Knowledgebase-Shelby County Trustee Property Tax Proposal

Information Product

Title:Shelby County Trustee Property Tax Proposal
Summary:MTAS was asked to review the trustee's tax collection proposal.
Original Author:Phebus, Dick
Product Create Date:07/18/2005
Last Reviewed on::12/05/2016
Subject:Tax collection; Taxes--Real property; Taxes--Real property--Tennessee; Memphis and Shelby County (Tenn)
Original Document: Shelby County Trustee Property Tax Proposal.pdf

Reference Documents:

Text of Document: July 18, 2005

Ms. Marie Owens
City of Memphis
125 N. Main Street
Room 301
Memphis, TN 38103

Re: Shelby County Trustee Property Tax Proposal

Via: E-Mail

Dear Ms. Owens:

In my previous conversation with you, I gave you my initial evaluation of the Shelby County Trustee’s proposal to collect property taxes on behalf of the City of Memphis. As you are aware, the Trustee proposed this same collection process as early as November 1992. After considerable review of the 1992 proposal, I prepared an executive summary and analysis based on then current financial data, such as the city of Memphis budget, property tax collection data and benefits/disadvantages of allowing Shelby County to collect city of Memphis property taxes.

The current proposal by the Trustee’s office is similar in scope. However, the three key components of the Trustee’s proposal, in this writer’s view, would provide few benefits in the manner Memphis’ taxes are collected and would ultimately cost the City significantly more than the amount budgeted for this operation. Most of the 1992 analysis is still valid today and I refer you to that narrative to further support my opinion regarding the inadvisability of contracting with the Shelby County Trustee for the collection of property taxes. The current proposal is briefly analyzed as follows.

Forecasting and Reporting

The Trustee proposes to provide forecasting and reporting services to the city of Memphis. Most of the information illustrated in the proposal is derived from financial data already available to the city of Memphis. Additionally, you have stated that the city of Memphis currently obtains economic and other financial forecasts from other sources and that you are satisfied with this arrangement. With current staff and outside resources, I can see no advantage in allowing the Shelby County Trustee providing this information.

Billing and Collection

The Trustee’s proposal contains an impressive list of services, such as mailroom, telephone, correspondence, online lookup with payment history, online payment option, and delinquent tax collections. While this writer did not thoroughly review the services available by the city Treasurer’s office, it should be noted that the city’s billing and collection function compares favorably with that of Shelby County, especially given the Treasurer’s budget as compared to the cost proposed by the Trustee, as detailed later in this narrative.

Banking Services

The Trustee’s proposal offers a separate deposit and withdrawal account for the city of Memphis property tax collections. During our previous discussions you indicated that the Treasurer’s office is satisfied with current banking services offered through various local banks. The Trustee offers fraud protection by comparing each office’s (other city governments) issue file with the bank’s paid file. I would assume that your office exercises the same or similar fraud prevention techniques in the collection of Memphis taxes.

Cost and Conclusions

The Shelby County Trustee offers to provide for the outsourcing of the collection of property taxes by the city of Memphis for 1% of current property taxes, 2% of delinquent property taxes, and various costs for attorney fees association with lawsuit cases involving delinquent taxes. According to 2004 property tax roles and tax rates, the city of Memphis levied slightly over $372 million in property tax. A 1% collection fee, as proposed by the Trustee, would amount to a cost to the city of $3.72 million. This proposal’s cost is more that the entire operating budget of the City of Memphis Treasurer’s Office. As a historical note, the 1992 proposal by the Trustee amounted to $540,000 annually with a 5% per year escalator clause, or about $2.3 million over four years.

In conclusion, it is this writer’s opinion that the city should not enter into this proposed contract arrangement with the Shelby County Trustee’s Office for the billing/collection of the city’s property tax. The services proposed by the Trustee are currently being provided, in all significant aspects, by the Treasurer’s Office. Additionally, the proposed fees for providing these services would amount to almost three times the current budget for Operations/Collections within the Treasurer’s Office.