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

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f P

rop

erti

es C

lass

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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 publications@lafollette.wisc.edu

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