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Business

LA City Council Votes To Create Collection ‘Czar’ For Unpaid Debt

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(credit: Frazer Harrison/Getty Images)

(credit: Frazer Harrison/Getty Images)

Election Returns

LOS ANGELES (CBS) — The City Council voted 9-1 Tuesday 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.

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.

(©2011 CBS Local Media, a division of CBS Radio Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. Wire services contributed to this report.)

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