The city is chasing down 26,000 people and companies that haven’t paid their tax bills, going as far back as far as 2008, for a total of $7 million.
If that sounds like hard work, it is, says City Tax Collector Kayla Jones.
What makes collections difficult is that, unlike real estate taxes, where the city can recover the unpaid taxes through a tax sale, most of these taxes are on motor vehicles that may no longer be registered to the person who was initially taxed. Or, the vehicle is still owned by the same person but he’s no longer living in Warwick. Unpaid tangible taxes – taxes owned by commercial entities on furnishings, computers and other equipment – also make up a chunk of the $7 million, says Jones. Companies that have moved out of Warwick or, worse yet, gone bankrupt, could owe these.
“We can’t find them,” Jones said of many of the individuals and businesses that make up the 26,000 delinquent taxpayers. But from experience she knows Rossi Law based in Smithfield can track down the delinquent taxpayers and get them to pay.
Earlier this month, the City Council extended the contract with Rossi for another two years. Rossi was the low bidder for the work and, as Jones points out, has already done much of the legwork to track down the delinquents. Switching collection agencies at this point would have delayed the process and, most likely, the chances of the same level of collections, she said.
Despite the vote, Ward 5 Councilman Ed Ladouceur, who chairs the finance committee, said Sunday he would ask the council to reconsider its action at Wednesday’s meeting. He said he has questions about the amount of delinquent taxes, how it reached that amount and why it is necessary for the city to retain an outside firm to chase down the money.
As the City Council learned, Rossi only gets paid if the firm performs. Rossi is paid 14.5 percent of the amount it collects. There’s no downside for the city.
Furthermore, as Jones points out, as much as half of what is owed the city represents accrued interest on the taxes owed. This means that when Rossi comes through with a collection, what the firm is paid is coming out of the interest, not the principal tax owed.
“What they’re getting is cut out of the interest. We definitely make out,” she said.
Efforts to collect taxes going back to 2008 started two years ago when Rossi was initially contracted. Jones said the $7 million in collectables represents unpaid motor vehicle and tangible taxes between 2008 and 2014. Over the past two years, Rossi has collected about $1 million in delinquent taxes each year. Jones said that Rossi would pursue the cases in court, an action her office isn’t equipped to take on.
“They are wonderful,” she said of Rossi. “We exchange emails daily and they are neat and organized, very professional,” she said.
Jones said a letter from a lawyer is sometimes all that is needed to get a payment or start the process. In some cases, she notes, people are unaware they were invoiced because they had moved out of the city and never followed through with re-registering their vehicle. In some cases where they can show they were no longer residents, Jones recommends the taxes be abated, an action taken by the council.