The cost of inadequate tax billing software

Nearly every Indiana county has failed to send property tax bills on time this year, forcing many local governments and schools to borrow millions and providing further proof that Indiana’s tax billing system is still a work in progress more than a decade after a court ordered a massive overhaul.  Only two of the state’s 92 counties sent tax bills on time, and 17 were more than six months late sending out the first of this year’s two tax bills, according to an Associated Press review of data from the Department of Local Government Finance, which regulates the property tax system.  Some counties still haven’t billed.

The delays in 2008 and this year have caused cash-flow problems for school districts and other local government agencies.  “It’s been an ulcer and it’s definitely not just for us,” said Sharon Qualkenbush, finance director for the Porter Township Schools, which borrowed $10.8 million last year and about $6 million this year because of the late tax bills.  Much of the money has come from the Indiana Bond Bank, a state agency that issues short-term and long-term loans to schools and local governments.  Executive director Dan Huge said the bond bank typically issues $250 million to $350 million in loans a year. But borrowing in 2008 spiked to more than $1 billion, and so far this year local units have borrowed almost $600 million. The increase in borrowing is due almost entirely to late property tax bills, he said.  Borrowers must repay the loans with interest. The Porter Township school system has paid some interest on this year’s loan but will owe an additional $34,644 by Dec. 31, Qualkenbush said

Getting the bills right

Thousands of property owners in Maricopa County may have paid an incorrect amount on their property taxes. The Maricopa County Assessor Keith Russell has launched a review of all of the county’s records. It is the first review of property tax records since 1994.

According to the Associated Press, the city of Chandler has already found 248 errors in their property tax rolls. Peoria has found around 1,000 mistakes. “We do pay a lot so if there is an error, I would want it to be known,” said Pheonix property owner Victor Harris. “That would concern me a lot,” added Ivan Huish, who owns property in Mesa.

Possible errors on the rolls might include being incorrectly listed as a resident of Phoenix or Tempe, which may have higher municipal tax rates than the city where the home actually exists. Property tax billing software can only do so much. A bill can still be calculated consistently if the valuation parameters provided are incorrect.

City Halls struggle to contain deficits

Peoria and other cities in Illinois are facing difficult decisions to fend off effects of the recession. In Champaign, not only is Chief Illiniwek gone but so are 19 city government positions, and residents are paying more for cable TV and to retrieve their impounded car. Joliet officials have projected a three-year $67 million deficit and, as a result, 90 fewer employees are working in city government today than last year. Springfield is requiring its employees to take eight unpaid furlough days next year. Sales tax also is going up in the Capital City.

Peoria is hardly alone in battling the crippling effect the recession is having on city halls throughout the U.S. and, especially, Illinois. Local and county governments throughout the state are scrambling to find ways to generate enough money to stay afloat during these tough times without sacrificing public safety, road construction and basic services that range from inspecting structurally unsound buildings to picking up stray dogs from neighborhood streets. "It's far worse than anything I've seen," said Larry Frang, executive director of the Illinois Municipal League. He's been with the league since 1974.

Locally, growth cities such as Washington are holding off on hiring new employees until the economy begins to show signs of recovery. East Peoria is contemplating scaling back its Festival of Lights events. Pekin recently introduced two new taxes on packaged liquor and food and beverages. In Peoria, the city's $10 million deficit has city officials pondering what can be done to restructure government. That means the public can expect immediate changes to the way yard waste is collected, library services and local arts awareness.

Subsidising solar

In Nevada, solar energy generation is being subsidized (encouraged?) through extended property tax abatements for renewable energy production plants, which were to expire in this year, and expanded them from 50 percent for 10 years to 55 percent for 20 years. The Las Vegas Sun newspaper reports that solar energy developers had been worried about a fierce stance by Assemblywoman Kirkpatrick, who began the year saying she would not support the industry’s request for a 75 percent property tax abatement and would impose a new tax on renewable energy. The revenue would go to offset higher energy costs for ratepayers.

Kirkpatrick was concerned that solar plants would not bring many permanent jobs to Nevada, and that solar plant construction jobs have gone to out-of-state workers in the past. But the possibility of a new tax “brought development to a halt,” said renewable energy lobbyist Tom Clark. “It sent a red flag to every developer.”

Business Tax Protests

Thousands of businesses are fighting Bernalillo County because the owners said their new property values are outrageous. Some business owners worry about what they're calling devastating effects. "I'm very angry," said John Gustafson, the owner of Broken Arrow Electric in southeast Albuquerque. He couldn't believe his most recent property value assessment. It's 30 percent higher than last year. "I panicked because I know what it means," he said.

It means he could have to pay thousands of extra dollars on taxes, which is money he can't spare in the sluggish economy. "Hopefully that means we won't have to lay off more workers," he said. Gustafson filed an appeal and according to the assessor's office, 9,000 businesses in Bernalillo County have done the same thing. Officials admit it’s far more than what they're used to seeing. "Nobody thinks its right because it isn't right," Gustafson said.

Property tax rebates: ending soon?

Most New Jersey homeowners, already paying the highest property taxes in the nation, will not see a property tax rebate check next year under Gov. Jon Corzine's revised 2010 budget proposal. The updated budget, released Tuesday by Treasurer David Rousseau, keeps rebates for 700,000 seniors and the disabled but eliminates them for everyone else.

Corzine's original proposal, released in March, got rid of rebates for those earning more than $75,000. But with updated revenue projections coming up $2 billion short for the 2010 budget year, Rousseau said rebates were not sustainable this year.

"We simply cannot spend money that we don't have," Rousseau told the Assembly Budget Committee members Tuesday. The move would save the state nearly a billion dollars and cost homeowners $950 on average; renters would miss out on an average $75 rebate, according to the Treasury Department.

At least 1 million homeowners would no longer get rebates; the number of renters affected is unclear, according to Treasury Department spokesman Tom Vincz.

Direct Debit

Direct Debit is a popular form of bill payment. It means that by the due date the customer's bank account is automatically debited with the amount of the bill. Some customers would like their credit card charged, rather than their bank account - arguably so they can get more frequent flier points! The problem is the merchant fee the credit card companies charge the utilities. Visa has attempted to address this issue by charging a flat rate fee rather than the merchant fee.

B-Pay View

e-billing in Australia is aupported by the banks, and a facility known as BPay View. BPay is a standardised electronic bill paying facility. With B- Pay View customers can manage & view all their bills online 24/7 from wherever they are. The benefits are:

Get organised: Customers can have a summary of all their bills and their due dates in one place.

Choose how to pay: Customers can still use BPAY if they receive bills online via BPAY View and pay from a bank account, credit card or use any other method each biller allows*.

Pay on time: Make instant payments with BPAY or schedule payments for a later date.

Be kind to the environment: Cut down on paper usage by choosing to receive bills online.

e-Billing

E-billing provides a faster, more efficient and convenient way to receive and check customer bills. It is increasingly used for property tax and utility bills (ie. public sector billing). Here are some of the advantages:
* It is interactive, giving the customer online access to more information on things like discounts and reliefs
* Customers can see their bill as soon as it is available
* Customers usually still have the choice to download and print their bill in PDF (Adobe) format if needed
* Each person named on the bill should be able to receive their own copy at the email address given for each person
* It helps to reduce printing and postage costs
* It helps to protect the environment by saving paper

Storm water billing

Storm water billing is not based on a water meter. It attempts to compensate for the amount of rain water that is not absorbed by the soil because there is some surface erected over the soil on privately-owned property – building, footpath, garage – that causes a water run-off into the public drainage system. This is usually known as the “impervious area”. Since these areas vary in size, billing systems usually apply stepped rates – if the area is up to A then the rate is Y, if it is between A and B, the rate is X and so on.

Customer records

The customer record should be independent of any Account record, as the customer may have multiple accounts. Older-style billing systems focused on the parcel or address (for property taxes) or the meter (for utility billing). Modern billing systems focus on the customer and the management of customer information. Among other things it means that when a customer moves to a new address all of the data already exists and does not have to be re-keyed. Because some data is non-standard, either between customers or between different cities or utilities, a number of user-defined fields should be available in the billing system to support this need.

From Customer Management Fact Sheet which can be found at Public Sector Billing.

CIS Billing

Billing systems are as often as not these days called “CIS Billing” - meaning Customer Information System. A CIS sytem will have customer records that keep a history of contact with a customer (calls, correspondence, e-mail), their credit data such as credit rating or deposits, and theft and tampering history (for utilities). Other data could be as extensive as preferred language, banking data for direct debit, even preferred bill format and preferred bill delivery method, such as via e-mail rather than standard mail. Corporate customers may have extensive data relating to headquarters and branch locations, linked accounts or premises, and company representatives.

A Customer is not necessarily a person or business who receives regular bills. They may be someone who is an irregular contact. Nevertheless the CIS Billing system should retain their data for use when required.

From Customer Management Fact Sheet which can be found at Public Sector Billing.

Account Enquiries

A well-designed summary enquiry screen makes the job of the call center operator easier and increases throughput. The summary screen should provide at-a-glance information that will answer 80% of standard call center enquiries such as the due date for the current bill, whether a payment has been received, the next date a bill will be sent (based on a meter reading or an installment), or (via a graph) the consumption pattern on a utility bill. It should also provide via drill-down access to supporting detail. Where values have changed over time (property value or metered consumption) an enquiry at the line level of the bill should show how the charge was calculated.

From the summary page a list of hot links should give the user access to their most common actions. That is, a list of common actions should be able to be tailored by each operator. As well their should be access to the knowledge base of answers to frequently asked questions.

From Account Enquiries Fact Sheet which can be found at Public Sector Billing.

Account Contacts

A Billing system should support Contacts who have multiple Accounts, both at the same time (ownership of multiple properties) and over time (as a person buys and sells properties as their place of residence). Each Contact may have multiple addresses – work, home, mailing – each with their own attributes. The contact's primary information (date of birth, driver's licence) does not change and so forms part of the central record, but address information is more variable over time and should be part of a series of effective-dated sub-records, linked to the central or main record.

It is important that a record is kept on each Account for Contacts other than the person(s) legally responsible for paying the Account. There may be a person practically responsible for paying the Account, such as a parent, child or legal guardian, who would also receive a copy of the Bill at their own address. Generally this is known as “third-party billing”. As circumstances vary between cities or utilities, the ideal Billing system should not be prescriptive as to classifying such people; it should support user-definable categories.

From Account Contacts Fact Sheet which can be found at Public Sector Billing.

Account Relationships

"Some of the stand alone objects that are drawn into a relationship with the Account are the customer, the address or parcel (for property-based bills such as tax or utility bills), the services or valuations being billed on the address or parcel, the permits associated with the address (if property-based) or the customer, and the licences that customer holds or that have been granted for the business. Utility billing applications will also have information about the meter and its reading route and sequence."

From Account Relationships Fact Sheet which can be found at Public Sector Billing.

Account Attributes

"A carefully thought-out Account structure is the key to effective revenue management information. While the Account is itself a business object, with its own numbering rules and attributes, it also draws on other stand alone business objects such as the address or parcel of land and customer names, also known as Contacts.

Three attributes belong to the Account alone – the Account number, the Account type and the industry code.

One mistake some utilties make is to have the meter reading route number embedded in the Account number. This does not make for flexible solutions and modern utility billing applications should be able to show an Account's route details without embedding the data in the number.

Account type is not always used. The most common of these is the “owner” Account and the “Tenant” Account.

Finally the Industry Code should be an Account attribute. These are generally known as Standard Industry Codes (SIC) and each country publishes their own standard list."

From Account Attributes Fact Sheet, which can be downloaded from Public Sector Billing

Move In functionality

"One of the most labor-intensive actions is Moving a customer in or out, or sometimes between two properties within the area served by the one city or utility. The process should be highly configurable and should also allow for common events such as a change in date or a cancellation. With a cancellation the Move In or Out may have already been carried out in the billing system and have to be “undone”; a good billing system should support these actions as automatically as possible. Where a customer is transferring between properties, all of their banking and security deposit data should follow them to the new address." From Move In & Move Out Functionality Fact Sheet, which can be downloaded from Public Sector Billing

Permits

Permits are an integral part of public sector billing. A water utility, for example, may have permits for commercial users to add chemicals to their effluent - this is known as industrial or trade waste. Cities have permits for almost everything - one-off permits for the St Patrick's Day Parade; continuous permits for the coffee shop owner to have seating on the pavement. Any software selected for public sector billing should have a permitting module as integral to its functionality.

Cities and the carbon tax

I sat in on a city meeting the other day where the officials were discussing the selection of a new piece of software. They needed to be able to record data that would enable the city to set out its carbon footprint. As the Obama Administration moves to institute a carbon tax or some other form of environmental levy, will cities be far behind in their grab for tax revenue? And how will their billing systems cope?

Mortgage fraud

The phrase "sub prime mortgage" really means a mortgage against a property of whatever value advanced to someone where the documentation was poor or non-existent, so the risk of default was commensurately greater. Some have argued that the policy of the Clinton administration in "encouraging" lenders to make mortgages available to the socially disadvantaged was responsible. Once the banks had had a solution for offsetting their lending risk peddled to them by the snake oil merchants of Wall Street, everyone else jumped in on the act. While the Community Reinvestment Act may have been introduced in 1977, its aggressive use started under the Clinton Administration. Some have suggested that a lesbian started the banks and other lending institutions towards that grand cock-up we have today, the financial mess on Wall Street. Her name is Roberta Achtenberg and she was Assistant Secretary for Fair Housing and Equal Opportunity at the Department of Housing and Urban Development (HUD) under Clinton. Whatever the source (and there will have been many), billing in the public sector has been hit and will need tax increases to fulfill its community obligations. And the law enforcement folks should have years of work ahead of them.