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Improving Your Collection Department: Building A Plan

David McPhersonDeputy Finance Director

City of San Jose

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$HOW ME$HOW ME

THE MONEYTHE MONEY

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Revenue Collection Strategic Plan (RCSP)

• The City of San Jose began the RCSP in January 2007 with the restructure of operations to maximize effectiveness of the time investigator collectors spent on collections.

• The goal was to implement an aggressive revenue collection campaign intended to:

1. Increase the tax revenue base2. Reduce the average number of days the

active accounts remain past due3. Audit programs which generate revenue (i.e.

TOT, UUT, Sale/Use Tax, etc)4. Improve the collection of data to maximize

collection efforts5. Improve customer service

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Staff Survey

• Understand the needs of your staff• Provide growth for each individual

team member• Improve morale of the department• Don’t be afraid of risk taking• Encourage innovation• Think outside the box• Keep staff engaged

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Evaluate Resources and Programs

• ABC Reports• Statistical Analysis• Accurate Accountability • ROI & Cost Benefits• Targets & Objectives• Technology Needs (laptops, multi-function

devices, etc)• Active Listening• Three P’s Implemented:

1. Policies2. Procedures3. Processes

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Evaluate Resources and Programs

• Revenue Reserves (bad debt write-offs)• Why do we do what we do?• Payment Processing efficiencies

1. Kiosk at strategically placed locations2. Web Self Service (pay on-line)3. Counter (one stop shop)

• Alternative Collection Programs

1. Hardships 2. Exemptions 3. Low Income Plans4. Payment Plans

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• Mail/Phone Analysis1. Returned Mail (What do you do with it?)2. Delinquent Notices (How many do you send?)3. Marketing Strategies4. Email Options5. Phone Tree’s – IVR Options

• Customer Service Evaluations1. Expectations vs. Resources 2. Listen and Learn

• Internal and External Controls1. Economic Conditions2. Software Programs3. Policy Decisions

Evaluate Resources and Programs

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Revenue Collection Strategic Plan (RCSP) Phases

1. Accounts Receivable Collections2. Amnesty Program3. Business Tax Discovery Program 4. BLIP Program5. Compliance & Revenue Audits6. Collection Agency Back Stop Program7. Intern Program 8. Sales Tax Compliance 9. Unclaimed Property10. Cost Recovery Fees

• Business Tax Admin Fee• Collection Agency Fee• Lien Fees• Bank Fees

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Strategic Re-Alignment of Revenue Management Division

Time Allocation Prior to RCSP Program

Complaint Follow-up

7%

CustomerService

26%

Support Service

24%

SpecialAssignments

10%

Administrative5% Collections

28%

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RCSP Program Target Time Allocation

Time Allocation Goal for RCSP Program

Administrative15%

SpecialAssignments

5%Collections

70%

CustomerService

10%

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Amnesty Programs

• Good Public Relations and Out Reach During Tough Economic Times

• Allows for Timely Bad debt write-offs• Qualifications

1. Accounts over 1 year past due2. Example: Admin Citations, Special Events/ Parade

Reimbursements, Animal Impound, etc.3. No taxes or lienable accounts (sidewalk repair, admin remedies,

and government agencies)• Resources

1. Schedule staff for proper coverage2. Budget for advertisement in local papers3. Utilize free marketing through the City website, communication

with the local Chambers of Commerce, and receive free ads through radio and TV via Public Service Announcements

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Business License Information Program (BLIP)

• Initial PhaseSent out 2,300 business tax lead notices per week for a 12-week period

• Second Phase1. Sent out 1,800 notices per week for 8 weeks2. The primary objective will be to notify 13,128

delinquent businesses to pay their business tax or notify the City that they are no longer in business

• Third PhaseImplement Business Tax Discovery Program

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Business Discovery Program

• Implement an E-Discovery Data Base• Create a partnership with Other Agencies• Business Tax (BOE, FTB, and EDD)• Sales Tax (BOE and other Cites)• Unsecured Property Tax (County Assessor)• Business Improvement District (Special Districts)• Sanitary and Storm Sewer Fee (Other Departments

and Special Districts)

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Pilot Program Summary Results (January 2007 – June 2007)

Program

Additional Revenue

and/or Cash Flow

Staff/Consultant

Cost

$ Generated/Total Cost

(*ROI)

Business Tax $543,139 $191,511 $2.84

Accounts Receivables

$3,584,591 $59,330 $60.42

Compliance & Revenue Audits

$1,149,212 $63,972 $17.96

TOTALS $5,276,942 $314,813 $16.76

*ROI=Return on Investment resulting in $ generated per $1.00 in cost.

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Comparison of Same PeriodJanuary to June FY 05-06 vs. FY 06-07

PeriodCollection Amounts

Staff/Consultant

Cost

$ Return on Investment

(ROI)

Jan-June FY 05-06 $2,143,000 $502,182 $4.27

Jan-June FY 06-07 $5,276,942 $314,813 $16.76

Percentage Change

146%Increase

37%Decrease

293%Increase

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Summary of Revenue Collection and Audit Results

For Fiscal Year 2007-2008

Reporting Periods

Quarter Ended 9/30/07

Quarter Ended

12/31/07

Quarter Ended 3/31/08

Quarter Ended 6/30/08

2007-2008 Year-To-

Date Results

Revenues Collected $ 3,464,744 $3,559,635 $1,685,734 $2,095,193 $10,805,306

Revenue Target $ 662,500 $ 662,500 $ 662,500 $ 662,500 $ 2,650,000

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Collection ResultsFor Fiscal Year 2007-2008

ProgramAdditional

Revenue and/or Cash Flow

Staff/Consultant

Cost

$ Generated/Total Cost (*ROI)

Business Tax Delinquencies

$2,339,478 $372,721 $6.27

Accounts Receivable Delinquencies

$6,300,803 $303,775 $20.74

Revenue Compliance/ Monitoring

$2,165,025 $502,775 $4.31

TOTALS $10,805,306 $1,179,271 $9.17

*ROI = Return on Investment resulting in $ generated per $1.00 in cost.

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Collection and Target Chart

$3,464,744

$662,500

$3,559,635

$662,500

$1,685,734

$662,500

$2,095,193

$662,500

$0

$1,000,000

$2,000,000

$3,000,000

$4,000,000

Quarter Ended9/30/07

Quarter Ended12/31/07

Quarter Ended3/31/08

Quarter Ended6/30/08

REVENUE COLLECTION AND TARGETS For Fiscal Year 2007-2008

Revenues Collected Revenue Target

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Summary of Collection ResultsTotal for FY 2007-2008 Quarters

$2,650,000

$10,805,306

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

Target Revenue Revenue Collected

REVENUE TARGET AND COLLECTIONFor Fiscal Year 2007-2008

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David McPhersonDeputy Finance Director

City of San José200 East Santa Clara Street

San José, CA 95113(408)535-7091

Dave.Mcpherson@Sanjoseca.gov