Electronic Payment Processing Tarrant County Tax Office

Tarrant County Tax Office Working with 1.75 million citizens Working with 1.75 million citizens 181 employees in tax office 181 employees in tax office Eight locations county wide Eight locations county wide Serving over 800,000 property accounts Serving over 800,000 property accounts Register about 1.5 million cars each year Register about 1.5 million cars each year Over $3 billion in tax collections each year Over $3 billion in tax collections each year Over $300 million in motor vehicle collections per year Over $300 million in motor vehicle collections per year Answer over 35,000 calls per month Answer over 35,000 calls per month

Tax Office Collections Property Tax & Motor Vehicle

Payment Options Cash – Still a popular payment method Cash – Still a popular payment method Checks – Traditional method favored by Seniors Checks – Traditional method favored by Seniors Credit Cards – Growing but expensive Credit Cards – Growing but expensive E checks (ACH) – fastest growth, favored by younger tax payer E checks (ACH) – fastest growth, favored by younger tax payer CSR – Many like to talk to someone to pay CSR – Many like to talk to someone to pay Next – Payments by Phone/PDA Next – Payments by Phone/PDA

Payments by Type

Why Did We Change? Cash and checks are hard to handle Cash and checks are hard to handle Buried in paper & old processes Buried in paper & old processes Taxpayer wants it Taxpayer wants it Staff / budgets – more with less Staff / budgets – more with less Risks of handling millions of dollars Risks of handling millions of dollars Bank requirements Bank requirements I like being Tax Assessor / Collector I like being Tax Assessor / Collector

What Have We Done? 2001 – Credit cards on line 2002 – ACH transfers to pay entities 2003 – Lock Box with ARC 2004 – E-Checks on line 2007 – Hybrid ACH & Ck21 – the big one 2008 – Face to face credit cards 2010 – eLock Box for bank checks

What are the Electronic Deposit Options? Account Receivable Conversion (ARC) – convert or truncate data on check to a data file & send to bank electronically Account Receivable Conversion (ARC) – convert or truncate data on check to a data file & send to bank electronically Image Cash Letter (ICL) – image check front & back to send to bank electronically; may be referred to as Check 21 Image Cash Letter (ICL) – image check front & back to send to bank electronically; may be referred to as Check 21 A combination or hybrid system – ARC & ICL A combination or hybrid system – ARC & ICL

Electronic Check Deposits You are going to need a scanner(s) You are going to need a scanner(s) Verifying data is critical Verifying data is critical Statement must provide notice Statement must provide notice Scan check and data Scan check and data Store paper checks Store paper checks Destroy paper checks Destroy paper checks Manage check images for office use Manage check images for office use

Hybrid Solution ARC & ICL Combined ARC & ICL Combined – Image of check (front & back) is created – Check data obtained from check Both files sent to bank Both files sent to bank Bank determines if check can be sent as image or data file Bank determines if check can be sent as image or data file

ACH – Where did it start? ACH - Automated Clearing House - Electronic transfer of funds and information - Idea started in early 1970s in California NACHA - National Automated Clearing House Association, began in Oversee the ACH movement nationwide - Regional Payment Associations oversee the ACH movement in their area (SWACHA)

Check 21 and September 11, 2001 September 11, 2001, changed everything September 11, 2001, changed everything On October 28, 2004, the Check Clearing for the 21st Century Act, more commonly known as Check 21, became law On October 28, 2004, the Check Clearing for the 21st Century Act, more commonly known as Check 21, became law Creates a legal equivalence of the original check and a substitute check Creates a legal equivalence of the original check and a substitute check The Federal Reserve’s objectives: The Federal Reserve’s objectives: – Facilitate check truncation and promote the use of electronics – Foster innovation without mandating receipt of images – Improve overall efficiency of the nation’s payments systems

Check 21-ICL (Image Cash Letter) Check processing & electronic transmission to collect instead of sending paper checks (cash letter) to the Fed or Clearing House Check processing & electronic transmission to collect instead of sending paper checks (cash letter) to the Fed or Clearing House Checks are imaged; thus, checks are not returned to the customer from bank Checks are imaged; thus, checks are not returned to the customer from bank If cancelled check is needed, bank can provide an image of the check If cancelled check is needed, bank can provide an image of the check Check 21 is the check world, NOT to be confused with ACH Check 21 is the check world, NOT to be confused with ACH

Conversion Truncation ACH: ARC/POP/RCK Image Exchange: Substitute Checks Check conversion and check truncation — partners for the future Check conversion transforms a check to electronic settlement - NACHA worldCheck conversion transforms a check to electronic settlement - NACHA world Check truncation transforms a check to an image-enabled electronic transaction for settlement - Check worldCheck truncation transforms a check to an image-enabled electronic transaction for settlement - Check world ACH - CHECK 21

Substitute Check Overview A substitute check is the legal equivalent of the original check for all purposes A substitute check is the legal equivalent of the original check for all purposes - Contains legible image of front and back of check - Conforms to industry standards (MICR, physical characteristics of check) - Includes all endorsements

Requirements Notice must be provided prior to consumer writing checkNotice must be provided prior to consumer writing check Must provide opt-out optionMust provide opt-out option Must be machine-readMust be machine-read Source document must be destroyed within 14 daysSource document must be destroyed within 14 days Retain copy of front of source document for two yearsRetain copy of front of source document for two years

Benefits Improved collections Improved collections Additional re-presentments Additional re-presentments Faster notification of returns Faster notification of returns Timing of payment can be selected Timing of payment can be selected Reduction in costs Reduction in costs - Transport fees, lockbox locations, processing fees - Image of check readily available

What Checks can be Converted? Consumer size checks Consumer size checks $25,000 or less $25,000 or less Business size checks that do not have the auxiliary on-us field in MICR line Business size checks that do not have the auxiliary on-us field in MICR line Contain a pre-printed serial or check number Contain a pre-printed serial or check number Completed and signed by the customer Completed and signed by the customer Bank can be a big part of managing this Bank can be a big part of managing this

Opt-Out Requirements Consumer must have the ability to opt out Consumer must have the ability to opt out Consumer must tell company each time check is presented that they do not want their check converted Consumer must tell company each time check is presented that they do not want their check converted Company is not obligated to accept the check, can suggest alternative payment method Company is not obligated to accept the check, can suggest alternative payment method Opt out is good for one time only Opt out is good for one time only

Copy/Retention of Check Company is required to retain a legible image or copy of the front of the check for two years Company is required to retain a legible image or copy of the front of the check for two years Company must use commercially reasonable methods to securely store Company must use commercially reasonable methods to securely store - All checks until destruction - All related banking information Note: there is no destruction requirement unlike the 14 days for ACH Note: there is no destruction requirement unlike the 14 days for ACH

How Will This Affect Customers? Customers will see notices of check conversion at the point of sale Customers will see notices of check conversion at the point of sale Funds may be debited from the check writer’s account more quickly than through a paper check clearing process Funds may be debited from the check writer’s account more quickly than through a paper check clearing process Your customers will see a description of the transaction on their bank statement indicating: Your customers will see a description of the transaction on their bank statement indicating: - Your business’ name, check number, settlement date, amount Customers will no longer receive a cancelled check back from their financial institution Customers will no longer receive a cancelled check back from their financial institution

Face to Face Debit/Credit Cards Transaction posted to databaseTransaction posted to database Check secured in cash drawerCheck secured in cash drawer Check is imaged & verified in back officeCheck is imaged & verified in back office Transactions sent downtown to verifyTransactions sent downtown to verify Deposits sent to bankDeposits sent to bank

Savings Bank charges reduced Bank charges reduced Deposit (float) earnings increased Deposit (float) earnings increased Taxpayers checks processed quicker Taxpayers checks processed quicker Entities get their money faster Entities get their money faster More personnel involved with error corrections More personnel involved with error corrections New equipment used by multiple departments New equipment used by multiple departments

Selected Results

Any Office Can Do This Even small – mid size tax office Even small – mid size tax office Limited or no IT support can be resolved Limited or no IT support can be resolved Do your homework: analyze costs & benefits Do your homework: analyze costs & benefits Evaluate alternate solutions Evaluate alternate solutions Good partners are essential Good partners are essential Look to your bank for help Look to your bank for help Make a plan to implement in logical steps Make a plan to implement in logical steps Involve commissioners, budget, auditors Involve commissioners, budget, auditors

Rear View Mirror Next Generation expects it Next Generation expects it Savings are significant Savings are significant Security is greatly increased Security is greatly increased Banking partner may demand it Banking partner may demand it Do you like your job? Do you like your job?

Lessons Learned Not for faint of heartNot for faint of heart Business processes changedBusiness processes changed Quality vendor partners essentialQuality vendor partners essential Involve all stake holders earlyInvolve all stake holders early Never enough testingNever enough testing Happy hour is goodHappy hour is good

Two Quotes Only two things in life are certain, death and taxes, and death never gets worse. Only two things in life are certain, death and taxes, and death never gets worse. INTAXICATION – Euphoria at getting a tax refund, which lasts until your realize it was your money to start with. INTAXICATION – Euphoria at getting a tax refund, which lasts until your realize it was your money to start with.