Delinquent tax contract a question of ‘fairness’

Covington is hiring an outside company to collect delinquent taxes in other to protect the ability of police officers, firefighters, and public works employees to help residents.

Services, residents suffer when people skip out of paying

COVINGTON, Ky. - Residents and businesses who pay taxes to the City of Covington shouldn’t be forced to make higher payments - or receive fewer services - because their neighbors refuse to pay their own taxes.
That’s the premise behind the Covington City Commission’s decision to hire an expert to collect delinquent taxes that have been on the books for years.
“We’re taking this step to ensure fairness,” said Muhammed Owusu, Covington’s Finance Director. “When people don’t pay their taxes, they increase the burden on the rest of us to fully fund critical services related to public protection, smooth streets and sidewalks, and job creation.”
The City Commission voted 5-0 Tuesday night to accept the bid of Avenu Insights & Analytics LLC for a three-year period with an option to renew for two one-year periods.
The company has two tasks, Owusu said, the first relatively straightforward and the second more complicated: 
  • Recover past-due property taxes, which are thought to total approximately $2.7 million for the calendar years 2015-2017 alone. The amounts of these bills are generally known, it’s just a matter of being persistent about collecting them, he said. 
  • Recover occupational (or business net profit) taxes owed the City by first identifying or “discovering” companies that should have registered with the City but didn’t, and then collecting those taxes. 
The City is legally permitted to go back 11 years for property taxes and seven years for occupational license taxes.
The contract will not cost taxpayers upfront. Rather, the company will be paid out of the taxes it collects - 25 percent of the delinquent property taxes and 40 percent of the delinquent occupational taxes it “discovers” and collects. The law allows the City to pay the company by assessing an additional fee on top of the taxes collected, but officials have decided not to assess that fee and instead pay the company out of the collections.
However, the City will assess penalties and interest on the back taxes.
Owusu assured the City Commission that the company won’t be going after people who are “a little late” on their taxes. It will target so-called difficult debts that have been on the books for at least a couple of years despite previous efforts to collect.
The collective amount of these debts is high because until recently, the Finance Department was left severely understaffed by decisions to leave vacant positions unfilled, Owusu said.
City Manager David Johnston said that most residents should welcome the initiative, since every uncollected dollar is a dollar “stolen away” from police and fire protection, job creation, street infrastructure, and the code inspections that protect the health and safety of neighbors from threats near their homes.
“Taxes are an investment in a stronger City and a higher quality of life for all of us,” Johnston said. “Those who try to avoid paying their share either make the costs go up for everyone else or limit the quality of the services we can provide.”
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