Maximizing compliance is growing more difficult for local government agencies — and local governments lose vital revenue when taxes and business license fees go uncollected. Is there a seamless solution that can both increase tax revenue for local agencies without overloading the current staff?
Millions of dollars in escaped taxes and business licenses go unrecovered every year. Since local government funding is inextricably tied to proper taxation, this means that governments are missing out on funding for important public programs. Unfortunately, with small staffs and ever-mounting responsibilities, local governments are often not staffed to perform discovery and recovery on this uncollected revenue.
For local governments, finding escaped taxes, improperly reported use taxes, and licensing errors is a tedious and manual process. However, city governments are experiencing a year-over-year slowdown in tax revenue and the growth in service costs and other expenditures outpacing it. It’s now more important than ever to stave off the impact of
It’s a catch-22 problem with real repercussions for the local community. Luckily, there’s a solution.
The most effective solution for a government to secure lost revenue is to perform an analysis on the current state of compliance and take necessary steps to recover this lost revenue. The discovery piece of the solution means searching out businesses that have not paid one or more local tax or license fee. Then the next step is to work with these businesses to collect revenue owed, thus frequently securing new and recurring revenue.
By identifying anomalies in existing taxpayer fillings, these discovery tactics lead to recovered revenue for the city, which can lead to lasting benefits including:
The biggest downside to handling discovery and recovery internally is the time it takes. Is there another way?
Our team of experienced analysts identifies compliance issues, provides detailed reporting, and recovers lost taxes and licenses on governments’ behalf. As an added benefit, our approach is performance-based, therefore clients only pay once funds are successfully recovered.
We start by compiling an inventory of entities subject to taxation and compare them with your business registry. Our focused approach identifies these non-compliant entities with nexus based on local ordinance; general business, itinerants, contractors, home-based, rental income, short term rentals, and more. With your approval Avenu takes next steps to notify the businesses and recover the tax revenue. This mix of technology and skills results in both immediate and future revenue because of better compliance from your taxpayers.
When Avenu was brought in to access the situation in Richmond, licensing fees weren’t rising at the same rate as rent pricing, which led to an increasing number of complaints on the conditions of rentals. The city did the work of reaching out to these non-compliant landlords about conditions and licensing fees but they received little to no response.
Avenu joined to help discover all rental property owners and short-term rentals and created programs to educate them about current statutes and proper licensing. Through these efforts, Richmond was able to:
Discovery and recovery is no small job, but taking actionable steps towards establishing a level playing field can have major benefits for local governments. In Warren, Kentucky, Avenu was able to recover over $370,000 and more than 930 new registrations in the first 6 months. In Vestavia Hills, Alabama, 2,927 previously unregistered businesses now pay required taxes and fees and $1,669,750 has been recovered since 2004.
By revealing and claiming escaped revenue sources, cities can start adding more revenue to the General Fund.
Curious how much revenue your jurisdiction is missing out on? Avenu regularly provides jurisdictions with a FREE ASSESSMENT that identifies potential revenue that can be recovered. With a few basic data points, we can deliver an assessment within two weeks that will give your jurisdiction an estimate of the tax revenue that is going unrecovered. Knowing the additional and collectable amount is the first step toward making a difference in maintaining service levels, adding new services, and balancing the budget.
This process offers local leaders an alternative to difficult and unpopular tax increases, giving them a powerful and practical tool for funding improvements to meet rising citizen expectations. Level the playing field today by decreasing burden on honest taxpayers who pay more with higher tax rates to cover shortfall. Request a free assessment today!
Avenu’s friends in the South may have spotted the Avenu booth at the 50th annual Alabama Municipal Revenue Officers Association (AMROA) Summer Conference at The Westin, Birmingham this week. A dedicated partner to revenue administrators around the country, Avenu is thrilled to be a Silver Sponsor of the event and support the professionals who help ensure their municipalities are fiscally secure.
Avenu Business Development Executive Yolanda Watkins Bailey was on site throughout the event, answering questions, introducing Avenu’s tools and services, and listening to agencies needs and concerns when it comes to their financial matters.
“I love getting to meet Alabama’s municipal finance officers face to face and learning what helps them succeed. Avenu has such great resources available and I very much enjoy when we can show that to a local audience.”
South Carolina’s city managers will be on the lookout for Avenu Insights & Analytics at the Municipal Association of South Carolina Annual Meeting. Taking place July 18-22 at the Marriott Hotel, Hilton Head Island, the MASC is a place for local government leaders to network, learn, and share their own insights on how to best manage the state’s municipalities. An avid supporter of local agencies, Avenu remains committed to helping South Carolina’s cities maximize their revenue and run more efficiently, and will be on site throughout the week. Look for Avenu Business Development Executive Adam Rubin at sessions – he will be ready to answer your questions regarding:
For any questions or to get in touch with Adam at the conference, reach out to him at firstname.lastname@example.org.
Avenu (formerly known as Revenue Discovery Services/RDS in Alabama) continues its leadership role in the state as a sponsor the Alabama City County Management Association Summer Conference, June 6-8 in Orange Beach.
As silver sponsors of the ACCMA event, Avenu will be co-hosting the Summer Social on Thursday evening. In addition, team members will be on hand at the Avenu booth to discuss your city’s or county’s particular revenue enhancement or administration challenges.
Avenu’s Yolanda Watkins Bailey, Perry Brasfield, Audrey Freemen and Randy Godeke will be present to answer any and all questions pertaining to:
“Avenu is committed to helping agencies in Alabama get the most out of their revenue. I look forward to meeting with local government leaders this week to work toward making a positive impact on our great state,” Watkins says.
Continuing its expansion, Avenu has launched an inside sales department and welcomes BC Alexander and Kaylee Yeatman as the first two professionals based in the Herndon, Virginia headquarters.
The team has already begun engaging local government executives about how Avenu’s revenue enhancement and administrative solutions can meet short- and long-term fiscal challenges.
An Iowa native, BC joins Avenu with a background in both engineering and business development. His master’s degree in computer engineering and experience in IT security development give him a unique perspective on Avenu’s technical offerings, while his recent work in business management and marketing will give him an edge in helping Avenu’s clients find the best solutions for their specific situations.
Kaylee comes to the team following an extensive background in customer relations. Her strengths include interpersonal communication skills, customer service, and familiarity with tax credit properties thanks to her time as a leasing specialist. Originally from Maryland, Kaylee is now a Virginia resident and is looking forward to helping all jurisdictions maximize their financial potential.
“I’m excited to work for a company that is reaching out to work with and help local communities. Avenu offers the chance for local governments to grow and prosper, and I’m eager to be a part of that,” Kaylee notes.
“Our national footprint is generating huge amounts of field information. The use of an inside sales team is going to both better assimilate that market intelligence and allow our Client Executives to share more critical information with customers. It’s an exciting time for this business,” says CEO Paul Colangelo.
View or download our recent webinar by Avenu’s Jonathan Gerth, Esq. on how you can get more funding from the franchise fees you collect from utility providers. Jonathan will cover how you can increase compliance with an ordinance review, pending legal challenges that can work in your favor, and how some fees don’t get included in your payments but should.
This free presentation addresses franchise fees from all categories of utilities:
Discussions will also include specific calculations to show what your franchise fee revenue should be!
Tracy Vesely has seen local government challenges from every angle. From revenue challenges in Kern County to legislative coordination of California courts to risk management for various cities, her experience has set her up to offer sound counsel on government operations and finance. We interviewed Tracy about her background and how it fits with Avenu’s vision.
How did you get into local government?
To fund my college education, I worked for a developer in the commercial real estate market. I loved the job and intended to stay in the field after graduation. However, marriage and a move landed me in county government. My start as a budget analyst in a county administrative office began my winding road to finance director. I never looked back. After 27 years I can tell you it was a great decision to stay.
What kept you in local government?
I like to learn, be challenged professionally, and add value to an organization and community. My career in local government has checked all of those boxes. As a finance director I was involved in all aspects of city service delivery and policy, which has deepened my commitment to public service. During a difficult budget year while I was with the City of Berkeley, a community organization that faced funding cuts gave me a paperweight in the shape of a broken heart to remind me of them as we made budget decisions. It remains on my desk 14 years later as a reminder of the importance of public service and stable finances for public agencies.
How does joining Avenu help you fulfill your personal and professional goals? Why Avenu?
I have always enjoyed the diversity of the work in local government. Now, at Avenu, I have a chance to not only work in diverse areas but across numerous cities in several states. It is a more global vantage point, and a chance to bring value across jurisdictions. Avenu’s focus on helping local government deliver stable revenues and plan for the future aligns with my professional experience and mission.
What are the three big challenges facing city finances in the coming five years?
Sadly, there are probably more than three challenges facing city finances. Pension costs are an obvious and very real challenge as they continue to increase and put extreme pressure on public sector budgets, especially in California. Reducing services to fund pensions is not a desirable remedy, so we must figure out a way to control these liabilities in a sustainable way.
Another challenge cities face is the need to replace and improve aging infrastructure. Years of deferred maintenance, especially during the great recession, has pushed our infrastructure to critical levels. Cities will be forced to improve/repair streets, bridges and other infrastructure assets in a significant way in coming years. Many cities are experiencing infrastructure failures and facing fiscal crises to fund these basic needs. As pension and infrastructure costs rise, cities need to maximize their limited revenues.
Unfortunately, a third challenge is that these limited revenue sources are shifting and no longer providing the level of funding that cities need. Sales tax has historically been a reliable source of revenue growth for cities in most states. Changes in the economy, e-commerce, and an obsolete sales tax base are causing dramatic changes in the viability of these revenues. However, it will be interesting to see the impact of the Wayfair Inc. v. North Dakota Supreme Court case outcome.
How does Avenu help local government address these challenges?
Avenu offers software and services that local agencies need to maximize current revenue streams and maintain core services for communities. Avenu partners with cities and counties, using data analytics and expertise to recover tax revenue and assist with elements of tax administration. Raising or creating new taxes is exceedingly difficult, so Avenu can provide opportunities to assist some aspects of public agency operations to save money. For example, Avenu can take over management of the business license process and deliver a web interface that makes it easier for businesses to acquire a business license while reducing the overhead for a city associated with business license management.
As a former finance director, why would your public agency use a firm like Avenu?
Finance directors are pulled in multiple directions at once. It is often difficult to be an expert in a single topic. Avenu provides a partnership that assists finance directors and city managers with recovering and projecting tax revenues, and informing economic development efforts.
What are the key indicators that cities should look at to assess their fiscal health?
Probably the most obvious fiscal indicator is the health of the general fund. Continued deficits and recurring use of one-time/reserve funds indicates a structural deficit. A depleted general fund reserve and the need to use general fund revenues to subsidize other operating funds are also indicators of distress. It is imperative that cities engage in multi-year forecasting models for the general fund and other key operating funds.
With more pressure on city finances the role of the finance director has become more high profile. What are the key traits needed to succeed as a city finance director today?
A successful finance director needs to do it all. Today’s finance director, while a master of fiscal oversight, must move beyond this traditional role and understand almost all elements of city service delivery. A finance director needs to be a strategist and voice of reason who supports the city manager while working to ensure the city’s fiscal stability. This can be difficult when innovation and available resources do not line up. Finance directors are no longer just in the back office. They are a face and voice of the public agency and it is important to be a good public speaker that is able to communicate complex data in an easy to understand manner. Thick skin and an unflappable nature are helpful traits, too.
Avenu (formerly known as Revenue Discovery Services/RDS in Alabama) is sponsoring the 2018 Alabama League of Municipalities Annual Conference, May 19-22 in Montgomery.
Look for these Avenu team members: Yolanda Watkins Bailey, Perry Brasfield, Audrey Freeman and Randy Godeke. They will be in the Avenu booth #519 – stop by to discuss your city’s particular challenges regarding compliance and processing of:
Avenu is also a Flagstone sponsor of the conference, reflecting its ongoing dedication to helping Alabama’s municipalities thrive. Avenu has been helping cities maximize revenue for more than 35 years, and this is the 24th year Avenu has attended the Municipal League of Alabama Annual Conference.
Avenu Insights & Analytics first partnered with Santa Rosa city leaders in 1991 with a successful run of compliance auditing, discovery, and recovery. When it came time to replace the city’s permitting and planning system in 2012, officials chose Avenu’s unique combination of customized technology and service-led solutions. By building off the needs of Santa Rosa’s citizens, city officials, and customer-first culture, Avenu continues to support the community, recovering millions of dollars in new revenue to date.
Santa Rosa, California
Ted Kamel, Senior Hotel Tax Examiner and Client Services Manager
Cities across Texas have experienced a new era in lodging tax growth that has directly affected promoting visitation to their communities. Occupancy taxes spent wisely can be a boost with increased heads in beds for a variety of events like festivals, concerts, sporting events, and other venues that bring guests into cities for short term stays.
Many cities in Texas have seen new prime lodging franchises open. Some communities have seen an increase in lodging facilities for workers needing short term living quarters over a couple weeks to several months. Others are experiencing the recent rise in short term overnight rentals of single family residences, condos, and other units not originally built for lodging purposes.
By following a few important guidelines, your city can analyze and take advantage of these trends to increase hotel tax revenues, and strengthen its ability to manage alternative lodging options.
The local ordinance should require the lodging provider to register before collecting the tax. Once registered, the business becomes the fiduciary trust in collecting and remitting the tax properly to the city either quarterly or monthly whichever is required per ordinance. Monthly tax remittance historically increases city revenues due to closer scrutiny. Cities should clearly state their right to review and exam periodic records allowed under State statute.
City hotel tax returns should collect more than just taxable rent. Data provided on the local return will provide some critical information that will assist cities beyond just collecting the tax. Strengthened returns will ask for the gross room rent, regular exempt rent allowed under statute, long term exempt rent for those staying over 30 consecutive nights, and finally taxable room revenue. Each tax return should ask for the number of rooms rentable at the property. Further, knowing the number of “room nights rented” assists cities and CVB to analyze trends in lodging occupancy rates, especially after special events.
Coupled with strong hotel tax returns, a regular exam program builds a long-term compliance ethic within a city’s lodging community. The best approach is to exam a percent of properties each year. Examiners should carefully study anomalies in data collected especially exempt rent claimed to a city on returns.
Properties should be examined at least once every four years. Changes in ownership along with possible franchise changes warrant periodic review. Owners should be given regular reviews in their responsibilities with a strong education program. Successor liability issues should be addressed with changes in ownership as well.
Creating volumes of spreadsheets that compare tax returns with property management records will create a large exam report, but will not go far in detecting hidden significant errors in reporting and remittance of the local tax. Examiners should be carefully chosen based on their background in understanding how to analyze long-term exempt rent and other data reviewed forensically.
Short-term residential, whether single family homes, condos or other units, are growing in popularity in cities across Texas. Some view these short-term rentals as a benefit by expanding the type of lodging options available to guests both seasonable and otherwise. However, many of these rentals are not in commercial zones and may impact neighborhoods. Further, cities are burdened by ensuring these properties are registered and remitting all hotel taxes per the local ordinance.
Cities should be proactive in approaching this growing trend by reforming certain provisions in its lodging and zoning ordinances. Certainly, a requirement for registering the property must be stated and advertised providing penalties for non-compliance. Some municipalities might require a special use permit similar to daycare centers, and other home based businesses. Single family homeowners in the area would be allowed a voice in the granting of a permit through the regular planning and zoning hearing process. If the special use permit is granted, it is usually up for a review every couple of years allowing the city to measure the effects on neighborhoods.
As with other permits granted, the city will have requirements on parking, noise abatement, the maximum number of overnight guests allowed on the property, and other issues related to short term rentals. Inspections regarding fire safety and health related issues might be imposed as they are for traditional lodging properties. Smoke detectors, escape routes, fire suppression equipment, exterior signage, swimming pool regulations, and other issues should be addressed during the permitting process. Cities should provide for citations for violations including verified complaints of neighboring residences.
If there is a higher concentration of short-term rentals within a certain area of a city, decision makers might create a short-term rental overlay zone with the same requirements imposed with special use permits.
Third party management companies often act as the agent renting short-term properties. While the local ordinances regulating these properties are shouldered by the owner, the collection and remittance of the tax usually lies with these companies. Cities should require a tax return be filed either monthly or quarterly regardless of the rental income derived during that period. Some major rental companies simply want to send the city one check each month or quarter for all units rented. Cities should either require a separate return per property, or one tax return with a list file of each and every unit rented. Cities must know the rental income and business activity of each property. Finally, cities must never give up their right to exam any short-term rentals, including those managed by third party companies.
Cities can maximize their hotel occupancy tax collections and establish a strong compliance ethic by following these simple guidelines. These increased HOT revenues will help improve not only your community’s cultural and special event programs, but also drive future dollars with a growing and thriving hospitality industry.
Ted Kamel is a Client Services Manager and Senior HOT Examiner with MuniServices, LLC. in Texas. Prior to joining MuniServices, Mr. Kamel served four terms in the Texas House of Representatives, and two terms as a Tyler City Councilman. MuniServices serves cities in Texas and nationally with tax compliance management, revenue optimization, consulting services, and budget transparency.