl suns. These are the assumptions we found as we analyzed the work done by the tax assessor-collector and the county attorney. This is page 12. Taxes are levied and assessed by law and it's the legal responsibility of outline property tax homeowners to comply with those laws. Two, the public policy goal is for all taxpayers to pay their taxes on time by January 31. As a matter of public policy, compliance with the law is strictly enforced by aggressively pursuing all delinquent taxpayers. With regard to enforcing laws, public entities must be as cost effective as possible. But enforcement of laws is not driven by cost benefit analysis. Another way of describing this is the profit modem is not a driver for enforcing laws. All of the jurisdictions for which Travis County collects taxes are treat in a fair and equitable manner. Reliable and timely cash flows are important especially for the smaller jurisdictions. So that will give you an overview of the system that we're working in and the system that we're comparing to. And so what I would like to do now is turn the presentation -- this is a lot of detail and it's long so we're going to be switching back and forthment I知 going to turn this over to mike wickering.
>> there's three main financial questions that we looked at in doing our analysis. And they are if the county looked at outsourcing delinquent taxes, would we expect, number one, to collect more delinquent taxes. Number two, what would be the impact on the delinquent taxpayers? Would it cost them more or less. And number 3 is kind of the big picture. If you look at all the revenues and all the expenditures, would we expect to have nor net revenue if we outsourced. And so before I start, I just want to real quick explain the data that we are working with. I know susan talked about the question and the r.f.i., question number 5. I wanted to tell you which data we got from the firms. From the pursue firm, the r.f.i. Asked for five years of data tore the six largest entities each deals with. The purdue firm was only able to provide four years and for one of the entities, burleson i.s.d., they were only able to provide three years of data. We included the burleson i.s.d. From our analysis completely. And you are going to see when question compare all three epblt at this time, Travis County, the linebarger firm and purdue, we're going to use four years, but we'll also add in the five. The linebarger firm did provide five years of data as we requested in the r.f.i. We did not receive the harris county from linebarger which was their largest client, and we did get a letter from the harris county tax assessor saying in effect they could thought provide that data. We did exclude hidalgo county. And the reason question did that, if you take it out, it improves the average collection rate about 1%. So it was quite a bit of an outliner and we didn't think that would be fair to include that. What we're looking at is five entities from each of the two law firms. So with that, i'll start talking about question number 1, which was if we outsourced the delinquent tax collections, would we expect our delinquent tax collection rates to increase. And the very first chart that we looked "-if you look at exhibit a, we started with our most current year that we have data for, tax year physical year 2004. That does include bolt current and delinquent taxes for one year. And as you can see, Travis County's actual collection rate was 98.77. And the purdue firm's as 97.85. That was their average for their five entities. And the linebarger firm was 97.7, their average for the 2003 firms. So just to make sure that 2003 was not an anomaly, we looked at in exhibit b the last four years. So tax years 2000 through tax year 2003. And we looked at, again, the average annual collection rate and then just took it what was the average for those four years. And again, if you look at that, Travis County had an average collection rate of 98.65. Purdue is 97.6. And linebarger's is 97.58. That gives us an idea of the annual collection rates which dogs include current and delinquent tax. The next thing we look is our most resented four years of data which would be tax year 2000 and what did we collect over that four-year period for that tax year. And this gives a little more weight to the delinquent tax collection efforts of the law firms and for Travis County because you probably remember July 1st is the key period. That means if we're looking at four years of data, they have had three years and three months to -- on their delinquent tax assess collections. That compares current o. -- but like I said, it's weighted more, I would say, more strongly towards additional delinquent tax collections. And if you look at this, Travis County's collection rate for that four-year period was 99.7%. And purchase. 93, linebarger99.31. The next step was in one of the proposals the linebarger firm asserted that although Travis County is better at current collections, if you sort of separate or isolate the delinquent tax collections from the current tax collections, they do a better job than Travis County. Even though we thought that -- we kind of think that current tax collections and delinquent tax collections are closely related, we still separated it and took a look at the delinquent tax collections by themselves. Before I start there's really three periods of the tax collection process. The first is October through -- October 1st through January 31st, and that's really the current tax collection period. I didn't include that in this little analysis because everyone agreed Travis County does a really good job at that. Had the highest rate. So the next period is from February 1st throug June 30th. And in that case, it's still all of that tax delinquent tax collection work is done by the tax assessor-collector's office including for to counties that outsource. And then the third period would be from July 1st basically through the end of time until it's collected. And what we're looking at is July 1st of each of those years through the end of September 30th of 2004 because that's the most current data that we have. In Travis County's case, that's still collected by the tax assessor-collector's office, but for the case of the law firms' clients it's when they do their delinquent tax collection. The key thing on how we came up with this is we used a collection -- how do we come up with the collection rate. And that is simply the amount that was collected in the period that we're looking at over the amount that was possible to collect in that period. When you look at exhibit e, this is deal with the February 1st to June 30th period. By the way, I only included the linebarger and Travis County because linebarger is the one who made this claim so I thought it was fair to just show those. In that period again when you are looking at just the amount collected in the period and the amount possible to collect, Travis County was at 91.1%. Linebarger at 79.66. So we are significantly better in that period. But again, that's the period that's done by the tax assessor-collector's offices. The next period is looking at July 1st through September 30th, 2004. When you whether or not at that again, we're just talking about the amount collected over the period over the amount that was possible to collect in that period. Travis County comes out at 68.36%. Linebarger at 66.61. So we're slightly better, you know, there's not a lot of difference in that particular area.
>> does everyone understand the calculation of the collection over what's possible to collect? That's an important issue. In other words, because Travis County collects so much more up front, we have less that's possible to collect. And so if you say how well do you do, you would have to say what could you collect and what did you collect, and that's what he analyzed.
>> what could you collect is the amount due at that time.
>> absolutely.
>> I sort of did a flip chart here --
>> and just as a follow up-question, does that mean that 31.64 remains uncollected? As of that period?
>> no.
>> we're not working from the --
>> in explanation --
>> talk into the microphone otherwise al will have a fit.
>> it does mean 31% is left uncollected.
>> well, for that period. Yeah, the better way to look at that, if you are going to look at what is still outstanding is say what's the cumulative amount that's been collected from whatever period to the end of -- if you asked me how much has been collected at the end of five-year period, for example, the answer is, like for Travis County, our last would have been 99.75 percent. So it's not necessarily the best way to look at that for that period because the levy does still change in -- once you are outside of that period. I don't know if that really answered your question.
>> sort of.
>> I guess the answer is what you asked, the answer is mostly yes, but there is some change to the levy that would make it not exactly that.
>> okay.
>> here's just a real simple kind of illustration of that point. Let's say we only have a $100 levy. There is collector a, collector b. Of that levy, collector a collected $90 current collections. Collector b got 80. At the end what you have at the end of the current period is in entity a there's $10 to collect. In entity b, there's $20 to collect. What we would say is how much could you collect. What is possible. Well, a could collect him. They can't collect any more than that. And he could collect 20. That's all that's out there. If in fact entity a collected 7, what you would say is that they collected 7 over 10 or 70% of what was possible to collect. In entity b, they collected 10 out of 20 or 50% of what was able -- what they were able to collect. So what you would see even in tkopls, even though b collected more dollars, if you say who did the most effective collecting, and that you can't look at that without saying what was possible to collect. And Travis County is in the position where less is possible to collect because we've collected more during the current period. And so in this case you would have to say that the most effective collector is collector a got 70% of what they could have collected. B got 50% of what they hrebgtd. That's what we're talking about, this formula. We took what was possible to collect and the amount they could collect. Then what you do as a little proof is you say here's what they collected, here's what they collected. In total a collected $97. B collected 80 plus 10 or $90. At the end, that analysis leads to also who collected the most taxes overall. So that is somewhat of a complex point. Bus since the collection rates are different as we're moving along, it makes a difference. I don't know if that helped.
>> what I would like to do is reinforce the importance of this chart because if I were going to advocate that b is better, I would point your attention to the $10 line. And I would say b collected more raw dollars, therefore b is the better collector. So this can be a very important design issue in terms of how to look at the data.
>> and this is the way we looked at it. [inaudible].
>> the next thing, the last thing that we looked at in this -- when looking at the first question was we also tried to forecast tax collections in dollars. And so that's going to be exhibit g and h. And what we did here is the first one is looking at four years of date attachment what we did is take the September 30, 2004 adjusted tax lever I of $293 million. That was kind of the adjusted levy. That's what's out there to be collected. What we did is we took the most recent data we had for four years of collections for one tax year,, which was tax year 2000. We had just gone over those collection rates. And applied those collection rates kind of going forward what this means in dollars. Obviously this is an estimate. If you do that, you can see after year 1 Travis County would in the blue, per do in the red -- I知 just changing can colors of the graph. The glean would be linebarger. Where we would be at after year 1 is Travis County would have 289.4 million, per do would have 286.3, and linebarger would have 286.2. Essentially Travis County is 3.1, $3.2 million ahead after one year. That's an important -- the one year thing is important even though we're going to talk about all four years because as you know we do our revenue and expenditure budge oath an annual basis. So that would be the kind of number you are looking at as far as just the difference in delinquent taxes collections. After every one of those years, Travis County has the most tax collections at that point. Exhibit h is -- are the same analysis looking at five years of date today instead, and so we are only able to compare Travis County and linebarger on that one. We're using the tax year 1999 collection data because that's the most recent five years of data that we have, and we're still using the September 30, 2004 adjusted levy. You can see in the first year we're about $3 million apart. And then after each year through the five-year period, Travis County still has the most taxes collected at that point. The gap narrows as they are collecting more of the money still outstanding. For summary for collection 1, Travis County collects more taxes and collects this faster than the two law firms have demonstrated in collection efforts with large clients. And although the purdue firm had a better record than line barring oh, we did not see any evidence that would indicate the collection efforts of either firm would be expected to consistently surpass that of Travis County.
>> it may help to know what tax rate we used for the three and why.
>> for the three?
>> Travis County and the two firms, say, on -- in exhibit g.
>> sure. Let me go back for a second and i'll tell you. I may have to pull up the --
>> did you ask the tax rate, judge?
>> the collection rate or the tax rate?
>> collection rate.
>> this may take a second.
>> g and h, the last two.
>> either a or b, what rates were used.
>> in exhibits g and h, what collection rates did you use and why?
>> the rates on that might go back -- yeah. For those of you --
>> page 17.
>> while is he pulling this up for anyone that pulls it up, we've got an executive summary, we've got the report, and then the green part in the back are the calculations. This is the calculations. I知 sure most people didn't get back that far.
>> Travis County's collection rates on outlined in blew up there, but I知 going to read them. Year 1 it would be 98.65. Year 2, 99.29. Year 3, 99.51. And year 4, 99.7. And then --
>> okay, so in exhibit g though we use a certain collection rate for Travis County.
>> we use each of those percentages for one for each year, times the 293 million --
>> yeah, okay.
>> does that make sense? Do you want the know what they are for the others?
>> you have these rates for each year.
>> absolutely. Because that is the cumulative collection rate after each year. It goes up slightly. A little more is being collected. And then --
>> and while he is asking that question, mike, because it's kind of a good point, if you turn to page 22 on the exhibit h, if you look at all of those and you see the kind of triangle up there so you are seeing each of those year's collection rate for each of the years. For 1999 we've got after one, two, three, four, five years. 2000 is just four because only four years have passed. There is not in the -- for instance, below that on the line barring barringer date there is not kwupb number there larger than the -- those numbers quadrant, every one of them just not the averages. But there is not one client that had a higher collection rate for any of those years in any of those periods.
>> now, what page is that on?
>> that, judge, is on page 22. It's green. Can you find it? It looks like this.
>> oh, okay.
>> it's way in the back. And kind of what I did was I went down just, you know, test their analysis and looked at every number and circled in the whole data which number was the highest and we were high necessary every single category.
>> just to answer the rest of your question, the number --
>> diana, would you sign that, please? -- find that?
>> I have the right book now.
>> we are sending help your way, judge.
>> tax lawsuits, other --
>> it's right after others.
>> did you find it?
>> got it.
>> so every one of those numbers is higher than any number.
>> just to answer the rest of your question, we were talking about exhibit g and I showed you the Travis County raeutsd. The linebarger rates are on page 19. Of that same section. And the rates that were used are highlighted in green. Do you want me to read them? 97.58 for the first year.
>>
>> [one moment, please, for change in captioners]
>>
>> ...linebarger's highlighted on page 24.
>> mike, making sure that I understand, too, in terms of the counties turned in for purdue and linebarger this is their choice.
>> we actually asked for the six largest entities in the rfi's.
>> other than harris.
>> you know harris is not there. Do you want to transition this?
>> is actually the end of our explanation of question 1. The next question was --
>> can I ask you some questions?
>> you sure can.
>> before you go to the next. Just going back to this handout that you all have, just so i'll understand, a little enter here, at the bottom of the page it says -- for February 1 of this year of 2004.
>> does it say 8?
>> property taxes? Has everyone got 8? Go ahead, Commissioner. Okay, February 1, this is for year 2004. The penalty is 6%, the 1% improves. After that it's 1% penalty, 1% accrues each month until July when it jumps up to 2%.
>> right. As of August through September -- through December, it would be 1%?
>> the --
>> per month?
>> the penalty would stop at 12%. So in other words in this example here, you would have a 12% penalty on there. Then the penalty does not grow. It's on the flat base. The 1% per month interest however goes on forever. The interesting to look at these, so stancive, 6% is not 6% per annum, not like your credit card says 6%, it's 6% that month. That is give leapt to a 72% per annum interest rate, it's stiff. That's the state law requires those, so Travis County doesn't set those, they are the same. No matter who collects the law sets the interest in the penalty.
>> okay.
>> so it will be the interest is 12%. Per year. And if it stays, if it takes you 10 years, then you would have that much more interest to pay.
>> the penalty --
>> actually the interest -- the interest would be 12%, the first year, the penalty would be 12. At the end of year 1, you have a 24% interest rate that you are paying. The next month, it's 25, 26, 27, it just keeps going up. So it's very, very burdensome. And, you know, as you talk to the people in the tax office, I mean, they work very hard and if you looked at the tax assessor's website, I gave you a copy of that, kind of the background, that's why they really want people to pay early. Because you could get yourself in a position where -- with this rate of increase you could never pay. Just gets worse and worse. No one just decides they are not paying their taxes, usually they are having trouble paying it. Yeah, that's an important part.
>> I guess my question to everyone would be what if the -- if that small percentage that 31% is unable to pay, but meantime all of this interest is accumulating on them, let's say that they really can't ever pay. What do we do about them? Do we eventually foreclose and sell their property?
>> yes.
>> put a lien on them.
>> we put a lien on them, we secure a lien.
>> so the law firms do that as well, I guess we'll hear from them later. If people don't ever pay, it stops by perfecting a lien on that property, you know, a lawsuit. When we either sell that or when they sell it we perfect our lien and get the property taxes.
>> so do we -- I know nelda does a terrific job in talking to people when they owe taxes. Then also doing payment plans with them, so there's an education process in place there. I guess i'll need to hear from the law firms how they handle the education and communication with people who go beyond this, this time. Let's say they are in arrears in their taxes for 10 years and, you know, what steps are taken to communicate with them and to educate them about what to do or how to -- how to either pay or catch up with the taxes and avoid, prevent being foreclosed on. So --
>> you are going to hear some more.
>> I want to hear that.
>> -- delinquent taxes.
>> make summarized the first issue, which is does Travis County collect more taxes and -- or less, could we expect more if we outsourced. The answer is Travis County does a -- does the best job and the fastest job of collecting taxes. So in terms of collecting taxes, that's our analysis on that issue. The second issue, which is what nick is going to cover now, is what about delinquent taxpayers. You kind of segued us into that Commissioner. That is what is the impact on the delinquent taxpayers and is there a difference between the two systems. Nikki?
>> hi. We did think that that was a very important issue to analyze was how is this going to affect dlint taxpayers as a whole if we were prioritize the delinquent taxpayer collection system. As susan said earlier there's a huge difference between what Travis County can charge as attorney's fees versus what a law firm can charge as attorney's fees. Travis County charges a 15% attorney fee to all delinquent taxpayers that they file a lawsuit against. Plus there are court costs that are related to that. Law firms, however, can charge up to a 20% torn fee on the entire -- attorney fee on the entire pool of delinquent taxpayers on July 1st or after. So there's a big difference in when the attorney fee can be assessed and the amount when you look at law firms versus Travis County. We analyzed the last five tax years, 1999 through 2003, that we had a full year of data for. If you look at the first exhibit, the chart cost to taxpayers, we looked at what law firms were charged delinquent taxpayers over the last five years versus what Travis County had charged delinquent taxpayers. If you see at the bottom the $5.1 million --
>> page 22 in the big handout, big long one.
>> -- that basically represents the amount that we estimate that the law firms would have charged delinquent taxpayers over and above the amount that Travis County charged delinquent taxpayers. I want to briefly just go over these calculations, how we got to that number. Travis County court costs, were actually obtained through a tax office query. We actually pulled all of the lawsuits that were filed from February 1st 2000 and January 31st 2005. Then we estimated the allocation by tax year. Travis County's 15% attorney fee, that was also obtained through a tax office query. And the 15% fee is charged on a base tax that the delinquent taxpayer owes plus the penalty and interest. And we actually had the base tax that was owed and we estimated that the principle and interest to be the maximum amount of 24% of what Travis County could charge and even though probably some of these delinquent taxpayers were not assessed the full 24%, we just wanted to be conservative and put in everything that Travis County could have charged. As far as the law firm, law firm costs, that they could have assessed, the linebarger firm reported in their proposal that they would file 75% fewer lawsuits than Travis County. So we went ahead and gave them the benefit of the doubt and put in court costs at 75% less than what Travis County charged. Although we are not really persuaded that that could happen and still maintain our high collection rate. And calculated court costs as such. The law firm attorney fees, we did go ahead and calculate this at 15%, also based on the base tax plus the penalty and interest, and also for the law firm attorney fees, we also reduced penalty and interest and the base tax by the amount that could have been under a partial payment agreement. On July 1st. By an attorney general opinion they are not allowed to pay an attorney fee if they are under a partial payment agreement. We estimated that and backed it out. After putting all of these numbers together, analyzing over the last five tax years, we estimated that law firms would have charged delinquent taxpayers as a whole an additional $5.1 million. If you look at the next graph, that smum rises it by Texas year. Travis County in whether you, law firms in red. These are costs, the higher the bar, the higher number, the higher the cost that is charged to delinquent taxpayers. As you can see, every single year we estimate that they would have charged more. Hang on one second. I ignored the first phone call, second phone call, would everyone please turn off their pages and phones, please, it is not fair to the presenter.
>> costillas excluding -- court costs excluding penalty and interest.
>> the penalty and interest she calculated as basically the same for both. Whether the law firm collects or we collect, you still have to pay the penalty and interest.
>> they are not included.
>> they are not included in that. On top of the 5.1 they would be paying penalty and interest.
>> then on page 41, costs would simply mean court costs? Teernd's fees, page -- attorney's fees, cost to taxpayers, executive summary. Cost there would be to find as court costs and attorney's fees, excluding penalty and interest.
>> yes.
>> okay.
>> yes. So in summary, the analysis of the last five tax years, we believe, it is our estimate, that law firms would have charged delinquent taxpayers an additional $5.1 million, over and above what Travis County charged. And this is simply because Travis County only charges 15% to the people that they file a lawsuit against. That are delinquent. And court costs. Even that 15% plus the court costs is still significantly less than the 15% that law firms are going to charge to the entire pool of delinquent taxpayers on July 1st or after. There's a significant difference in the lawsuits that we file versus how many people are actually delinquent. So there's a huge monetary difference by each tax year. It's also important to note that the 15% that Travis County charges, when it is collected, it actually goes back into Travis County as revenue. And benefits all Travis County taxpayers. Whereas the 15% that law firms charge as attorneys' fees goes to the law firm as revenue and does not benefit Travis County or its taxpayers. This is an analysis of how delinquent taxpayers are tasked and how Travis County taxpayers are affected as a whole and mike is going to discuss that.
>> that leads to us the third question --
>> before you go there, too, just for clarification, how many times can a delinquent taxpayer get filed on?
>> every year that -- every year that they don't pay their taxes for that particular tax year, so like if I didn't pay my taxes for tax year 1999 and I ignore the collection letter, several letters that go out, we're going to get into all of that, I could have a lawsuit filed against me. The next year, the next tax year, if I haven't paid those taxes as well, they are going to probably roll it into one lawsuit, but they are actually going to file on me again for that year. So you -- when we get to talking more about the lawsuits, we have another part where we are going to talk about that. You will see that, you know, a lot of times we have taxpayers who are not just delinquent for several years, in other words they haven't paid for that one year for several years, they also have several years of delinquent taxes that they haven't paid. Did that answer your question?
>> uh-huh.
>> we enjoin do we not for all of our jurisdictions? Like if we had 80 jurisdictions, not all overlapping, let's say they were, we wouldn't file 80 lawsuits, there would be one lawsuit that would take care of the taxes that they owe to all of those. We don't have 80 that overlap.
>> typically you might have about five or six jurisdictions on your tax bill. Some people have more, some people have less.
>> the third question was if Travis County outsourced, would it provide a cost saving to all Travis County taxpayers. What we did year is looked at the big picture, all revenues that are associated with delinquent tax collection activities and all expenditures that are associated with delinquent tax collection activities. We used the most recent fiscal year for which we had actual data, fiscal year 2004 and we analyzed three scenarios. The first scenario we looked at the average purdue collection rate versus Travis County's actual results. The next scenario we are going to look at was the average collection rate versus Travis County actual results. Then the final analysis scenario that we looked at was the best county collection rate from either of the two law firms versus Travis County's actual collection results. So I知 going to start with the chart that says purdue analysis. And the first section deals with just the collection of delinquent taxes, there's two lines there. Are you all at the -- at the chart that says --
>> it's a big, long -- [multiple voices] did you find it? 20 and 29,.
>> that's the same as page 47 of the executive summary, right if.
>> yes, judge, just bigger so you could see them easier.
>> I wanted them this big. We just broke it down on the slide, the big one didn't fit. First just collections of the delinquent taxes, current year delinquent tax collections. Travis County the number there of 9.7 million, that's Travis County's actual delinquent current year tax collections for fy 2004, which is equivalent to tax year 2003. That equates to a percentage of 98.77%. That was our actual collection rate. For the perdue firm, their one-year collection rate averaged per tax year 2003 was 97.85, that would translate to current year delinquent tax collections of 6.9 million. The next line is collections for prior years, that's delinquent tax collections for previous years, so we are looking at tax year 2003 as the current tax year, this means delinquent taxes that were collected in fy '04 for tax years like 1999, 2000, anything before tax year 2003. The 2.9 million for Travis County is our actual collections. For the fiscal year 2004. And the amount that is there, 2.1 for perdue, is kind of prorated. What we did we assumed that perdue would do as good of a job at collecting for prior years as they did collecting current year delinquent taxes. We made that assumption for each of the three scenarios that we looked at. Really giving in my opinion the benefit of the doubt to the firms. But I wanted to try to make this as fair an analysis or at least weight it a little more away from Travis County if possible. And what you see then is the total delinquent tax collections, just the tax collection amount for Travis County, this is only Travis County taxes, too, $12.6 million in -- for fiscal year 2004, perdue the estimate would be 9 million. That would result in a loss of revenue from property tax collections delinquent property tax collections of $3.5 million in that year. Then the next page of the chart, we are looking at the revenue and expenditures that are associated with delinquent collection activities. In other words, not the actual collection of the delinquent taxes, but the other revenues that come in from that activity as well as the expenditures take we spend to -- to collect those taxes. So in the revenue section, under current, that's Travis County. The $2.9 million for attorney fees is what we actually collected in attorney fees for that year and we assumed that if you outsourced this, that that's going to be zero. Because the law firms aren't going to -- are going to keep the attorney fees that they charge. The next line is partial fee, the $935,000 represents exactly what Travis County collected in fiscal year 2003. That is for doing both current and delinquent taxes, so to come up with the number for the perdue firm in this analysis, we backed out the $364,000 that is allocated to the parcel rate for the -- for the staff in the -- in the -- in the county attorney's delinquent staff collection, because we are assuming that you would let inate that staff if you are going to outsource this to a law firm.
>> [indiscernible]
>> absolutely.
>> is that correct?
>> yes.
>> all right.
>> the -- the last revenue line item is $1.1 million for court costs. That is all the court costs that are associated with delinquent tax collection cases that were collected in Travis County. For fy 2004 because the perdue firm did not indicate they would file less lawsuits, we kept that number the same, if we were planning -- assuming it was going to be outsourced to them. In the expenditure side, these are budgeted expenditure amounts and p.b.o. Provided these. I don't know if you guys want to say anything or you just want me to run through them.
>> why don't you run through them. If there are any questions -- > no problem.
>> the first part is county attorney's salaries and benefits, 810,945 is what was actually budgeted to that fiscal year for the delinquent tax collection staff in the county attorney's office. So again we assumed that would be eliminated if the outsourced it. County attorney operating costs, that's an estimated, again we assumed that would be eliminated if you outsourced it. I知 going to skip out of order and go to the tax office salaries, that should be salaries and benefits of 377,000. We kept that the same for both, because our analysis show if you did outsource you probably would not be able to eliminate the staff in the -- in the tax assessor collector's office, the reason for that is they only spend a portion of their time working on the part that you would be eliminating. From October to December -- to February first, they would still be collecting current taxes from February 1st to June 30th, they would still be collecting delinquent tax, even in the period of July 1st to the end of the year, the money would still be coming in. If you have a law firm, they still have the money go to the tax assessor collector's office, they would be the ones making it out, also having to break it out for the law firms.
>> so our many friends in the tax office can relax.
>> yes, they can.
>> that would be our analysis.
>> they look relaxed back there.
>> we are really not that relaxed. Then the tax office operating costs were estimated at 70,000, again since you -- since we assumed you wouldn't be eliminating staff if you outsourced us, that stays the same on both sides. The last cost that I was going to talk about is the litigation costs. That is the expenditures that are associated with basically the court costs revenue that's up on the top. So from the lawsuits that are filed for delinquent tax collections, there's expenditures that roll in from a number of offices, constables, some of the cases are filed in j.p. Courts. District clerk for the ones that are filed in district courts and the district court expenditures as far as the -- when judges are hearing those cases. So that's some of the expenditures that are kind of lumped in there. We actually have that broken out, if you are interested in -- in the main report. I can find that for you if you are. But we again assumed that those two expenditures would stay the same because the perdue firm did not indicate they would file less lawsuits. So what you end up with just looking at the dlipt tax collection activities, the revenues and expenditures, the net revenue which is -- which is the revenues less the expenditures for Travis County would be 3.2 million. For perdue it would be 803,000, which would result in another decrease in net revenue of $2.4 million. So when you add that, to the -- to the decrease that you would gotten from just delinquent tax collections from the other page of 3.5 million, you take that 3.5, 2.4, add them up, $6 million, that is the decrease in net revenues, revenues minus expenditures that you would expect in the first year. That's an important thing again because like i've said before, you are doing -- we are doing our revenue and expenditure budget on an annual basis, so that would be what you would expect the net impact on that fiscal year 2004 would have been had you outsourced.
>> that's a minimum because as mike said, we really lean toward getting the law firms -- giving the law firms all of the benefit of the doubt. If we were looking at the first year of operation and also realistically what we thought they would bring in, I知 not sure we would give them the total benefit of the doubt. The other thing is this would be based on an increased levy for '06. So I think a safe thing to say is that the decrease in the revenue estimate would be no less than $6 million, I think that's a fair statement.
>> yeah. The last thing that we did in the analysis is since we are looking at tax year 2003 delinquent tax collections, we thought about, well, you are going to get some additional collections coming in in future years for those -- for that tax year. And it's going to be higher for the law firms because there's more left for them to collect. So what I did is we used the -- for Travis County, 99.7%, which was the average four-year collection rate after four years, we would have 99.7. That would result in an additional $2.7 million being collected in the next three years. For perdue I used 99.33%, which was their most recent average four-year collection rate. That would result in an additional $4.3 million. Coming in over the next three years. So that at the end of four years, you would expect to have a decrease in net revenues of $4.3 million. And I知 not going to go through the other two in the same level of detail. I知 going to point out where they're different unless you would like me to go through them all again.
>> no.
>> okay.
>> wild guess. If you go to the page that has the linebarger analysis on it, again we are using the average collection rate. So Travis County numbers are actual and then we use 97.7 to get the $6.5 million that's there. And the number below it, the delinquent tax collections for prior years, again is based on that same assumption that I was telling you about, we would assume they would do as good of a job collecting vious years as the current year. That comes up to a dough increase in net revenue just for the delinquent tax collections of $4.1 million. The next page on the revenues and expenditures from the activities, the main difference is if you look at court costs on the revenue side, we decreased that by 75%. Due to the fact that they would file 75% less lawsuits, also decreased the expenditures associated with that, which would be litigation costs. Those are also decreased by 75%. That does give you a total, when you add the net revenue lost from the collection activities, to the actual loss of delinquent taxes, of $7.1 million less in net revenue for the first -- for one year for fy '04 again this one I added back four years to give you five years total because linebarger did give us five years of data. I used 99.75 for Travis County, which is our collection most recent collection data for five years. 99.47 which was the same for the linebarger firm. After five years the net -- total net revenue would be a decrease of $4.7 million. The last analysis, we looked at the average for both firm. What if we take the very best county collection rate by either firm. In the data submitted to us, tarrant county, a linebarger client. Again the main difference is going to be on the first page of that, looking at the delinquent tax collections for the current year, again Travis County stays the same, those were our actuals. The collections for the current year are based on the 98.16% collection rate. That would give you $7.8 million or almost 7.9. The end result is it would be a decrease of $2.3 million in delinquent tax collections for the current year for fy '04 and again I kept the same -- because it was a linebarger client, I kept the same assumptions of the 75% less lawsuits for revenues and expenditures on the next page. And that adds another loss of $2.9 million based on the collection activities. When you add the 2.9 to the 2.5 that's $5.3 million. The last thing, I added back four more years of collections for both Travis County and the linebarger firm, that would end up after five years you would have a net revenue decrease of about 3 million, 2.99 million. And to summarize this, looking at the big picture, all revenues, associated with delinquent tax collections, Travis County would lose a significant amount of net revenue if Travis County outsourced the collection of property taxes delinquent after June 30th of each corresponding tax year. And you know whether we use the average collection rate of the perdue firm or the linebarger firm or the best individual county collection rate submitted by either firm, the county would have lost over $5.3 million and the loss ranges from 5.3 to 7.1 million in estimated fy '04 net revenues. The losses would be greater in future years if the levy increases. Again, you know, probably obvious but i'll say it any house. The result would be that Travis County would either have to cut expenditures for other programs at Travis County or increase property taxes to compensate for that loss. Susan mentioned it, I will say real briefly. If you -- what we looked at here was net revenue, you are talking about revenues minus expenditures. For the purposes of the revenue estimate we obviously just look at revenue. Planning and budget comes in and tells you what expenditures they would cut. If you look at the revenue only, the actual range would be $6.5 million to $8.3 million in revenue decreased and as susan pointed out, it would -- in an actual revenue estimate it would probably drop by more because we would be more conservative. There's some areas where we gave the benefit of the doubt to the law firms that we probably wouldn't in our first revenue estimate.
>> those -- those are significant numbers that you are suggesting, especially with the estimated revenue loss, revenue decrease --
>> they are significant [multiple voices]
>> I mean that is a heck of a range. However, I guess we can hear from the law firms, but according to sources of folks that are saying the dollars we have are flawed. I don't know. Some folks are saying there have been selective data. I don't know. As far as us trying to assess this stuff. So -- so I知 hearing different variations of stuff and --
>> I think that you have to make that --
>> I understand that, I understand that. What I知 trying to say you are going us your projections and of course that's what you are supposed to do as far as [indiscernible] the best that you can look at [indiscernible] but what I知 saying is that the numbers that are presented here today, the -- the -- the real gut wrenching reality check is that you are saying according to what your research has indicated is that we will lose somewhere between 5.3 and a little more than 7-point something million a year, is gut wrenching. That's a very disturbing large number of revenue decrease. Now that bothers me a lot. But however, I would like to hear from at some point --
>> you will hear from both folks, you know, some of these figures may not be correct.
>> Commissioner, let me just point out one thing because -- the auditor just submitted a third revenue estimate for the '06 budget process. The auditor is responsible for providing that revenue estimate. The auditor at this moment is giving you a signal about what the drop in the revenue estimate would be for '06. I believe the auditor has an open mind and if the auditor heard testimony that had her change the analysis, we would see it. But at this moment the rather gut wrenching detailed in depth review results in the conclusions that you are seeing and a signal as to what the auditor's revenue estimate would be. If it was outsourced.
>> right. And I guess we will hear from the other folks here as far as those persons that are willing to enter into some type of situation for outsourcing purposes. But, you know, I知 just looking up a, you know, to make up something as far as property taxes to -- if this is outsourced, you know, that's -- that's enough to -- making up the difference, hearing what I am seeing, seeing what you are telling me, I really don't know everything. But I know that you have given your report. I知 thanking you for that. I still need to hear what all of this other stuff is talking about. I want to put everything on the table so I can make a decision! So I知 -- i've heard -- I知 hearing what you are saying, I have read it, looked at it, I haven't heard from those other folks to see what we are saying is a lot of disturbing things brought up and publicly brought up. It's no secret! It's been publicly brought up in the newspaper. People talk about on the streets. I just wants to hear something, see what these other folks are saying to see what or why these determinations came about, what they have to say! That's basically where I知 coming from.
>> what you have heard is the economic analysis. The linebarger firm made several other fairly significant assertions in their submission and we felt that they were worthy of looking at. One of those issues is the filing of lawsuits. Lawsuits are a tool that all tax collectors use in collecting delinquent taxes, law firms use them, Travis County uses them. As a matter of fact the linebarger firm did give us a nice little treatise on litigation and lawsuits in their newsletter the year that ken joined the firm, that's the reason I happened to see it. But it talks about how important litigation is. So that's what we are going to look at. Some of the statements they make regarding litigation and we researched those. Looking at litigation, you start out with a public policy assumption, because again that's the framework. Taxes are levied and assessed by law and the legal responsibility of all property owners to comply with those laws. As a matter of public policy, compliance with the law is strictly enforced by aggressively pursuing all delinquent taxpayers. All of the jurisdictions for which Travis County collects taxes are treated in a fair and equitable manner. The first question is does Travis County's process, which includes lawsuits, achieve a high level of collections? In other words is that tool as it is embedded with the other tools that we use effective? And the answer to that is yes, you have just heard a fairly long presentation on that. What you are seeing there is a collection rate summary. So the entire process that Travis County uses is effective. It is more effective than any of the data that we have seen by the other firms. But then the second question is are the -- that -- that -- are the same criteria and processes followed for all delinquent taxpayers who do not respond to the Travis County collections effort? There's been a lot of talk about that. And first you might ask the question when does Travis County file a lawsuit? The tax collector assessor performs many collection efforts started on February 1 when property taxes become delinquent. First the tax office send out a section 33.04 delinquent notice that demands payment by February 28th. Second, if is there in response to the section 33.04 letter, a demand letter is sent giving the taxpayer 10 days in which to respond. Third, if there is no response to the demand letter, a litigation letter is sent demanding payment immediately and stating that Travis County is in the process of filing a lawsuit against them. In short, taxpayers can avoid legal action by responding to the tax office collection letters and setting up alternative methods of payment if necessary. They can enter into a -- an installment payment program, the tax office works with them to set that up. If they do that, then litigation is not filed. The tax office only pursues litigation on taxpayers that are unresponsive to their collection effort. Then is the process fair? The tax office has four collection criteria for filing a lawsuit. What we looked at is what those criteria were and were they applied the way they said they were. Those criteria are this: after they have gone through all of this process, they start looking at litigation in this order. The taxpayer owes a large am of tax, the larger the balance the higher the priority. Descending lest, just start moving down that list. We collect taxes so quickly they get down the list pretty fast. Two, the taxpayer already has a balance from a previous year. Didn't pay last year or the year before and now they are not paying again. Taxpayer has a poor payment history. Has written a check on insufficient funds or has broken a payment plan. Not dealing in good faith with the tax office. Four, the taxpayer owes tax to a jurisdiction that has a low collection rate. That's important because when we collect for these other jurisdictions you will see in the next analysis that we did, for instance, very often in the del valle school district, if the collection rate is not as high as it needs to be, the tax office puts extra resources on their to work those low performing districts, as the daily valley school district needs more, they might focus on taxpayers in that area. As we looked, we saw the lawsuits that were finaled followed that criteria. In the line barringer proposal, this is a quote from that, linebarger proposal, they talked about litigation. This was what spurred our interest to do the research. This is title -- this is a quote from their page 4 of their executive summary. A two year average based on the property tax bill for the average Travis County homestead, fy 2003 and 2004 and the quote says, over 86% of these lawsuits were filed on properties which were appraised at or below the average homestead amount. I have to tell ya this got our attention, this is why we looked at this issue. You look at the next slide, you can see right off the bat that this is questionable. What I did here is put a hierarchy of properties. In other words we filed 7,578 lawsuits in two years. Of those lawsuits, 45.8% personal property. So there is no way that 86% of the lawsuits could be on homesteads under the average because 45% were on personal property not real property at all. Then of the lawsuits 54.2% were on real property. Real property is broken down into commercial, and residential. You take residential and that's broken down into homestead and non-homesteads. Then you take the homesteads and you break them down as homesteads with taxes owed over 4,913 and home instead with taxes owed less than 4,913. When you take those numbers, there are really 1341 that are lawsuits have been filed in two years, homesteads with taxes owed less than the average value or 17.7%. So if you turn to the next page, that is a significant difference. Travis County is not filing 86.6% of the lawsuits against homeowners whose home is valued at less than the average. The real number there, is 17.7%. But we looked at that further and we focused on the lower priced homes to see if there was -- if the criterion were follow would. Again criteria applies to everyone. That's what you are going to see on the next chart there. That is we looked at of the lawsuits filed on homesteads, 649 were filed with homesteads which had auto value of $100,000. Less than $100,000. So we looked at the criteria. Did they meet the criteria that the tax office set? 31% were sued because they had a large balance due for one tax year. Simply means the tax office had worked the amounts owed from the highest to lowest, and they got there. They reached that number. 40% were sued because they owed delinquent taxes on a parcel for multiple years. By the way, what -- we looked at every one of these lawsuits. The average number of years delinquency for these suits were 3.5 years. That means on average these people had not paid taxes for 3.5 years. You can see why a lawsuit would have been initiated because at some point the message is you don't need to pay taxes. You vice-president paid for three and a half years, we don't file litigation. 23% were sued because they had a poor payment history and/or had written a check so on insufficient funds. The tax -- they still attempt to contact the taxpayer. If they do not respond a lawsuit is initiated so a -- 23. 7% were sued because the parcel was in a jurisdiction with a low collection rate. Most of these parcels, approximately 76% of them, were sued because they were in the del valle i.s.d. In precinct 4 in an effort to collect more property taxes for that school district. So you can say was the tax office fair? If you don't pay taxes, three letters are ignored, you don't make a partial payment plan, you meet the criteria, a lawsuit is filed. We saw no evidence that that criteria was not fold by the tax office and carried out by the county attorney's office. The next slide I think is important because it puts in a perspective of lawsuits and who is pursued. When we looked at the data, the five year data for tax year 1999, it's important to note that Travis County had collected 99.75% of all of the 209 million dollar levy that was out there. What that means is that the end of fy '04, there was only $525,000 worth of taxes uncollected. So what that tells you is Travis County reaches everyone. So if you have -- if you have constituents that's calling up saying I think they are picking on me, the answer is they are, they are pursuing everyone because you don't get to that kind of collection rate. Now, of the 525,000 that's left, of that, 272,000 were personal property and 253,000 was real property. So in -- in evaluating lawsuits, I think that the conclusion is that we found I know the conclusion, we found no evidence that would indicate that practices were followed by the -- by Travis County that violated strict enforcement of tax collections in a fair and judicious manner. We saw no evidence that would indicate that lawsuits were filed unnecessarily. Nor in an unfair manner. Because of track's high -- Travis County's high collection rate and the speed at which they collect they do reach almost all delinquent taxpayers. We found that the activities of both the tax assessor collector's office and the county attorney's office were consistent with the pursuit of the following two public policy assumptions: taxes are refusevied and assessed by law and it is the legal responsibility of all property owners to com pie apply with those laws. Compliance with the law is strictly enforced by aggressively pursuing all delinquent taxpayers. When we looked at lawsuits in depth, we felt it was an effective tool witnessed by their collection rate, that the policies on litigation, the criterion were objectively and fairly applied to all taxpayers. The other issue that was brought up, tangential, had to do with court costs, nikki is going to deal with that.
>> I will briefly talk about court costs. In one of the proposals it was stated that court costs averaged about 400 to $500 per case or more. In our analysis that didn't -- that wasn't the case. We actually analyzed all of the cost court collections for fiscal year 2004, came up with an average total cost of court costs per case of $250. Now, there are -- there are court costs that actually are more if the lawsuit goes through a tax sale. Those are significantly more. Because you have more expenditures when you go through the entire process through a tax sale. Those averaged $497. But that -- that doesn't happen very often. In fact of all of the lawsuits that were filed that happened less than 10%. That's why the average court costs per case is only $250. Which is significantly less than the 400 to 500 that was asserted.
>> the last point we wanted to make, to make sure that our analysis was fair, in the linebarger proposal, again on page 2 of their executive summary, they make a statement that "the economic factors in Travis County makes high collection rates more achievable." to document that, they attempt to document this assertion by stating, this is another direct quote, "of particular note is the comparison of Round Rock i.s.d. With the Pflugerville i.s.d. These two districts have very similar sociai don't economic foundations and therefore the most comparative of the area districts." I think what they were trying to say there is that's what they thought was probably a better comparison of their records. What we did is we looked at the Round Rock independent school district collection rate and we looked at that of Pflugerville. And page 60 -- next one if you would, please, christie, that one first. And the first thing that we did was we tried to get a gauge on sociai don't economic factors. We went to the Texas education indicator system, which assesses the sociai don't economic factors of their student body. In the linebarger, they said the collection rate was 101%. Clearly that can't be true because you can't collect more than the adjusted levy. We went back to the linebarger firm and they said they had made a slight error there in the adjusted levy. They corrected it and the actual collection rate for -- for '04 was 98.62%. As you see then, we looked at Pflugerville which Travis County collects and the collection rates were exactly the same. We looked at the socioeconomic profile which linebarger felt predicted collection, you can see that Round Rock had 20.5% economically disadvantaged students, where Pflugerville have 35%. So Pflugerville had a significantly higher percentage of economically disadvantaged students and even with that, if you look at that socioeconomic factor, Travis County got the same collection rate from Pflugerville which linebarger felt was comparable. But more interestingly, if you take a step up there, we looked at Austin independent school district while we were looking at it, the percentage of economically disadvantaged students in aisd is basically 56%. So it's more than twice that of Round Rock, of the three districts the highest collection rate was for aisd in '04, that was 98.95% collected by Travis County. So we did not think that argument was persuasive. The other thing we think that it is, as we looked at these, you need to be very careful at looking at school districts if they don't really reflect what the county looks like. Some might, some might not. And we don't think that Round Rock independent school district necessarily reflects Travis County. To go outside to something more objective, we looked at tarrant county, which is a linebarger client and karroll i.s.d. A perdue clients, you can see the carol i.s.d. Was 99.42%, linebarger's collection for that very same county was 98.16. That's not really surprising because that looks like a fairly small school district that doesn't really represent all of tarrant county. If you are looking at the data that the law firms submitted there was really only one entity that -- that did exceed Travis County's collection rate and that was perdue for carroll i.s.d., if the argument would be pick your best school district and go for it, the best collection was carroll i.s.d., the perdue firm to be fair to them did not represent they could replicate that in Travis County and we don't think they can. School districts do not necessarily reflect what we think we would see here.
>> the one thing that I would add about looking at Round Rock i.s.d. Versus Travis County is the reason that we also wouldn't think it would be that comparable is Round Rock i.s.d. The parts that are in Travis County there's about 14,000 parcels in Travis County. Travis County as a whole has about 330,000 parcels. You are talking, it represents about a little less than 5% of all of the parcels in Travis County. So -- you know, as you would expect, something that has less, you know, not all that representative of all of the parcels, some are going to have higher collection rates, some lower. So ...
>> and in summary, we have looked at the economic collections, we have looked at the impact for delinquent taxpayers, we looked at the impact on the revenue estimates or revenue for Travis County. We looked at the lawsuit collections. We looked at court costs and we analyzed what one of the firms thought was their most comparable district and our conclusion is that both the firm that we analyzed do a real good job of collecting tax, Travis County plain does a better job much again I want to thank all of the people that worked on this. Mike, did you want to make a closing comment?
>> I just wanted to say as far as the other, you know, if you look at the financial issues, our analysis really shows I think you are better off keeping things the way they are. That's kind of an odd thing to come in front of you and say. We talked a few times, you have asked the auditor's office to look at a lot of different projects the last several years, typically we are down here telling you, this isn't working, this is broke, you need to do this, it's kind of a nice change of pace to be down here and giving you some good results for a change. You know, in our opinion, we looked at this as one of the most effective and well-run programs in Travis County. The only thing that I would add when you are looking at the other issues that are not financial, one of the things is if there's policy changes that you would like or you think need to be made, you know, you might want to consider just taking a look and working some of those out as opposed to outsourcing. The outsourcing part is going to cost you, in our opinion, so much money in net revenue that, you know, you have a lot of room to play with adding some things in if there's something that you don't like about the current process.
>> that's kind of why we laid those public policies issues out there. There's kind of assumptions about what you do, you can make a different assumption. Thank you very much for your patience, this was a very long presentation, but it was complicated. A lot of numbers, we knew it was important to you, it certainly was important to us, thank you very much.
>> I want to thank all of y'all for the work. I think the question needs to be answered and answered publicly. The other thing I did not ask this question because I have received -- I haven't received calls from anybody saying they shouldn't pay taxes. I think everyone agrees that they need to pay their taxes. But I don't need to wait to get calls from people to ask questions about our processes here. It's pretty much like the role of congress. They have to question supreme court nominees because of the impact that they will have on people's lives. And so I think we are in a very similar situation here. We need to look at all of the processes and see how they impact our constituents, which in my opinion are all over Travis County and not just precinct 4. Except when it comes time for election. You know, politically, we have to -- we have to run by districts and not at large. So at any rate, thank you all very much.
>> thank you.
>> thank you all.
>> thank you very much.
>> thank you.
>> one of the key assumptions was that in order to figure out how well a firm might do for Travis County, we used the firm's highest collection rate at another county.
>> what we did is we told them to submit their five biggest -- you want to take that. He did the analysis.
>> yeah. Some of this was bound by what you asked for in the rfi. What you asked for in the rfi was for the firms to submit their six largest entities and the collection rate data for five years for each of those entities and I kind of already explained we ended up with only five entities for each for various reasons. But what we looked at in those three pieces, I assume you are talking about those three charts that I spent a pretty long time explaining. Used the average collection rate for the linebarger firm of their five entities, used the average collection rate for the perdue firm for their five entities we chose of theirs. When I did that last chart, that was actually not an average at all. The best collection rate for a county for either law firm.
>> okay. All right.
>> all right.
>> questions, comments?
>> [indiscernible] thank them --
>> if you do have questions call --
>> pardon me?
>> if you do have questions later that come up, be sure to call if you are thinking about --
>> you know, I知 not a bashful person, you know that I will ask in a minute [laughter] I will just lay it right in front of you. What I知 trying to say is when you brought that up about the decrease in revenue, very significant to me.
>> it is.
>> now -- but the point is I need to hear, that's what I was telling you earlier, I thank you for your presentation, don't think I知 throwing rocks at none of y'all, I知 not. It's just that I need to hear from others that are saying things maybe different than what you are saying. How you derived there, arrived there, I知 anxious to get to all of it so I can measure it and play around with it and stuff like that. Thank you.
>> now, it may be a good idea for us to stand in recess for five minutes to give the --
>> I think so, judge.
>> before you get started on that, since everybody else was getting their little quick say, couple of things. Susan, you did lay out very nicely in terms of what is the process from February first on in terms of getting the attention of a taxpayer. But I think it also needs to be mentioned that ms. Nelda seems to have a habit of sending out our tax notices before election in November. And so you actually get a notice in terms of what you have due, you have the entire month of November, you have the entire month of December, and you have the entire month of January to know what your obligations are. Generally visa gives us two weeks, but you have 90 days more or less to have full notice of what your obligations are. I have also answered a couple of questions today, e-mails raising that somehow this wasn't independent or questioning the independence, susan you touched a bit about has at the very beginning. But we did have up front expectations here because this was officially done as an r.f.i. And in a very public process, a very open process, a very entertaining process we actually approved an r.f.i. And we talked a great deal about who was going to be the evaluation team. It was going to be the purchasing agent and p.b.o. And the auditor and I don't believe I heard from a single vendor, nor anybody here or others about having issues up front that that is who the evaluation team was going to be. And two of those are independent officers of county government as opposed to reporting to the Commissioners court. The county attorney and the tax collector appropriately had no role in the analysis that had been done here. They had no role in the writing of that report. One of the persons I visited with admitted that they had not read the report but looked forward to reading the report and hearing more about the independence angle.
>> [indiscernible]
>> no it wasn't you [laughter] what is also interesting, back in 2001, the last time this issue kind of sort of came forward, but never came forward to a public report like this, planning and budget I believe was pretty much the only folks that were involved in that analysis. With an unsolicited proposal, no disrespect to christian and his staff, we were going through a much more rigorous analysis and because of the -- this was an actual procurement of professional services and it clearly shows the work that has gone into this. The auditor is independent. I just came from south Texas judges and Commissioners, believe it or not, one of our little sections was on what is the county auditor, they have been around for 100 years as of this year in terms of being --
>> not me.
>> I know, susan you were there. When it happened, but they were stab established to provide a necessary balance. I thought they were rather flowery and he have fusive of -- he have fusive of -- owe effusive. A county auditor must not may, but must be a competent accountant with at least two years experience in auditing and accounting, thoroughly competent in public business details, a person of unquestionably good moral character and intelligence and before making an appointment, not us, but the district judges must carefully investigate and consider the person's qualifications. So we are very blessed that there was independence not only from the county auditor but from the independent purchasing agent as well related to how all of these numbers got together. Finally I want to add my thanks as well as everybody here on this panel for the amount of work that's gone into this, the analysis, asking of the questions, et cetera. I知 very pleased that --
>> this will be back on the agenda next week.
>> it's okay, I want to make sure this is said. There are a lot of folks here from the county attorney's office and the tax office and I知 glad that you are here so that I can personally tell you what immense pride that I have. Too often government doesn't do as well as those on the outside. But you can point with pride to the fact that you do a fantastic job and better than those on the outside. And I said it before, this report proves it out. The reason that we do it is because the process is more transparent, it is fairer to taxpayers, and oh, darn we do a better job. I wish that I could take credit for saying that, but our former county attorney was the first person who stood in my office and told me that. And he was correct.
>> any more political speeches before we hear from the [ applause ]
>> let's stand recess for five minutes and give the vendors a chance to set up.
The Closed Caption log for this Commissioners Court agenda item is provided by Travis County Internet Services. Since this file is derived from the Closed Captions created during live cablecasts, there are occasional spelling and grammatical errors. This Closed Caption log is not an official record the Commissioners Court Meeting and cannot be relied on for official purposes. For official records please contact the County Clerk at (512) 854-4722.
Last Modified:
Wednesday, July 27, 2005 7:49 AM