LOS ANGELES, Calif.–The City Council voted 9-1 today to create an inspector general position to help fix the city’s poorly performing billing and collections processes, which cause the city to lose tens of millions of dollars per year in badly needed revenue.
The new position will be filled by an existing city employee–who will work inside the City Administrative Office–to get the effort under way as quickly as possible.
The inspector general was a top recommendation of the Commission on Revenue Efficiency, which was charged by the council last year to come up with ideas for improving how the city collects money.
“We do a bad job of collecting, billing and following what we’re owed in this city. This is the first time, we’ve not just been given a diagnosis of the problem, but some actual medicine to cure it,” said City Council President Eric Garcetti, who introduced the motion to create the commission.
“Any money that we left on the table while we are furloughing people, while we’ve laid people off, while we’ve cut services, was simply unacceptable and it had to stop,” he said.
According to the commission’s report issued last October, the city was owed about $541 million, not including unpaid taxes. More than 42 percent of that total involved bills more than two years past due and now largely uncollectable.
The report also found that less than half of revenue-generating departments charge interest or late fees, and only about 49 percent of bills eligible to be referred to collections agencies actually are.
The Office of Finance is generally responsible for handling collections of overdue bills, but many city departments have neglected to turn their late bills over to the office.
The vast majority of the unpaid bills originate with the Los Angeles Fire Department, which is owed about $248 million, mostly for ambulance services, and the Department of Transportation, which had about $213 million in accounts receivable, mostly from unpaid parking tickets. The Housing Department also had nearly $38 million in overdue housing fees and penalties.
The Los Angeles Fire Department is limited from collecting much of its share because of laws prohibiting billing of Medicare and Medi-Cal patients for sums not paid by those programs. The department has been rolling out a new electronic billing system to improve its collection process.
It will be fully online in late June.
City Controller Wendy Greuel released a series of audits in recent weeks of the Department of Transportation’s parking ticket collection processes.
She found the department had failed to collect up to $15 million by not aggressively pursuing the worst parking ticket offenders.
The city has also been unable to collect an estimated $25-50 million in parking occupancy taxes annually from parking lot operators because of poor communication between the Office of Finance, the City Attorney’s office and the Police Commission, which issues parking lot permits.
The billing collections problems exist despite two city controller audits of city billing in the last four years, a mayoral directive for department heads to abide by the city’s billing rules and recommendations to centralize the city’s billing process that go back 20 years.
“The inspector general position is intended to finally get those recommendations actually followed through on, to fix the problems,” said commission Chair Ron Galperin. “The city has not had one person that had billing and collections and nothing else on their plate.”
It was previously agreed to budget $150,000 for the position for one year, according to City Administrative Officer Miguel Santana.
Galperin said the inspector general’s first task should be to write off debt the city is unlikely to collect and sell it off for as much as possible.
He said the inspector general should also be responsible for identifying ways to reduce the cost of collecting debt and making it easier for people to pay their bills.
“You make it hard to pay … too onerous, you’re not going to collect,” he said.
Galperin said the recommendations have a broad range of support, including Neighborhood Council Budget Advocates, the business community and some labor units.
“We need one point of accountability for collections. The numbers are staggering as far as where collections have failed,” said Greuel, who released an audit of citywide collections processes last July. “We don’t want to create another level of bureaucracy. That’s why I’ve suggested the position should have audit authority.”
Councilman Paul Koretz called the vote “one of the most critical that we take in terms of impacting our budget for many years to come.” But he cautioned that the CAO should be careful about who it hires.
“The fact is whoever we pick, it has to be someone who is willing to be gutsy and willing to make a few enemies in city hall. They’re going to have to call people on their lack of action,” Koretz said.
Councilman Dennis Zine cast the lone vote against creating the inspector general position to oversee billing and collections.
“Creating an inspector general position will create more government. Putting more layers on top of the inability to collect is not going to collect more. It’s just going to waste more money,” Zine said.
“The inspector general will not have the ability to do anything,” he added. “They’re going to be able to write reports. We don’t need any more reports or recommendations. We need to actually get things done to collect money that’s due the city.”
Zine and Councilman Bernard Parks have expressed support for giving the Office of Finance more freedom to place liens on those who are late paying city bills and fees.
“I don’t care what bill it is. If you owe the city and you’re not paying it, put a lien on the property and see how quickly people start paying bills,” Zine said.
Councilwoman Jan Perry expressed concern that the position is not very well structured and that it will not be easy to determine if the inspector general is being successful.
“I am willing to give this a try, at least for this one-year period … but I’m not happy about the way that it is being launched,” Perry said, calling for an early status report on the inspector general’s work.
Garcetti said adding an inspector general is not about creating a new bureaucracy.
“Quite the opposite. We are looking at how do we cut through bureaucracy and streamline and make efficient our collections,” he said.
“Every single penny that we put back in is part of the road to recovery.”
In related action today, the council agreed to extend the Commission on Revenue Efficiency’s run until September. It had been set to shut down in July.
Galperin said that over the next few months, the commission plans to make recommendations about how to simplify the city’s business tax structure and also plans to ask each city department head to submit two ways to save more money and two ways to generate more revenue.
By Richie Duchon | City News Service