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Contracting Out Tax Bill Collection + Law Firm Paying for Line-Sitters:

An interesting story from the Louisville Courier Journal:

Since Feb. 3, a local law firm has paid ... a cadre of ... students and stay-at-home moms to wait outside the [Jefferson County's sheriff's] office, ... 24 hours a day, seven days a week.

The goal is to be first in line April 6 -- the first day that the firm's client, an unnamed investment company, can make an offer to buy Jefferson County's delinquent property tax roll.

As part of a system that may soon be ended by the Kentucky General Assembly, the company that's first in line pays the county what it's owed -- in recent years, an average of about $14 million on about 15,000 delinquent bills -- and then can make money by charging the derelict owners 12 percent interest a year until they pay their debts.

If the owners still don't pay, after one year, the company could foreclose on their properties.

For its part, the law firm -- Albrektson & Wakild, of Crestwood -- can reap collection fees of up to 100 percent of the amount owed on small bills, and smaller percentages on larger bills....

Not my field, but seemed like an interesting story, so I thought I'd pass it along. Thanks to reader William Ridlon for the pointer.

Oren:
Clearly the county should auction it off to the highest bidder (if they want to maximize revenue) or reverse-auction it off to the bidder that will accept the lowest interest rate (if they want to minimize the number of foreclosures).
3.2.2009 5:15pm
LADenizen:
Oren is obviously right. Soviet-style bread lines waste everyone's time and money. The state could have collected all of the money being spent to keep those students in line and used it for useful purposes, instead of paying people to suffer in the cold and miss their studies.
3.2.2009 5:17pm
kumquat:
LADenizen - Sometimes, it's useful to actually read the full article. It says on page 2 that they're waiting inside a building that's open 24 hours, so nobody's out in the cold. And where did you get the idea the students are missing studies? They can do their homework on the job, and nobody's making them skip class to be there.

Not that this isn't a supremely unproductive use of money and time, of course.
3.2.2009 5:33pm
gasman (mail):
Leaves the possibility for a competing firm to buy off one of the line sitters. Offer a percentage of the action plus some cash to take a 5 minute break, leaving the head of the line to the next firm.
3.2.2009 5:53pm
John (mail):
CT has a similar policy, except the interest rate is 18%.
3.2.2009 5:58pm
wfjag:

It says on page 2 that they're waiting inside a building that's open 24 hours, so nobody's out in the cold.

It also says, Kumquat, that the student has been in line since Feb. 3d. The Louisville Courier-Journal article
FEMA: Ky. ice storm damage $185 million (Feb. 25, 2009), notes that Pres. Obama declared 93 Kentucky counties a major federal disaster, and that utility outages due to the ice storm amounted to around 700,000. So while the student wasn't outside, he may have been waiting in the cold, inside.


a supremely unproductive use of money and time

Oh? A grad student is getting $13/hr (and can study at the same time), the local government is getting $14 Million, and a law firm is getting 12% interest and up to 100% in fees on accounts collected. All in all, not a bad result from contracting out tax collections and not bothering with the due process protections that would result from requiring a distraint action first. True, the poor folks who may or may not know about their alleged tax deliquencies may get hosed, but, what's that as compared with ensuring money for government operations and fees for lawyers? And, if the federal budget includes foreclosure relief, the law firm may collect that way in lieu of foreclosure. Seems pretty "productive" to me.
3.2.2009 6:06pm
Anon Y. Mous:


a supremely unproductive use of money and time


Oh? A grad student is getting $13/hr (and can study at the same time), the local government is getting $14 Million, and a law firm is getting 12% interest and up to 100% in fees on accounts collected. All in all, not a bad result from contracting out tax collections and not bothering with the due process protections that would result from requiring a distraint action first. True, the poor folks who may or may not know about their alleged tax deliquencies may get hosed, but, what's that as compared with ensuring money for government operations and fees for lawyers? And, if the federal budget includes foreclosure relief, the law firm may collect that way in lieu of foreclosure. Seems pretty "productive" to me.


Well, all except for the part that they're not actually producing anything. Just because someone is making money off a colossal cluster-fuck doesn't mean that it isn't an extremely inefficient and non-productive way of doing things.
3.2.2009 6:21pm
Fraud Guy (mail):
Locally, the tax sales are a semi-auction:

Each potential bidder submits their suggested interest rate on the amount owed to the county in a written bid, with a maximum annual interest rate of 18%. The low bid wins, with the county winning at the default rate if no one bids on the tax lien. Collection payments are made through the county, who records payments and forwards them to the tax buyer.

Per the county, the usual winning rate is in the 0-3% range.
3.2.2009 6:37pm
Elliot123 (mail):
Why can't the contract just go to somebody's brother-in-law or a big campaign contributor?
3.2.2009 8:08pm
Constitutional Crisis (mail):
Somewhere, Charles Dickens is smiling.
3.3.2009 12:41am
Brian G (mail) (www):
What's wrong with this? This looks like the American enterprising spirit in action to me.

What was that? This is unfair and should not be allowed. Oh, I forgot, we are in Obama's America. Free enterprise should not be rewarded. Never mind.
3.3.2009 6:02pm

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