THE CITY OF KENT, OHIO FINANCE COMMITTEE WED., MARCH 5, 2008

Transcription

1 THE CITY OF KENT, OHIO FINANCE COMMITTEE WED., MARCH 5, 2008 The Finance Committee of Kent City Council was called to order at 7:17 p.m., on Wed., March 5, 2008 by Wayne A. Wilson, Chair. PRESENT: ALSO PRESENT: ABSENT: MR. AMRHEIN, MR. DELEONE, MR. FERRARA, MR. HAWKSLEY, MS. SHAFFER, MR. TURNER, MS. WALLACH, AND MR. WILSON D. RULLER, CITY MANAGER; J. SILVER, LAW DIRECTOR; B. RISSLAND, DIR. OF BUDGET & FINANCE; AND L. COPLEY, CLERK OF COUNCIL J. FENDER, MAYOR MR. KUHAR, COUNCIL Chair Wilson explained the first item on their agenda was a presentation by Regional Income Tax Authority (RITA). Dave Ruller, City Manager: Mr. Ruller said the second item on the agenda will be a discussion on a process for staff to look for opportunities to improve services, etc. He said that some times, it deals with opportunities to leverage technology or to leverage cooperative efforts. He said that one such opportunity is the possibility of using services available through RITA. He said this came up during their budget discussions in Mr. Ruller said it is not going to save them money at the onset. He said part of his 2008 budget message dealt with doing things that will spend more money, but will serve their citizens well. Mr. Ruller said this is not a decision night. He said that half of them are new to Council and this discussion, which is why they invited representatives from RITA. He said the staff is interested in exploring the possibilities, but do not want to invest too much time and/or energy if Council is not interested. Barb Rissland, Director of Budget & Finance: Ms. Rissland said that Rick Carbone, Executive Director, would be presenting for RITA, adding they will entertain questions as they do the presentation. Mr. Carbone said he wanted to be sensitive to their time. He said he previously served as Law Director for two municipalities, in Olmstead Falls and Lyndhurst. He said he understands committee nights. Mr. Carbone said he wanted to be sure their questions were answered, and told them to feel free to interrupt him at any time. Mr. Carbone said he could literally talk about RITA for hours, but was not going to do that. He noted they distributed a handout, adding it was up to them whether he did an overhead presentation. Mr. Hawksley suggested it is easier for the audience to follow along if they use the overhead. Mr. Carbone said he has been the Executive Director for three years, having just signed another fouryear contract. He said that present with him was Rich Barille, Chief Operating Officer, and Chuck Hawk, Member Relations Coordinator. He explained that Mr. Hawk s job is to drive all around the state to talk to their members, so they understand their needs and issues. Mr. Carbone said that RITA was formed in accordance with ORC Chapter 167, which permits any two or more municipalities to contract with one another. He said they contract with each other, not RITA. He said they formed in 1971 with 38 municipalities. He said they currently have 139 municipalities, with three more committed to joining in He said they are probably the best example of regionalism and cooperative effort in Kent, as economies of scale are offered. Mr. Carbone said they now serve in excess

2 of 1.2 million in population throughout Ohio. He said they can offer services that a municipality cannot offer because of the financial strains, such as electronic filing, payment and registration. He said they can partner with software providers, and get a bill passed in Washington, DC because they are listening to numbers. He displayed a list of all of the municipalities at this time. He said all of the communities went through the process of analyzing the information, and came to the conclusion that this is the best, most efficient way to collect taxes. Mr. Carbone said each community has one vote in the Council of Government, adding they have a ninemember board of trustees. He said the board members serve three year terms, and are elected by the membership. Mr. Carbone said the committee meetings are monthly. He said he reports to the board of trustees. Mr. Carbone said they talk about people processes, and technology. He said they feel they are very effective in tax collection because of the people they have, the processes they developed, and the technology they have developed. Mr. Carbone said they do everything from registration to litigation. He said they have a year round registration department. He said they have the IRS Data Exchange Program. He said they worked hard to obtain a change to federal laws, allowing them to partner with the IRS to benefit them. He said until that changed, the IRS was very selective, and partnered only with municipalities with a population of at least 250,000. He said they convinced the legislators to change the federal law. He said this allows them to find out who is not reporting or under reporting their income. He said it also allows them to not bother those who should not be bothered, such as a senior citizen. Mr. Carbone said they deal with compliance, preparing and filing lawsuits on the municipality s behalf. He said they are directed by the City, and file on their behalf, seeing the lawsuits to the conclusion and judgement. He said they have an administrative subpoena program, adding this would be issued to noncomplying taxpayers. He said they staff the City Hall for the program. He said he reviewed three similar municipalities. He said they mailed over 8000 subpoenas at a cost of $70,680, and had tax, penalty and interest assessed in the amount of $ Mr. Ferrara noted that was assessed and not captured, and Mr. Carbone said they received $147,719 in payments, with a balance due that was billed in the amount of $119,939. Mr. Ferrara asked the cost, and Mr. Carbone said it is $8 per subpoena. He said they staff city hall with their auditors. Mr. Ferrara asked if this includes going after the uncollected taxes, and Mr. Carbone said they would discuss that in a second. He said that many pay on the spot, adding if they have to file lawsuits, they do all the preparation. He said the only charge they pay is the time their employees actually spend in court. Mr. Ferrara said most of the cases are small claims cases, and by statute, they are authorized to send employees on a city s behalf. He said they have paralegals, only charging their time in court, not for preparatory time. Mr. Ferrara asked the rate, and he said it is $35 per hour. He said they may have 25 cases scheduled on the same day, and the paralegals can handle those cases in a matter of two hours. He said it is a cost of approximately $70 per month for handling twenty-five cases. Mr. Carbone said the overage annual cost is $500 to $800 for the fees for paralegals or staff attorneys. He said they can file in the municipal court and the common pleas court, and charge a rate of $35 per hour. He said most of the cases are settled prior to court, so there is no charge. He said they have ninety municipalities signed up for the legal program. Mr. Carbone said they take the cases to judgment, but do not do garnishments and attachments. He said they do use a collection firm in Cleveland, adding they charge the RITA rate, which is 18% to collect post judgment. He said that most of the monies are collected before it gets to that point. Ms. Wallach asked how this is going with the foreclosure crisis. She said she spoke with someone in

3 another town, who said people are having a hard time paying their taxes as they are working so hard to pay their mortgage. She asked if he saw a real problem, and Mr. Carbone said he did not see any more than usual. He said they have a staff who sets up payment plans. Mr. Carbone said that Twinsburg joined on a year ago, and just finished their first year of collections and their first year of the subpoena program. He said there was an article in the paper about a taxpayer who was relieved at how well he was treated. He said the taxpayer had not paid taxes since 2003, and they worked with him to set up a payment plan. He said if there is a foreclosure, and they have a lien, they do the follow through and assert the lien so the City does not lose it. He said they also follow through on bankruptcies at no charge. Mr. Carbone said the municipalities set the guidelines on payment plans, and RITA administrates the municipality s ordinance. He said the municipality sets the penalty and interest rates, which are administered by RITA. He said they will make suggestions, and are in constant contact with the Law Director about changes in the state statutes to be sure the ordinance is up to date. He said that is part of their fee. He said they are very active with state legislators in Columbus, and were at the table when some sweeping changes occurred in ORC Chapter 718. Mr. Carbone said he looked at three sample cities with respect to the legal program. He said seventynine cases were filed, and forty-two cases were paid in full. He said that staff costs were $423, and court costs levied were $5202. He said they would set up a fund if Kent chose to participate in a legal program. He said Kent funds that account to be used for court costs, and as the court costs are recovered, they go back in the fund. Mr. Carbone said they are excited to have the benefit of the IRS exchange data program. He said the IRS has been to their offices, and requires a stringent security program. He said the IRS is satisfied with their security. He said the IRS agent was amazed they were able to get the federal law changed. He explained that the bill was sponsored by Congressman Turner from Dayton, and twelve other congressmen signed onto the bill. Mr. Carbone said they have auto calc, where taxpayers can have the calculations done for them. He said all they have to do is print it and send it in. He said they all know the income tax is the life blood of every municipality. He said they need to make it as easy and as efficient as possible, so they do not spend a lot of time collecting the money. Mr. Carbone said they are starting a new basic tax system, (RitAX), which is a ten-stage program and will replace LTAX, legacy tax system, which is their current system. Mr. Carbone said the Siebel Call Center allows high customer service levels. He said they can track phone calls. He said when a taxpayer calls in and is prompted to enter information, that account will be on the screen when the agent answers the call. He said the IVR (Interactive Voice Response) system identifies the callers and places them in person to person contact with proper people. He said it also allows twenty-four hour self-service. Mr. Carbone said the Tax Administrator Form Viewer system allows the City s authorized individual, to access same information that it is in the RITA system. He said that all returns are scanned. Mr. Carbone reiterated their services, including e-filing, e-payments, e-registration. He reiterated their partnerships with various tax software companies. He said they also developed I-File-Pro, allowing tax personnel the ability to assist taxpayers with electronic filing and payments from City Hall. Mr. Carbone said that Youngstown disbanded their entire department, and with their first year of collection, they increased by 8.5% to 9%. He said that Twinsburg has seen an increase of approximately 6%. Mr. Ferrara asked if that is their net fee, and Mr. Carbone said it is the total amount. He said they would have paid a similar amount with their own tax department. He said it was very close, whether they maintained their department or paid the 3% fee. Mr. Carbone said their fee, by agreement is a 3% retainer of collections. He said that after their annual

4 audit in June, they review the actual costs. If a City s actual cost was 2.5%, they refund the difference. He said that the state auditor s office recommends RITA, adding that is one of their biggest referrals. He said Twinsburg had to either increase their staff to keep up, or go with RITA, adding they chose to go with RITA. He said if they increased their staff, their costs may have been more. Mr. Ferrara said that Mr. Carbone mentioned it cannot go over 3%, and if it does, they take it from future withholdings. He asked how often that happens, and Mr. Carbone said it varies, and usually happens with the smaller ones. Mr. Carbone invited them to the agency for a tour, adding he can show them how it is done. He said they have four offices, with their main office in Brecksville. He said they have offices in Upper Arlington, Youngstown, and a part time office in Mentor. He said he would love to show them around. Ms. Shaffer asked if any municipalities have ever dropped out, and Mr. Carbone said they have. Ms. Shaffer asked their reasons, and he said it was a good question, adding he would like to know that answer. He said that one was a Mayor who ran for office, and heard from some residents that it should be in house. He said the mayor s platform was to bring back an in-house tax department. He said the mayor told them that RITA offers good services, but he promised to help the voters. He said that two have left them in the past three years, with one individual being instrumental in getting both to leave. He said the individual was employed by one entity, and then went to another. He said it was a personal thing with him, adding the cost nor the service bore it out. He said he heard rumors that one may be coming back. Mr. Carbone said he has never heard a municipality was leaving because of a lack of service or a clear-cut case of costs. He said that the cost is sometimes almost equal, but their services outweigh the costs. He said they do not get involved with politics. Ms. Shaffer asked the length of the contract, and Mr. Carbone said the contract is indefinite. He said they can leave, with six months notice. Mr. Wilson asked if there is a fee involved to leave RITA, and Mr. Carbone said there is no fee. Mr. Wilson asked if the City has to buy back their information, and Mr. Carbone said the agreement provides they are obligated to return all information stored on the City s behalf. He said storage is an issue, adding they scan it and keep it electronically. He said they also have a records retention program, and a complete Disaster Recovery Program. He said their backup plan includes daily backups, offloading the data to tape backup media. Mr. Carbone displayed their cost formula at this time, and noted their own personal contact information. He said they are open to further discussion. He said he did not want this presentation to be a sales pitch, and they can make their own judgment call. Mr. Turner asked if there has been some type of cost benefit analysis, showing their overall net benefit, and Ms. Rissland said she has not done an extensive analysis. She said this presentation was more of an Are you interested presentation. Mr. Turner asked Mr. Carbone if they have done an analysis on the benefit to participating communities, and Mr. Hawk said they did one for Twinsburg. Mr. Carbone said they would welcome the opportunity to do this, adding they would love to do a complete analysis with projects for the future. He said he could provide them with a detailed analysis, adding they would need information from Ms. Rissland. He said they could surmise some of it, but need authorization. Ms. Wallach said Mr. Carbone had said they would do that for member cities, and Mr. Carbone said they would do it for perspective members. Ms. Wallach asked if there is a fee, and he said no. He said almost every member community since mid-2005 has requested one, adding it would give them a good feel. He said that met with Twinsburg s Council and Administration, and did a full projection. He said the city liked what they saw, adding they are very conservative. He said Twinsburg s actuals exceeded their expectation. He said that many cities see a substantial increase, adding it may be because they are

5 RITA. He said the people know that RITA will find the taxpayer. He said they do not get into the compliance programs until the second or third years, adding they need the first year under their belt. Mr. Carbone thanked them for their time. He said they are the best example of cooperation, and would love to have Kent consider joining the Council of Government. Ms. Rissland said it is not a matter of costs, but a matter of the services provided. She said with technology changes, they do not have the ability and are not set up at this point. She said it would probably take a substantial capital investment. Mr. Wilson asked her to define substantial, and Ms. Rissland said she would have to look at the whole scope. Mr. Wilson asked if she had a number, and Ms. Rissland said she did not have a number. Ms. Wallach asked if this is an appropriate time to ask for more information, and Ms. Rissland said it was appropriate. Ms. Wallach said MS. Rissland memo indicating she was holding back on the upgrade to her computer system, and asked what cost was involved. Ms. Rissland said if they go with RITA, they would not need a Tax Commissioner, and could deduct that salary. She said they would save postage and the printing of the forms. She said their forms burster is not working well, and they have to upgrade their software license for the ASA-400. She said the current system will not operate the upgraded software. Ms. Rissland said her IT position has been vacant for two years, and she would have to contract that out. She said they buy police cruisers on a routine basis, adding technology has to be upgraded. She said it seems that most of what they buy is obsolete six months after it is purchased. Ms. Wallach said she would like to know how much is outstanding that they are not collecting, and Ms. Rissland said that would be difficult to ascertain. She said the best way would be a database from the IRS. She said they purchase the state tapes, but only get the AGI. She said the IRS tapes show who files and does not file. Ms. Rissland said it is hard to find people after they leave Kent, adding RITA has the IRS data tapes. Ms. Shaffer asked if MS. Rissland felt a sense of urgency to get this questions answered, as they are in another tax year. Ms. Rissland said she needs some direction, as she has been without a tax commissioner. She said she has an individual in mind to do part time help. She said that both tax auditors that retired have agreed to come back during the tax season. Ms. Rissland said they need to make a decision about their software fairly soon, as she has been trying to put bandages on it, until a decision is made. Ms. Shaffer asked the size of the tax collection department, and Ms. Rissland said they have one tax auditor and one account clerk that collects $10.3 million in taxes. She said they contract with Dave Sed, an attorney, for collections, and he does charge more than 18% and the City does pay court costs. Ms. Wallach asked if they would no longer need to contract with the attorney in Ravenna, and Ms. Rissland said she would like to try their system. She proposed keeping an individual as a point person, adding with the IRS data, they can get the information after someone files. She said it is critical, now, with the JEDDs to keep up with businesses moving in. Mr. Wilson said Ms. Rissland showed it would cost $100,000 more to go with RITA, and asked if that included the Income Tax Commissioner position. Ms. Rissland said it would eliminate the Tax Commissioner and one of the account clerks. She said she would reassign one person, and eliminate operation costs. Ms. Rissland said they eliminated one position in Mr. Wilson asked with the elimination of the Tax Commissioner and one position, if they would still have a $100,000 deficit, and Ms. Rissland said that was correct. There was no audience comment at this time. MOTION TO AUTHORIZE A COMPLETE COST BENEFIT ANALYSIS FOR RITA. Motion made by Mr. Hawksley, seconded by Mr. Ferrara.

6 Mr. Ferrara said he would appreciate a complete cost benefit analysis. The motion carried by a voice vote of 7-0-1, with Mr. Wilson abstaining. Chair Wilson called for a recess at 8:16 p.m. at this time. Chair Wilson reconvened this meeting at 8:25 p.m. MOTION TO AUTHORIZE AN EXECUTIVE SESSION, PRIOR TO THE ADJOURNMENT OF THE LAST COMMITTEE MEETING, FOR PENDING LITIGATION. Motion made by Mr. Hawksley, seconded by Mr. Ferrara. Roll call was taken on the motion. Voting aye: Mr. Turner, Mr. Hawksley, Mr. DeLeone, Ms. Wallach, Ms. Shaffer, Mr. Wilson, Mr. Amrhein, and Mr. Ferrara. The motion carried by a roll call vote of 8-0. Chair Wilson said the next issue is the Ohio Excellence Improvement Process. Mr. Ruller said as a city organization, they are always looking to save money and improve their services. He said in Tennessee, at his last job, they used the State Quality Awards program, adding Kent has the same program. He said they are starting their own journey, and have to do a self-assessment of their organization. He said that it benchmarks Kent against the best in a class of organizations. Mr. Ruller said it was originally just for businesses, and is now open to the public sector, adding that Ashland is doing the same thing. He said he is hoping they will see the organization perform better, adding it is not a sprint, but a marathon. Mr. Rulelr said he wanted to address this publicly, adding they have started their own first year application document. He said he hoped they will begin to see those things that reap rewards and become a source of pride in an organization. He said in Tennessee, they were the first city to be a Level 3 City, adding there are five levels. He said besides the pride factor, it never hurts to say they are an exceptionally well run City government. There were no questions from the committee at this time, nor audience comment, and Chair Wilson adjourned this meeting at 8:30 p.m. Linda M. Copley, Clerk of Council ACTION RECOMMENDED: 1) TO AUTHORIZE FURTHER INFORMATION, INCLUDING A COMPLETE COST BENEFIT ANALYSIS ABOUT RITA. 2) INFORMATION WAS PRESENTED ON THE OHIO EXCELLENCE IMPROVEMENT PROCESS