Improving Tax Compliance Sunday ■ MAY, 21 2017 3:50-4:40PM Improving Tax Compliance MODERATOR Brian Seals Taxpayer Services Supervisor, Lakewood, CO Carla de la Pava SPEAKERS Treasurer, Arlington County, VA Adam Langley Senior Research Analyst, Lincoln Institute of Land Policy #GFOA2017

IMPROVING TAX COMPLIANCE Carla de la Pava Treasurer Arlington County, VA Adam Langley Senior Research Analyst Lincoln Institute

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IMPROVING TAX COMPLIANCE:

QUALITY ASSESSMENTS Communication Tools Data Analysis CARFAX

ACCIDENTAL DELINQUENTS 460,000 Email Reminders 7,500 Robo Calls 900 Pieces of Returned Mail Advertising/Social Media

PEOPLE WHO CANNOT AFFORD TO PAY Taxpayer’s Assistance Program (TAP) Interest free, short-term loan guaranteed by the Treasurer

Adam

THE EVADERS Impose Liens Seize Assets Bank Court Action (Judgments) Wage Rent Seize Assets Court Action (Judgments) DMV Holds Publish Names Seize State Income Tax Refunds

Discussion and Questions

Reducing Property Tax Delinquency with Monthly Installment Payments Adam H. Langley

Mortgage Escrow for Property Taxes

Mortgage Escrow for Property Taxes Property Tax Through Mortgage % Homeowners Who Pay Property Tax Through Mortgage 44% Have Mortgage Escrow: Pay property tax as part of mortgage bill 56% No Mortgage Escrow 20% Have mortgage, but no property tax escrow 36% Do not have a mortgage Source: American Community Survey (2015).

Mortgage Escrow for Property Taxes Property Tax Through Mortgage % Homeowners Who Pay Property Tax Through Mortgage Under 65 65+ All Ages 55% 20% 44% Have Mortgage Escrow: Pay property tax as part of mortgage bill 45% 80% 56% No Mortgage Escrow 16% Have mortgage, but no property tax escrow 25% 63% 36% Do not have a mortgage Source: American Community Survey (2015).

Property Tax Escrow 46% of Americans couldn’t come up with $400 in emergency (Federal Reserve survey) $400

Property Tax Escrow 46% of Americans couldn’t come up with $400 in emergency (Federal Reserve survey) $400 Median Property Tax Bill = $2,259 Source: Federal Reserve Report on the Economic Well-Being of U.S. Households in 2015; 2015 American Community Survey (U.S. Census Bureau).

Property Tax Escrow 46% of Americans couldn’t come up with $400 in emergency (Federal Reserve survey) $400 Median Property Tax Bill = $2,259 Monthly Bill = $188 Source: Federal Reserve Report on the Economic Well-Being of U.S. Households in 2015; 2015 American Community Survey (U.S. Census Bureau).

Monthly Property Taxes and Delinquency Study of Wisconsin municipalities Increase number of installments from two to three → Reduce property tax delinquency by about a third (Waldhart and Reschovsky 2012) Preliminary survey in Survey Monkey Homeowners without mortgage escrow ≈ 2.5x more likely to have ever been late in paying their property tax bill relative to owners that pay property tax through mortgage

Monthly Property Taxes and Delinquency Problem Billing property taxes in one or two large lump sums → Financial challenges for many households → Some become delinquent Solution: Options to pay property taxes monthly Property tax escrow plans run by tax collectors (15 states) Milwaukee: Tax bill includes monthly installment option

Property Tax Escrow Programs Different names Prepayment agreements, escrow plans, monthly payments Local option programs Taxpayers submit application to enroll in monthly payment plan Several payment options available: Check, automated monthly payment via EFT or ACH, credit/debit card Money held in escrow account to pay off annual or biannual bills Gov’t earn interest on escrow accounts Reconciliation process at end of year Final monthly bill slightly more or slightly less than first 11 bills Taxpayers submit 13th payment or receive refund to bring into balance

States that Allow Pre-Payments for Property Taxes Source: State statutes (2015-2016).

Best Practices for Property Tax Escrow Plans Outreach and advertising are critical On payment plan for delinquent taxes → Enroll in monthly escrow plan for current taxes Encourage automated monthly payments People paying by check → Use tri-fold coupons for reminders and to make it easier to process payments Use RFP to minimize transaction costs on automated payments

Monthly Installments in Milwaukee, WI Automatic enrollment w/out application Tax bill includes monthly option Automatically enrolled in monthly payment plan after making first monthly installment

Milwaukee Tax Bill Has Option to Pay in Full or Installments Monthly or Full Payment Note: Milwaukee has six taxing districts with different number of installments: 7 monthly installments (Feb-July): Includes county, state, and sewer district (Ex: $484) 10 monthly installments (Feb-Oct): Only city, school district, and technical college (Ex: $335)

Monthly Installments in Milwaukee, WI Automatic enrollment w/out application Tax bill includes monthly option Automatically enrolled in monthly payment plan after making first monthly installment No escrow accounts Monthly payment goes right to receivables Ten monthly payments; No reconciliation Tax rates set in December 1st payment by Jan 31; Final payment Oct 31 Several payment options Automated payments through EFT Check Pay at 13 U.S. Bank branches in city Learn More: http://city.Milwaukee.gov/treasurer

Property Tax Delinquency Rate (2013) Note: Same-year delinquency rate for cities with poverty rates above 25%. Source: Pew Charitable Trust (2013), Delinquent Property Tax in Philadelphia.

Participation Rates in Four Jurisdictions with Monthly Payments Milwaukee (WI) Butler Co. (OH) Twin Falls Co. (ID) Denton Co. (TX) % Paying Monthly 20.8% 3.7% 2.1% 0.03% # Taxpayers who Pay Monthly Installments 33,753 5,700 625 50 Total Number of Accounts 162,035 155,000 30,000 143,000 Participation Rate for Homeowners without Mortgage Escrow (Estimate) 33.0% 6.5% 4.3% 0.1% Source: Data provided from city or county treasurers.

Options for monthly property tax payments: Wrap Up ½ homeowners pay property tax in 1-2 lump sums each year Billing taxes on annual or biannual basis → Delinquency ↑ Options for monthly property tax payments: 15 states: Property tax escrow programs run by tax collectors Milwaukee: Tax bill with option to pay monthly in Milwaukee Contact Adam H. Langley ALangley@lincolninst.edu 617-503-2117 www.lincolninst.edu