Found Money

Even as city councilors continue to mull over the details of the proposed budget Mayor Dewey Bartlett Jr. presented to them a couple of weeks ago, one policy change city officials are exploring has the potential to dramatically improve the city's bottom line.

The mayor's chief of staff, Terry Simonson, said representatives of the mayor's office met in January with officials from Revenue Discovery Systems, an Alabama-based firm that provides a variety of government revenue services, to explore the idea of contracting with that company to collect sales tax receipts from businesses that operate within the city limits. The state Tax Commission currently performs that service for the city of Tulsa, but the mayor's office is investigating whether a private firm could do it better -- and more cheaply, Simonson said.

At stake, potentially, is millions of dollars in sales and use tax revenue, the primary source of income for the city's general fund.

"We believe that a private-sector company can do as good as or better than government doing the collecting," Simonson said. "It begins with the philosophy that government shouldn't compete with the private sector to do something that could be done in the private sector. Government should just stick to the things only government can do and do them well."

After that visit by RDS officials last winter, two representatives of the city of Tulsa visited the firm's headquarters in Alabama -- a trip financed by the Tulsa Community Foundation -- to check out the company in a more in-depth fashion. The two officials followed that trip, Simonson said, by visiting state Tax Commission headquarters in Oklahoma City and comparing the operations.

"It was confirmed to our team that the Tax Commission is very thinly stretched and doesn't have the resources appropriated to them to do a much better job than they're doing," he said, noting that virtually every state agency has experienced deep budget cuts.

This week or next, Simonson said, those city staffers should be prepared to make a presentation to the mayor on their findings. City officials believe a private firm might be more aggressive than the Tax Commission in making sure local businesses are remitting all their sales and use tax receipts to the city.

"It's hard to believe that when you rely upon a purely voluntary system of payment that has very little if any auditing or collection enforcement, that there aren't some businesses not paying," he said. "And if there's no repercussion or consequences immediately following your not paying, what's the incentive to pay?"

Simonson said RDS officials claim many of their client cities have seen dramatic improvements in their sales tax receipt collections since employing the firm.

"They did show us in some localities where they're doing this, in their first year of work, (they) were able to raise the collection rate anywhere between 4 and 6 percent of what they were getting before," he said. "Well, 4 to 6 percent of $230 million (the size of the mayor's proposed general fund budget) can be a sizable amount of additional revenue for the city."

Sizable, indeed. A 4 percent increase in receipts for the general fund would amount to an additional $9.2 million a year, while a 6 percent hike would come to $13.8 million annually -- the kind of numbers that would have a tremendous impact on the city's ability to restore many of the core services that have been cut over the past year as sales tax receipts plummeted in the wake of the recession. Simonson said that might be only the beginning.

"They say that, years after that, it kind of grows," he said. "That's where they start. I think they showed us some records in the second year of the three-year contract they had with some cities, it jumped almost 11 percent. Well, that would be unbelievable for us."

Of course, the city would have to pay a fee to a private firm to perform that service, but Simonson said even that aspect of a potential deal is attractive.

Simonson said other municipalities within Tulsa County, including Jenks and Owasso, also have expressed interest in contracting with a private firm for the service, as well as Tulsa County itself.

"One of the benefits of multiple jurisdictions going in together with the company is that the amount that any one of them pays in terms of a fee drops," he said. "So if you bundle local governments then each of you pay less for the service."

City officials originally were interested in packaging such a change in tax collections with a proposal to require each business in Tulsa to purchase a $50 license each year. That requirement would have instantly created a database of all businesses operating in the city limits and given city officials a list to working from when it came to collecting tax receipts.

But the business license fee has been placed on the back burner, Simonson said, while city officials explore it further. In the meantime, city officials believe they can acquire much of that same information from the Tax Commission, though they are not sure how current or complete that data would be.

Simonson said such a transition from the Tax Commission to a private firm likely would not require City Council approval.

"I think the mayor can do it on his own because it's a contract for professional services," he said. "Certainly, we've been telling the council about it, but I think in terms of the agreement, the mayor can sign the contract."

Simonson said despite the city's talks with RDS, the city probably would go through a Request for Proposals process before awarding a contract for tax collection services. But if the mayor decides to pursue the idea, Simonson doesn't expect there to be a lengthy delay in initiating the change. In fact, it could be in place by fall, he said.

"It looks like there might be a 90-day time period to ramp up and transition from the current method of collecting to a company collecting," he said. "So I think a 90- to 120-day period of time is probably real doable."