TAX NEWS - JUNE 2010

U.S. Tax: Kansas City's tax collection runs slowly

by LYNN HORSLEY, 02 June 2010 -- Kansas City Council members always say they want the city to collect every dollar of revenue owed.

But an audit released Wednesday finds the city falls far short in that function.

The report by City Auditor Gary White and his staff found that the city averaged between 121 days to 241 days after taxes were due to identify delinquent taxpayers. And it can take months or even years for the city to notify those taxpayers of their potential delinquency.

"It takes us forever to identify a delinquent case, and then once we identify that delinquency, it sits forever to be assigned," said Mayor Mark Funkhouser. "Wow."

"The findings are very disturbing," agreed Councilman John Sharp. "Until we do a better job of collecting the taxes that are owed us, we're not really in a position to go to taxpayers and say we need to increase taxes."

The audit looked at the effectiveness of the taxpayer service division's efforts in collecting profits, earnings, convention and tourism taxes and business license fees from 2004 to 2008.

Among the key findings:

- For 16,000 businesses that owed 2007 profits taxes, first notices had not been sent by May 2009. By summer 2009, a backlog of 23,000 business delinquency cases (from 2004 to 2008) needed to be assigned to specialists.

- Total involuntary business tax revenues from delinquent cases dropped from about $5.2 million in 2004 to $4.9 million in 2008.

- The Revenue Division did not include performance standards or measurable outcomes in the city's contract with a collection agency. The city in 2008 gave its collection agency $3.8 million in potential profits and earnings tax cases to pursue. But the agency collected only $151,000.

Randy Landes, the city's longtime treasurer who was appointed finance director in January, agreed with the audit's findings and said he is working hard to address the problems. Council members expressed confidence in Landes and said they want a progress report in a few months.