The Collection of Municipal Fees
Prepared for the City of Milwaukee Budget and Management Division
By:
Melissa Berger
Stephen Collins
Paco Fuchs
Emily Ley
Lara 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?
45
Total Dollar Value of Special
Charges 2004-2010
120
35
100
30
Thousands
25
20
80
60
15
40
10
20
5
2009
2010
Source: Calculated with data from the City of Milwaukee Assessor’s Office
Year
2010
2008
2009
2007
Year
2008
2006
2007
2005
2006
2004
2005
0
0
2004
Millions of Dollars (2010 dollars)
40
140
Number of Special Charges
2004-2010
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
Collection
Rate
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
Utilities
Municipal services
Storm water
Water
Sewer
88.2%
82.8%
88.8%
90.9%
90.0%
Minor violations
Garbage cart
Building reinspection
Tree removal / encroachments
DNS misc- minor violations
Snow removal
Weed removal
Health abatement (litter)
18.3%
33.6%
11.2%
6.3%
28.3%
33.3%
17.4%
14.0%
City services
Bulky waste
Special privilege
Covered opening
DNS misc- city services
Fire prevention inspection
Apartment garbage
71.2%
28.2%
80.4%
55.0%
Blight
Building nuisance abatement
Condemned building razing
Police board ups
5.3%
19.9%
49.2%
0.05%
48.7%
0.0%
93.0%
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
Comparing Properties in the City of Milwaukee and Properties with Special Charges
Percentage of Properties per
Assessment Class 2007-2010
Median Assessed Property
Values 2007-2010
Residential
Commercial
Mercantile
Apartments
(4+ units)
Other*
All Milwaukee
Properties
79%
4%
3%
13%
All Milwaukee
Properties
$115,375
Properties with
Minor Violation
Charges
82%
8%
7%
3%
Properties with
Minor Violation
Charges
$88,125
Properties with
Blight Charges
81%
7%
7%
5%
Properties with
Blight Charges
$77,225
$98,125
Median Assessed Property Values
2007-2010
Properties with
Delinquent Utility
Charges
89%
4%
4%
2%
Properties with
Delinquent Utility
Charges
Properties with
City Service
Charges
51%
24%
13%
11%
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 Properties
Owner-Occupancy 2007-2010
Percentage of Properties Classified as Owner-Occupied
80%
70%
60%
50%
All Milwaukee Properties
Delinquent Utility Charges
40%
Minor Violation Charges
Blight Charges
30%
City Service Charges
20%
10%
0%
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)
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
Lower probability of payment
• Characteristics of fees
• 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
– Fee amount
– Condemned building razing
fees
• Characteristics of properties
– Tax delinquency
– Owner occupancy
– Duplexes (relative to singlefamily 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 Analysis
1. Trend Analysis
2. 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 protocol
Collect detailed information on administrative costs
For further information
Contact 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