By Anna Bakalis, 10/07/2010
Unpaid Debts Could Help With Budget Deficit
A blueprint for how Los Angeles officials can collect money owed to the city — from outstanding parking tickets to insurance companies who haven’t paid for emergency medical services — was released Monday.
Of the estimated $541.1 million the city is owed in non-tax receivables, almost 77 percent is more than 120 days past due, and about 42 percent is more than two years past due, according to the Ad Hoc Commission on Revenue Efficiency (CORE).
Facing a city deficit in the hundreds of millions of dollars, Los Angeles officials are looking to collect unpaid bills to avoid further cuts to police, fire, traffic safety and other essential city services. The city has a budget of about $7 billion.
CORE is a seven-member volunteer commission, charged with reforming the city’s billing and collection process. After months of review of city departments, the commission released the 90-page report.
The report recommends hiring an Inspector General to go after delinquent bills. It also recommends adding more interest, penalties and fees, including an increase in the use of liens and public reporting of the outstanding bills. The report also suggests that city departments invest in technology that would allow people to pay bills electronically.
“The city doesn’t have enough money to do what it needs to do,” said Ron Galperin, chair of the commission, who added that even in a good economy, the city should run itself efficiently.
The top three city agencies that have the highest number of delinquent bills are the department of transportation, the fire department and the housing department.
The money collected from the departments goes mainly to the city’s General Fund, Galperin said.
But some advocates for low-income residents said those who can’t afford to pay outstanding citations or the uninsured are in the same financial boat as the city — they too have fallen on tough economic times.
Ben Gales is an attorney who helps facilitate a citation clinic through HALO, a homeless advocacy program, to help veterans and low-income clients pay their tickets through community service. HALO is operated under the City Attorney’s Office.
“What happens so often when they can’t pay, and as the fees accumulate, it is impossible to get their life back on track,” Gales said.
It starts off with a citation that goes unpaid and ignored and a bench warrant is issued. Sometimes the small tickets can add up to hundreds of dollars and people can’t get a driver’s license, Gales said, making it harder to get a job. As the city cracks down on collections, an effort should be made to help those who are unable to pay parking tickets or other citations, Gales added.
Galperin said CORE does not recommend going after individuals, but rather companies — those who to have multiple bills that can add up to millions of dollars. Galperin said companies like UPS and other delivery services are more likely to be able to pay, since companies add the cost of tickets and fees into the cost of doing business.
On Monday, Galperin was joined by several city leaders at a press conference to announce the findings of the CORE audit. Council President Eric Garcetti, City Controller Wendy Greul, Councilman Paul Koretz, 5th District, and Councilman Bernard Parks, 8th District, were in attendance.
“The city is facing a multi-million dollar long-term budget deficit, which means it’s important, now more than ever, that every dollar owed is collected quickly. The time for talk is over, it’s time to act,” Greuel said.
Among other findings, the CORE audit found that city departments are collecting just over half of what they bill and only 48.5 percent of accounts eligible to be sent to a collection agency are actually referred there.
While officials are aware there is no way to collect all of the money, Galperin said the process can become more efficient, and within one year, the city could net between $10 and $25 million, largely from fire department and emergency medical services and from vehicle citations.
“Each day that Los Angeles continues to not act on reform is a day of lost revenue, lost business and lost city services,” Galperin said.
In February, Council President Eric Garcetti, 13th District, created CORE to look at ways to improve revenue collections, tax compliance, centralized billing and carrying out recommendations from the city controller’s audit of collection practices.
“This crisis has presented an opportunity to fundamentally reform city hall, and I am committed to making sure this opportunity is not wasted,” Garcetti said.
The recommendations will be considered next by the council’s Governmental Efficiency Committee and Budget and Finance Committee. It will then go to the full Los Angeles City Council for consideration, Galperin said.
The department of transportation issued 2.7 million tickets in 2009-10, and in the last five years, has issued close to 15 million tickets — making it the third largest parking program in the country after New York and Chicago, Galperin said. DOT had total billings of $282.1 million for 2008-09, with collections coming at approximately $138.5 million.
More than $90 million in outstanding bills for the DOT are more than two years old, making them tougher to collect. However, “squeezing even modestly more value from these accounts would make a difference,” according to the CORE report.
The report also recommends lowering from five to three unpaid tickets that a car can accrue before being tagged as a “scofflaw” vehicle. Parking enforcement officers locate, immobilize, and impound those vehicles.
The Los Angeles Fire Department had billings in 2008-09 that topped $175 million, and the department received almost $85 million, a 48 percent collection rate.
Emergency medical services represent the biggest share of the fire department’s billings. A large portion of uncollected billings comes from the city’s indigent and uninsured population, but also insurance companies, MediCal and Medicare.
Galperin said one way to have a better collection rate from insurance companies is to replace the forms filled out by the attending emergency personnel with electronic devices and outsource the medical billing to a third party. He said insurance companies will simply reject a claim if something is not filled out correctly.
“We believe this alone will make a tremendous difference,” Galperin said.
The Los Angeles Housing Department (LAHD) reports that its Billings and Collection Unit sends out 250,000 bills and collects more than $43 million annually in fees to support the department. In May, LAHD made a list of 20 property owners with outstanding balances of $25,000 or more past due. The owners are reported to collectively owe more than $873,000 for fees dating back to 2006.
Koretz, who is also the chair of the Audits and Governmental Efficiency Committee, said he will treat CORE’s recommendations as a top priority.
“The CORE blueprint makes great sense and implementing its recommendation will save the city many millions of dollars, at a time when every dollar is desperately needed,” Koretz said.
For more information on the report, go to: http://core.lacity.org/html/documents.html