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The Collection of Municipal Fees. Prepared for the City of Milwaukee Budget and Management Division By: Melissa Berger Stephen Collins Paco Fuchs Emily Ley Lara Rosen. Overview. What is the problem? Which factors explain fee payment? Statistical analysis - PowerPoint PPT Presentation
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The Collection of Municipal FeesPrepared for the City of Milwaukee Budget and Management Division
By:Melissa BergerStephen CollinsPaco FuchsEmily LeyLara Rosen
Overview
1. What is the problem?
2. Which factors explain fee payment?
3. Statistical analysis
4. Policy options and suggestions for further research
Defining Municipal Fees and Special Charges
• Municipal Fees: Property-related fees issued for city services, utilities, and violations
• Special Charges: Municipal fees authorized by the Common Council to be added to owners’ property tax bills if unpaid
What is the Problem?
Total Dollar Value of Special Charges 2004-2010
2004 2005 2006 2007 2008 2009 20100
5
10
15
20
25
30
35
40
45
Year
Mill
ions
of D
olla
rs (2
010
dolla
rs)
Number of Special Charges 2004-2010
2004
2005
2006
2007
2008
2009
2010
0
20
40
60
80
100
120
140
Year
Thou
sand
s
Source: Calculated with data from the City of Milwaukee Assessor’s Office
What is the Problem?
• An increasing share of Milwaukee’s property-related municipal fees is not being paid in a timely fashion.– From 17.3% in 2007 to 20.3% in 2010
• Any delay in receiving payment is costly– Debt service– Lost interest revenue– Outsourced collections– Time and resources of staff to collect and track fees
Which factors explain fee payment?• Characteristics of Fees
– Issuing department– Fee type– Fee anticipation– Fee amount
• Characteristics of Properties– Assessment class– Assessed property value– Owner occupancy– Aldermanic district
• Characteristics of Collection Practices– Billing notifications– Late penalties– Payment options
Characteristics of Fees• Issuing departments
– Department of Neighborhood Services (DNS)– Department of Public Works (DPW)– Milwaukee Water Works (MWW)
• Type– Utilities– Minor Violations– City Services– Blight
• Fee anticipation– Expected– Unexpected
• Fee amount
Average Collections Rates by Fee Characteristic and Type,2007-2010
Source: Calculated with data from Milwaukee Water Works and the City’s Departments of Neighborhood Services and Public Works
88.2%Municipal services 82.8%Storm water 88.8%Water 90.9%Sewer 90.0%
18.3%Garbage cart 33.6%Building reinspection 11.2%Tree removal / encroachments 6.3%DNS misc- minor violations 28.3%Snow removal 33.3%Weed removal 17.4%Health abatement (litter) 14.0%
71.2%Bulky waste 28.2%Special privilege 80.4%Covered opening 55.0%DNS misc- city services 48.7%
Fire prevention inspection 0.0%Apartment garbage 93.0%
5.3%Building nuisance abatement 19.9%Condemned building razing 49.2%Police board ups 0.05%
Blight
Collection Rate
Utilities
Minor violations
City services
Characteristics of Fees• Issuing departments
– Department of Neighborhood Services (DNS)– Department of Public Works (DPW)– Milwaukee Water Works (MWW)
• Type– Utilities– Minor Violations– City Services– Blight
• Fee anticipation– Expected– Unexpected
• Fee amount
Characteristics of Properties
Percentage of Properties per Assessment Class 2007-2010
Median Assessed Property Values 2007-2010
Comparing Properties in the City of Milwaukee and Properties with Special Charges
Residential CommercialMercantile
Apartments (4+ units)
Other*
All Milwaukee Properties
79% 4% 3% 13%
Properties with Minor Violation Charges
82% 8% 7% 3%
Properties with Blight Charges
81% 7% 7% 5%
Properties with Delinquent Utility Charges
89% 4% 4% 2%
Properties with City Service Charges
51% 24% 13% 11%
Median Assessed Property Values 2007-2010
All Milwaukee Properties $115,375
Properties with Minor Violation Charges
$88,125
Properties with Blight Charges $77,225
Properties with Delinquent Utility Charges
$98,125
Properties with City Service Charges
$314,450
Source: Calculated with data from Milwaukee Water Works , the City’s Departments of Neighborhood Services and Public Works, and Milwaukee’s Master Property Record (MPROP)
Characteristics of PropertiesOwner-Occupancy 2007-2010
Source: Calculated with data from Milwaukee Water Works and the City’s Departments of Neighborhood Services and Public Works, and Milwaukee’s Master Property Record (MPROP)
0%
10%
20%
30%
40%
50%
60%
70%
80%
All Milwaukee Properties
Delinquent Utility Charges
Minor Violation Charges
Blight Charges
City Service Charges
Per
cen
tag
e o
f P
rop
erti
es C
lass
ifie
d a
s O
wn
er-O
ccu
pie
d
Characteristics of Properties
Total Value of Special Charges 2007-2010 by Aldermanic District
Source: Calculated with data from Milwaukee Water Works , the City’s Departments of Neighborhood Services and Public Works, and Milwaukee Master Property Record (MPROP)
Characteristics of Collection• Billing notifications: type and frequency
– DNS: Some letters, some invoices sent once– DPW: Invoices sent once (*one exception)
– MWW: Invoices sent quarterly
• Late penalties – DNS: None– DPW: $10 one time fee (*two exceptions)
– MWW: 5% and 3% compounded quarterly
• Payment types accepted– DNS and DPW: Cash and check only– MWW: Cash, Check, MasterCard, Discover, E-Check, AutoPay
Statistical Analysis
• Department of Public Works (DPW)
• Department of Neighborhood Services (DNS)
• About 140,000 observations
• Observations are individual municipal fees issued 2007-2010
Statistical Analysis
Higher probability of payment
• Characteristics of fees – Increased expectedness – Fire prevention permit fees– Apartment garbage collection
fees
• Characteristics of properties – Assessed property value– Owner living in Wisconsin
• Characteristics of collection – Late penalties– Expected invoices
Lower probability of payment
• Characteristics of fees – Fee amount– Condemned building razing
fees
• Characteristics of properties – Tax delinquency – Owner occupancy – Duplexes (relative to single-
family properties)– Multifamily properties (relative
to single-family properties)
• Characteristics of collection – None
Statistical Analysis• Invoices: mostly positive increases in probability of
payment– Expected invoices to unexpected letters
• Residential: 25 percent increase• Commercial: 41 percent increase• Mercantile: 6 percent increase
– Other relationships varied (less data)
• Late penalties: large positive increases in probability of payment– For both expected and unexpected fees
• Residential: 17 percent increase• Commercial: 18 to 21 percent increase• Mercantile: 29 percent increase
Three Key Policy Options
1. Mail invoices with due dates for all fees
2. Issue late penalties for all unpaid fees
3. Offer credit card payment options for all
fees
Suggestions for Further Analysis1. Trend Analysis2. Cost-Effectiveness Analysis
Prerequisites for Analyses:Improve data maintenance
• Require departments to register each billing and payment event for each fee issued
• Implement uniform coding protocolCollect detailed information on administrative costs
For further informationContact the La Follette School’s publications office at 608-263-7657 or [email protected]
Or see www.lafollette.wisc.edu/publications/workshops.html
Thank you
Data
• Interviews (January - April 2011)
• Departmental accounts receivable files (2007-2010)
• Master Property Record (2007-2010)
• Assessor data (2004-2010)
• Treasurer records (2007-2010)
Regression Methodology
• Multivariate probit regression model
• Dependent variable = 0 if the fee was placed on the property tax bill and = 1 if it was paid in full and not placed on the property tax bill
• Explanatory variables: characteristics of fees, properties, and collection practices.
• Add equation
• Departments of Neighborhood Services and Public Works data only
Regression Methodology
• 138,200 observations in 3 distinct categories: 1. residential properties (89,238)2. mercantile apartments (23,628)3. commercial properties (25,334)
• Divide by “expected” versus “unexpected”• For each sample, we estimate the effects of
– billing type (invoices and letters)– late penalty issuance
Process
Departments collect a portion of municipal fees
October: departments submit list of unpaid fees (now special charges) to Assessor for placement on tax bills
December: Treasurer mails property tax bills
If owners do not pay in January, City Attorney sends four warning letters, then employs Kohn Law Firm (KLF) to collect.
If KLF cannot collect, City forecloses on property