The Observation Deck

I read with a bit of shock the proposal by the city finance director to move tax collection in house. To me, this seems to defy logic for the following reasons:

1. The city claims this will save money, but the dollars that are being saved seem minimal.

2. The city is unhappy with RITA and feels they could do a better job. Tax collection is a great example of something that isn't a city's strength. Cities are good at running parks and fixing streets...administrative jobs such as tax collection should be farmed out to a group that specializes in it.

3. In his letter to council Vic Nogalo stated that he is committed to “hiring professional income tax specialists and accountants". How likely is the city to find good people for tax collection for a suburb of Cleveland? What caliber of people would apply for this position? Wouldn't a professional income tax specialist or accountant want to work for a firm such as RITA over the city of Lakewood? The point of this is that Mr. Nogalo is making a HUGE assumption here...more than likely he will have a very difficult time finding qualified staff for this position. He will also have a difficult time retaining these people, which further increases costs since he will need to recruit new people, train them, etc.

4. The city makes the assumption (incredibly) that salary costs will not rise and benefit costs will not rise. Everyone knows this is not reality. Costs will rise.

5. The city is proposing to EXPAND their bureaucracy by adding staff. Everyone knows once they add staff, they will eventually come back asking for more staff because they are overburdened or because there is something new they want to do.

6. Adding a new department like this is just one more way for the city to lose focus on what it should be doing: continuing to improve the infrastructure (streets, parks, etc) and facilitating economic development.

7. The city is making the assumption that the software used won't cost more than advertised and will work as promised. This is unrealistic and everyone knows it. Systems like this always end up costing more and rarely work as promised.

8. "The City will need the cooperation of R.I.T.A. to ensure the proper conversion of taxpayer data." Lakewood is taking away hundreds of thousands in revenue from RITA. How likely are they to be "fully cooperative"?

9. According to the Lakewood Observer article "If the cost of in-house collection does not increase beyond the first year cost of $720,000 the City will save about $4000 in 2009." This is probably the most unbelievable statement of all. Create an in-house taxation department, add staff to do the work, invest in software that nobody knows much about, deal with all the issues and questions from the public, and dozens of other issues...all for a projected savings of just $4000 that is FOUR YEARS OUT?

I have to say this is one of the worst ideas I've seen in a while. Hopefully this is just an attempt by the city to put some pressure on RITA to get their costs in line and do a better job. If that's the idea here, then great. If they really plan to pursue this, I guess I better start showing up to city council meetings cause someone needs to speak very loudly about this.

I think the withdrawal from RITA has already occurred.

However, I quite agree with you.

I honestly cannot fathom how anyone in the city, or on council, really thought this was a good idea. I do not buy the argument that it will save us money; in fact, I think the opposite is more likely. I think it will end up costing the city MORE money and I believe the level of service will decline.

But time will tell, won't it?

The one thing I have to say is that it will give the city a much better way to collect from Landlords.

Seeing how many rental units are in the city this could be huge.

The other thing Bill Call's article fails to mention is that the city can go back to RITA anytime with no additional costs or penalities.

This makes the decsion a little easier to understand.


Jim O'Bryan

Wow. I guess I completly missed it and I had no idea this was going on. I guess that's my fault.

Jim: Can you elaborate on what you mean by collecting more money from landlords?

Mike

What Jim is referring to is another area of tax collections that your normal W-2 wage earner never would see. There are also Municipal taxes that are generated on certain business profits...beyond the standard wage witholding. Thus, a property in Lakewood which generates a profit has a a potential tax liability, depending on the character of the business (C Corp, S Corp, Partnership and so). At least that's how I understand it.

Jeff

Mike

Landlords at least unscrupulous ones can easily slip through the crack of tax collection. I have to apply to the city for my rental license every year. so that the city of Lakewood knows I own rental property. To my knowledge these records were not shared with RITA. This would allow a landlord to forget about putting them on his/her return.

The one thing that jumps out from the city doing it is that they have the records for rentals, and other businesses that could fly under RITA's radar. This should make collection easier.

But this is a theory at this point, but one that could make up some serious money in a city what needs it. If Bill Call's numbers are correct and I have no reason to doubt him because he is very sharp. Even $14,000 would help this city.

The other part I mention is that we can always go back to RITA makes it an experiment at least worth trying for now.

I have spoken with Vic about this article and other things. The one thing I have to say about him that makes me a little more comfortable is his outlook on the future of the region and the country. He sees very tough times ahead for the country, region, and city and is planning for those times. I find this to be far better than those that say, "Well the economy is getting better and soo we will see manufacturing increase in the region." That is crazy talk.

Let's be honest, living in this region will be tough for the next couple decades. But I am committed to making the best of it, and making Lakewood the best it can be during that time. Certainly from all forcasts I see Lakewood is better situated than Rocky River, Westlake, Bay and other burbs. The Lakewood Observer is just one small part of what some of us call the Visionary Alignment for Lakewood. The plan is to make Lakewood solid, secure and a fun place to live for the next couple decades and beyond. The Observer will start unveiling many of these programs and concepts in coming issues. It is very exciting stuff!

I think we are very lucky having Vic Nogalo working for us.


Jim O'Bryan

Jim,

First off, you guys are doing a great job with the paper. Keep up the good work. As a new resident of Lakewood, I find it refreshing to find a community of such great citizen participation.

I think the true benefit that Mr. Nogalo is referring to is more so the ability to track the tenants of these rental properties. As there is not a very good system in place to identify who these people are it is allowing them to slip through the cracks. I do not dispute that there are unscrupulous landlords out there, it is however easier to track them as they are the owners of the home (information that is easily accessed through the County). Information regarding tenants is more difficult to obtain. The City has to rely on utility-type services to obtain this information ( such as the water dept., electric , cable, etc.) I am certain that there are many tenants that are "flying under the radar".

When I first heard of the City's departure I was astonished. I think it will be very difficult to perform at the level of RITA at a lower cost. My main concerns were the transition process, the space requirements to house this new department and the loads of records associated with it, and the cost of start-up (i.e. hardware, software, etc.) Since, I was not involved in this decision process, I must believe that the City has addressed these concerns.

One thing I am not comfortable with is the attitude of "It's worth a shot, what do we have to lose". The City is already strapped for cash, if costs exceed estimates or there are problems in the transition this could cost the City a significant amount. Not to mention the people that are to be hired to run this department, would then be laid off if the City were to subsequently switch back to RITA. I just hope that this is an idea that the Council and Mayor are willing to stick with for an extended period of time and have patience should savings not be realized immediately.

In my experiences as an accountant, it seems that a lot of citizens don't quite understand local income taxes. I think it would be wise for the City to launch some sort of education initiative, be it seminars, brochures, etc. to educate the public about Lakewood's income taxes.

As it seems that the switch is a done deal, I hope that the City is able to find the right people to make this transition successful and profitable.

Jason

Jason

All valid points.

First the paper is as much the works of gals as guys.

As far as the participation, it is astounding. I do not know how long you have lived in Lakewood but the one thing that gives me hope is that everybody that is anybody is involved in this project. People that have been bitter opponents have joined with the Observer to become avid participants. This is great news for the city and the residents. But more participation is needed.

Perhaps I could get you to write the piece you are asking the city to write. I think you have an interesting view and obviously some depth of knowledge on this subject. You write it, we will publish it.

I know that we can get Tom George and Vic Nogalo to help with any information you might need.

What do you think?

Jason--- I second that emotion.

Actually, a history of this can sometimes be helpful. For example the commonly used term "income tax" is incorrect. It's a payroll tax. That's just one thing that has to have a new light put on it.

I know that the Mayor and Finance Director will be more than willing to add to the discussion.

See you at the Madison Car Show!!!!

Stan Austin