TO: Board of Supervisors
FROM: Robert G. Minahen, Treasurer-Tax Collector
REPORT BY: Robert G. Minahen, Treasurer-Tax Collector
SUBJECT: Adoption of an Ordinance approving a new Tax Collector fee for enhanced collection of certain delinquent unsecured property taxes and approval of an agreement with American Financial Credit Services, Inc. for delinquent unsecured property tax collection
RECOMMENDATION
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Adopt an Ordinance approving an update to Part 180 of the Napa County Policy Manual adding a 25% enhanced collection fee for certain delinquent unsecured property taxes; Approve a waiver of competitive procurement requirements and award sole source Agreement No. 240264B to American Financial Credit Services, Inc. (AFCS) for delinquent unsecured property tax skip tracing, billing, and recovery services for the term April 11, 2024 through June 30, 2025, with automatic renewals at the end of each fiscal year for up to three (3) additional years; Approve a Budget Amendment for expenditures related to offsetting revenue sources; and Assign for purposes of collection any or all delinquent unsecured taxes 90 days after the date upon which they are due and delinquent to AFCS on the condition that the Tax Collector approves each assignment (Fiscal Impact: Increased revenues to offset collection costs, General Fund, Not budgeted; Discretionary)
[4/5 vote required]
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BACKGROUND
The California Government Code and Revenue and Taxation Code provide county tax collectors with a variety of collection tools to use in collecting unsecured property taxes that are currently employed by the Tax Collector staff. There are additional enhanced collection programs that are allowable under State law that the Tax Collector’s Office does not frequently use such as bank levies, property seizures and sales, and the use of outside collection agencies.
Pursuant to a 2019 Memorandum of Understanding with the California State Association of Counties-Finance Corporation, the Tax Collector previously utilized the Tax Refund Exchange and Compliance System (CalTRECS) to pursue unsecured property taxes. However, unsecured property tax collection services are no longer available through CalTRECS, leaving Napa and other counties to look elsewhere for outside collection assistance.
The Tax Collector researched options for outside enhanced collection assistance and determined that American Financial Credit Services, Inc. (AFCS) was the only available company that specializes in cost-neutral debt collection for local agencies. AFCS provides the same services elsewhere in California for a 25% fee on the base tax. The collection fee will not be charged on the 10% late payment penalty nor the 18% per annum interest set in the Revenue and Taxation Code. The Tax Collector intends to only refer outstanding unsecured debts that are more than four (4) years delinquent to AFCS; the highest actual collection fee will be 13.7% of the outstanding tax debt plus penalties and interest. This is less than one year’s worth of interest and is, in the Tax Collector’s opinion, reasonable.
Government Code § 26220 authorizes the Board of Supervisors to assign delinquent accounts to third-party collection agents with the approval of the Tax Collector and under such terms and conditions as the board may prescribe. The requested action includes an assignment of all delinquent unsecured taxes 90 days after the date upon which they are due and delinquent to AFCS subject to the Tax Collector’s approval of each assignment on a case-by-case basis. The Tax Collector will work directly with AFCS to assign specific delinquencies for enhanced collections effort to recover some of the $6.0 million of delinquent unsecured property taxes and related penalties dating back to the 1997 tax year. AFCS will not have authority to pursue unsecured taxes without explicit direction from the Tax Collector.
Successful collections will result in increased unsecured property tax revenues apportioned to the County General Fund, Library Fund and Fire Funds as well as schools, cities/town and special districts throughout the county.
The only change to the proposed fee schedule is the addition of an enhanced collection fee of up to 25% for delinquent unsecured property taxes assigned to, and successfully collected by, the outside collection agency.
Because the proposed fee is in addition to the delinquent penalties and County costs set in Revenue and Taxation Code Section 2922, the County Counsel’s Office advised adopting the fee by ordinance pursuant to Government Code Sections 54985 and 54986 rather than by resolution. GOV 54985 allows the Board of Supervisors to set fees which exceed limits established elsewhere by law so long as the amount of the fee is reasonably necessary to cover costs. GOV 54986 requires that, when the County establishes fees pursuant to GOV 54985, it do so by ordinance.
On February 27, 2024, the Board of Supervisors introduced an Ordinance to update Part 180 of the Napa County Policy Manual. The Board unanimously passed a motion of intent to adopt the proposed Ordinance. This consent calendar item requests that the Board take final action adopting the Ordinance.
Requested Actions:
1. Adopt an ordinance amending the Treasurer-Tax Collector’s fee schedule to include a 25% unsecured property tax enhanced collection fee.
2. Waive competitive procurement requirements, approve and authorize the Chair to sign sole source Agreement No. 240264B to American Financial Credit Services, Inc. (AFCS) for delinquent unsecured property tax skip tracing, billing, and recovery services for the term April 11, 2024 through June 30, 2025, with automatic renewals at the end of each fiscal year for up to three (3) additional years
3. Approve a Budget Amendment (4/5 vote required)
a. Increasing revenues in Property Tax Administration Fees (1000-1120000-46105) by $100,000;
b. Increasing appropriations in Central Collections Services (1000-1120000-52110) by $100,000.
4. Assign for purposes of collection any or all delinquent unsecured taxes 90 days after the date upon which they are due and delinquent to AFCS on the condition that the Tax Collector approves each assignment (4/5 vote required).
FISCAL & STRATEGIC PLAN IMPACT
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Is there a Fiscal Impact? |
Yes |
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Is it currently budgeted? |
No |
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Is it Mandatory or Discretionary? |
Discretionary |
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Discretionary Justification: |
The addition of an enhanced collection fee will allow the Tax Collector to cover the costs incurred to contract with an outside agency to collect delinquent unsecured property taxes. |
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Is the general fund affected? |
Yes |
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Future fiscal impact: |
The fee will allow the County for be fully reimbursed for the cost of utilizing an outside collection agency. Enhanced collections would be result in no net additional cost while providing additional tax revenues to benefit the County, cities/town, schools and special districts. |
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Consequences if not approved: |
The County will not have a source of funds to contract for the collection of certain delinquent unsecured property taxes and said taxes will remain outstanding. |
ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: The proposed action is not a project as defined by 14 California Code of Regulations 15378 (State CEQA Guidelines) and therefore CEQA is not applicable.