County benefits from tax collection software
The Jefferson County (Ky.) Sheriff’s Office is responsible for more than just law enforcement. In fact, it also collects property taxes from several districts, including the Commonwealth of Kentucky, Jefferson County, the county school board, 20 local fire protection districts and one local sewer district. Since it switched to a new client/server tax collection system, the county has increased earned interest and reduced expenses by well over $1 million.
The sheriff’s office is responsible for assembling and mailing more than 330,000 bills each year, collecting the taxes and distributing the money among taxing entities. The office receives annual tax payments via mail, walk-in taxpayers, lockbox transmissions and mortgage companies that manage tax and insurance escrow accounts for customers. Until recently, the sheriff’s office used a mainframe program for collecting and disbursing property taxes. The computer applications did not have the flexibility to fully process under-payments or over-payments, so the office returned them to the senders, taking money out of the hands of the individual taxing districts.
By returning the incorrect payments, the office lost interest income and spent extra time and money “re-collecting” the funds. Additionally, the four-day lag between the time payments were received at the lockbox and the time they were deposited into the office’s accounts reduced interest revenue.
The bills were keyed in by the lockbox provider in batches every three or four days, with payment information provided to the office via the mainframe interface. The walk-in payments were sent to the lockbox for weekly batch processing. Postage fees, the cost of producing billing statements, and the fact that two or three people would handle tax bills to manually enter them into the system, all contributed to the overhead.
To address those concerns, an administrative management team from within the sheriff’s office studied the processes and systems, which had been in place with relatively few changes since 1981. The team recommended a “retail-like” tax collection method, which would allow the office to take any tax payment, regardless of amount, apply it to an individual taxpayer’s property tax liability and run a balance for the payer. The team suggested that transactions be made online in real time, with the majority of payments processed by the retail lockbox.
The team selected the municiPAL cash receipt management and tax billing system from Automation Counselors, Frederick, Md. The sheriff’s office installed the Windows-based software on an IBM AS/400 Model 50S using the OS400 operating system. Databases reside on the AS/400, and PCs run over a local area network.
With the integrated system, the lockbox provider processes scannable bills in an instant and automatically passes the information to the sheriff’s office as processing occurs. Cashiers enter the walk-in payments with wand scanners interfaced to the collection software. The lockbox provider’s role in the process has been reduced to processing and depositing payments, regardless of amount.
Now, with the ability to immediately deposit all payments received and prorate the distribution of those payments, the sheriff’s office gets the greatest possible amount of money into the hands of the taxing districts in the least possible time, maximizing allowable interest income. Additionally, if errors are made, they can be easily spotted at the end of each day. The new software also provides a better audit trail than the previous system did.
The office now generates tax bills that look more professional and include easily understood information. Property tax notices also are mailed to all taxpayers. In the past, individuals whose taxes were paid by mortgage companies never received notices explaining tax distributions to the various jurisdictions.
In 1996, the sheriff’s office earned $980,000 in allowable interest income – up from $225,000 in 1995. Additionally, the office reduced lockbox processing and postage costs by $220,000 in 1996, and it plans to reduce mainframe maintenance costs by an estimated $75,000 per year once the mainframe can be shut down. The combined financial savings easily paid for the investment in the new system during its first year of operation.