Challenging Times Call for Examination of Revenue Sources
Throughout 2019, local governments dependent upon the property tax carefully followed the progress of Senate Bill 2, passed by the 86th Texas Legislature and signed by the governor last June. Property taxes are the primary funding source for Texas counties, and S.B. 2 reduces this funding potential.
“Maximizing additional revenue sources will be essential,” said Jim Allison, general counsel for the County Judges and Commissioners Association of Texas. Counties should examine all of their income categories, Allison told officials after the passage of S.B. 2.
Then came COVID-19. The resulting disaster declarations may delay the revenue caps imposed by S.B. 2. However, the Coronavirus pandemic and the ensuring economic devastation makes Allison’s advice even more important.
For example, when Comptroller Glenn Hegar announced the May distribution of monthly sales tax revenue to local governments, he noted a decrease of 5 percent compared to May 2019.
“These allocations are based on sales made in March by businesses that report tax monthly, and sales made in January, February, and March by quarterly filers,” Hegar noted. “Widespread social distancing requirements were not in place across much of the state until late March, meaning the impact of those measures affected only a portion of allocations for this month. The agency expects next month’s allocations, based on April sales, will show steeper declines compared to a year ago.”
The full economic impact of the pandemic will unfold as the world, nation, and State of Texas reopen. However, Texas county officials were already facing a potential revenue shortfall due to S.B. 2. COVID-19 may change the circumstances, but the mission is still the same: Find every penny.
When encouraging counties to examine their revenue sources, Allison offered specific suggestions including the following: Review fine and fee collections, and determine if improvements can be made.
Since starting with collections on Jan. 15, 2015, Aransas County collections specialist Misty Kimbrough has revamped most every aspect of the collections process.
“I have the mindset of helping people be successful,” she shared. “If they are successful, the monies/compliance will follow.”
Kimbrough requested and received permission to implement the following changes over a two-year period:
- acquired and implemented i-PLOW, a collections program;
- acquired and implemented Thomson Reuters CLEAR, an online investigation solution;
- helped develop the county’s indigent defense plan to meet standards for the court-appointed attorney process;
- started the process of going to the Aransas County Detention Center to complete the payment plan process prior to defendants being released; and
- established better communication with the adult probation department.
“We now email and/or speak almost daily, sharing contact information and alerting each other when issues arise so we can have a united front when dealing with problems,” Kimbrough detailed.
Documented Success
While 2018 was the best year for collections, 2019 was the best year over all when including community service hours, Kimbrough reported.
“We have increased our cashiering of all methods, monies, community service, jail credit, and any waivers, by over 50 percent,” she stated. “Automating some of the processes such as the phone calls and mail communications has allowed me more time to actively work on delinquent accounts.”
Kimbrough’s goals for 2020 include:
- Utilize text and email messages.
- Go paperless. “I don’t know if we can do without paper completely, but I hope to use our computer/iPad to help us keep it to a minimum!” she said.
- Continue to expand the community service program so those who are struggling financially have a compliance option.
Now mid-year, the county is on track to implement auto texting and emailing this year through the i-PLOW program, Kimbrough indicated.
“We are not paperless yet, but we are still working towards that end,” she said. “We are adding the electronic needs to help with this to the 2021 budget proposal; I hope that will be approved, and we can move forward in January 2022.”
Community Service Option
In 2017, the 85th Texas Legislature passed Senate Bill 1913/House Bill 351 which, among other changes, allows courts to consider community service as an option for defendants who are unable to pay court fines and fees. However, Kimbrough had been exploring a community service, non-monetary option for at least two years before the legislation was passed.
Specifically, the law:
- requires the judge to ask, in open court, whether the defendant has sufficient resources or income to immediately pay all or part of the fine and costs;
- increased, from $50 per day to $100 per day, the credit provided to defendants who satisfy payment through confinement or community service; and
- expanded the categories of work and other programs that may satisfy a community service requirement.
After the devastation following Aug. 25, 2017, this option was especially needed.
Collection Efforts Post-Hurricane Harvey
The Aransas County Courthouse was condemned following Hurricane Harvey. Some three weeks later, county offices were up and running in alternate and multiple locations. In January 2018, the county had regrouped as a unit in a temporary courthouse.
Kimbrough, a one-person department, resumed collections operations within a month. However, with 30 percent of the county’s population displaced, Kimbrough knew many of her “clients,” those who owed fines and fees, were now without phone service, internet, jobs, and transportation.
“Since I also live here, I was very aware of the daily struggles,” Kimbrough recalled. “For those that I could reach, if they were in need, I postponed payment plans, etc. But more importantly, I tried to get them to the right place so they could get the help that they needed.”
Following the hurricane, it took Kimbrough approximately six-nine months to find and contact most of her clients.
“Some continued to pay, and some could not, but within about a year we were back on target for collections,” Kimbrough summarized.
Collection Efforts During/Post-Coronavirus
“With most businesses closed and a large number of my clients out of work, we postponed payments,” Kimbrough said. “For those who are on probation, it will be harder for clients to catch up because all fines, fees, and court costs must be paid in full to complete probation successfully,” she elaborated. “For those who are not on probation, we have deferred payments until their June due date, and from that date we will work case by case.”
During the shelter in place, there were no community service options. As of May 4, two locations in Aransas County were using a limited number of workers.
“By June 1, more organizations will be willing to use community service workers again, and it will help my clients to get back on track with their payments,” she surmised.
Kimbrough predicts 2020 collections rates will be much lower, likely similar to 2017 after Hurricane Harvey.
Outsourcing Collections
In 2019, the Texas Legislature made another change affecting fine and fee collection.
Counties already have the statutory authority to assess a 30 percent fee on a delinquent fine or fee when contracting with a private attorney or public vendor to improve collection of balances more than 60 days past due.
The 86th Texas Legislature extended this authority to include the collection of past due alcohol beverage license fees owed to the county.
“Concerns have been raised regarding the lack of protections in place for cities and counties when an establishment that is permitted or licensed to sell alcoholic beverages falls behind on the payment of local permit or license fees,” as explained in the House Bill 3754 bill analysis. “While the Texas Alcoholic Beverage Commission is able to cancel the permit or license of such an establishment, it has been noted that cities and counties have little recourse to recoup the delinquent fees. H.B. 3754 seeks to provide a mechanism for the collection of these fees by a city, town, or county.”
Effective Sept. 1, 2019, the Alcoholic Beverage Code was amended to allow cities and counties to contract with a third-party vendor for collection of the fee once it becomes 60 days late. The bill also authorized the third-party vendor to assess a collection fee in addition to collecting the fee owed to the city or county.
Counties who already use a third party to collect delinquent fines and fees have noted not only an increase in collections, but what one judge described as a tremendous time savings.
“As a justice of the peace, I am tasked by statute to collect these fees and fines,” said Midland County Justice of the Peace David Cobos. “I wanted to utilize every method available in order to do so.”
Cobos’ court uses the services of Perdue Brandon Fielder Collins & Mott‚ LLP, for delinquent collections.
“I found that it was better to reach them that way rather than putting people in jail, which ends up costing counties double the money,” Cobos shared. “I would have to have double the staff to do in-house collections, and this is just a huge savings. It doesn’t cost us anything except a little time in preparing the cases, which we would prepare for anyway.”
Hopkins County Justice Courts use Graves Humphries Stahl, Ltd., for delinquent fine and fee collection, which “adds fluidity to the court and frees up the court clerks to address other cases filed with the court, both civil and criminal,” said Justice of the Peace Brad Cummings. “The clerks aren’t suffocated in constant legwork that is associated with searching for elusive or contumacious defendants,” he continued.
Outsourcing allows the in-house staff to direct their attention to maintaining mandatory time frames on the civil side of the court’s responsibilities, filing and maintaining other court orders (i.e. emergency protective orders, ignition interlock devices, GPS orders, etc.), and attending to the needs and requests of compliant defendants that contact the office in person or by phone, Cummings summarized.