Member Login

Covington "No Longer Fooling Around" on Back Taxes

The City of Covington is upping its game in collecting back taxes.
 
The city announced that it is soliciting bids from companies for delinquent tax collection services with the goal of bringing in experts to recover and possible discover the millions of dollars that Covington says it's owed.
 
"There's too much money on the table and I don't have the staff to hound people, so we're literally handing this task off to outside agencies," said Muhammed Owusu, Covington's finance director.
 
The companies selected by the city will pursue two tasks: 
  • Recover past-due property taxes, which are thought to total $2.7 million for the calendar years 2015-2017 alone.
  • Identify how much money in occupational (business) taxes is due Covington and try to recover it. 
 
The city is legally permitted to go back eleven years for property taxes and seven years for occupational license taxes.
 
The first task is relatively straightforward, Owusu said. The delinquent tax bills are known. It's just a matter of being aggressive and persistent about collecting the unpaid bills.
 
The second task is more complicated, requiring not only "recovery" but first "discovery," since the tax obligations for business taxes are largely self-reported. The occupational taxes are assessed on net profits, and the first step will be to identify the companies that should have registered with the City and paid taxes but failed to do so.
 
"We have to find the businesses that were flying under the radar," Owusu said.
 
One strategy to find those companies will be to compare Covington's business records with state tax records.
 
Covington really has no idea how much money from those unpaid business taxes is out there but anticipates the recovery will be high enough to be worthwhile.
 
The companies hired by the city will be paid a percentage of the taxes they collect. Owusu said the City is actually being compassionate with that fee structure. Legally, it could allow the companies to bill residents and businesses a fee on top of the unpaid tax bill but instead will pay the cost out of the collected back taxes.
 
But the City is going to assess penalties and interest.
 
City Manager David Johnston said residents should welcome the initiative.
 
"It's a matter of fairness and equity," he said. "Taxes are an investment in a stronger city and a higher quality of life for all of us - what we call the 'common good.' Most residents and businesses invest in critical services that create that 'common good' by paying their fair share of the costs. Those who try to avoid paying their fair share either make the costs go up for everyone else or limit the quality of the services we can provide residents."
 
Every uncollected dollar, Johnston said, is a dollar stolen away from police and fire protection, job creation, street infrastructure, and the code inspections that protect the health and safety of neighbors from threats near their homes.
 
"Covington residents and businesses deserve and demand quality services, and our goal is to provide those," he said.
 
The city commission approved the invitation for bids during its meeting Nov. 20.
 
Owusu said the aggressive tax collection strategy is just one manifestation of a new attitude toward uncollected revenue. It will extend, he said, to things like billing property owners when the city has to cut their grass and take other steps to keep up their property to protect neighbors.
 
"The city is no longer fooling around," he said.
 
-Staff report