Two years after New Orleans’ inspector general said the city was paying a company too much to collect past-due property taxes, it appears that a new contractor continues to collect relatively high rates for collection and tax-sale services.
Over eight months recently, Archon Information Systems billed the city about $918,000 in collection fees to collect about $12.8 million in delinquent taxes, city records show. The inspector general’s report examined 19 months of collections by another company, which the inspector general concluded was worth less than $300,000.
The fees were only part of the payments to Archon, according to invoices and check records provided by the city in response to a public-records request. The invoices also show two charges that neither the city nor the company would explain. In total, Archon’s billings from June 2014 through January came to about $3.15 million.
In 2013, New Orleans Inspector General Ed Quatrevaux issued a report criticizing how much the city paid Strategic Alliance Partners to do the same work. His office said that $3.3 million the city paid the contractor for collections on real estate taxes in 2010 and 2011 was more than 10 times what the services were worth. The company was closely connected to Archon. SAP used Archon as a subcontractor, and Archon’s CEO was a founder of SAP.
Averaged over the 19 months covered in the report, SAP charged about $175,000 to collect $1.8 million each month, The Lens determined. Under the new contract, Archon’s collection fee averages about $115,000 per month for average collections of $1.6 million. But Archon’s total charge including the additional, unexplained items is more than double SAP’s charges, about $394,000 per month.
Archon’s fee represents 7 percent of its total tax collections. When you add up everything charged by Archon each month, the figure shoots up to 25 percent. The contract Quatrevaux said was a bad deal was for 9.5 percent.
If Archon continues to bill at the current rate, the city will end up paying the company $4.7 million a year, including nearly $1.4 million in fees for tax collection.
The payments to Archon aren’t based on a percentage of collections, but rather a series of flat fees established in the contract with the city. The Lens determined the percentages to easily compare rates with the previous contractor and the inspector general’s report.
As Quatrevaux’s report noted, collection costs are borne by the city taxpayers when they pay their delinquent property taxes.
Quatrevaux declined comment on the city’s payments to Archon, saying his office is in the middle of a follow-up review on the collections contract.
The Lens requested the invoices on March 10.* We received them May 19, the week after we filed a lawsuit against the city for its failure to provide public records in the time frame allowed by law.
Archon has a separate contract with the city to conduct this year’s large auction of delinquent properties that the city has previously been unable to auction at tax sales. However, the auction process began in March. Invoices for tax-collection records the city provided to The Lens only run through February.
Each invoice is just a few lines long, listing three charges, including a “collection fee.” The two other charges made up the rest: “tax code 51,” totaling about 5 percent of collections for the eight-month period, and “tax code 66,” totaling 12 percent of collections.
City officials did not respond to The Lens’ request to explain those charges.
Archon is required to submit detailed monthly activity reports to the city. The Lens requested them on May 20; the city has not provided them.
The legality of fees to collect past-due property taxes has been called into question.
The court ruled that only the city — not a contractor — is authorized to collect taxes, and even then could collect only taxes, interest and actual costs, not penalties and fees.
The ruling applied only to the New Orleans law. Other parishes continued to use similar fees to pay contractors under a 2009 state law. The 2014 decision echoed one from 2008, when the court had earlier declared the city’s practice unconstitutional.
Barrios declined comment for this article.
Last year, Mayor Mitch Landrieu signed a contract with Archon that established specific dollar-amount charges for services rather than a percentage of collections. And the contract makes clear that the city is the actual and sole tax collector, and that Archon is only assisting the city.
*Correction: This story originally stated that The Lens requested these records on March 13; it was March 10. (June 2, 2015)