This chapter examines the Kerrville Independent School District's (KISD's) financial management in the following six sections:
- A. Fiscal Operations
- B. Payroll Processing
- C. Budgeting
- D. Fund Balance
- E. Tax Collections
- F. External and Internal Audit
E. TAX COLLECTIONS
The assessment and collection of school district property taxes involve different entities with distinct responsibilities. KISD's board sets the district's tax rate after adopting the district budget in accordance with state law. The local appraisal district is responsible for setting property values and certifying tax rolls. Each May, the appraisal district provides an initial revenue estimate, but certified tax rolls are not available until July.
Local property taxes provide the majority of the district's revenue, comprising 69.9 percent of total budgeted revenue in 2001-02. The KISD Tax Office collects property taxes on behalf of the district. These receipts are held in a clearing account and periodically transferred to the district general operating account at Security State Bank and Trust. The district contracts with an outside law firm to collect delinquent taxes for the district. When delinquent taxes are collected, the law firm retains 15 percent as a commission. The district keeps the remainder of the delinquent taxes collected plus penalties and interest.
The district's Tax Office is located in downtown Kerrville. A part-time tax assessor-collector supervises the office and reports directly to the assistant superintendent of Business and Finance. Two support clerks are responsible for waiting on customers, providing telephone assistance, making bank deposits, generating and mailing tax notices and receiving payments. The district uses software to download appraisal rolls from the appraisal district.
Nearly 60 percent of Kerrville residents are approaching or have reached retirement age. Taxpayer liability for those individuals who have reached 65 years old is frozen at that level for the remainder of the taxpayers' lives. In a retirement-based population, this effectively places a ceiling on the tax revenues that can be derived from a significant portion of the district's tax base.
KISD has a number of large corporate taxpayers that offset the effect that the aging population has on the district's local revenue. Last year, however, the third-largest taxpayer, Mooney's Aircraft, filed for bankruptcy leaving the district with a large amount of delinquent taxes left to be collected. The district has been able to work out a payout plan to collect the delinquent taxes over the next three and a half years.
KISD collects 99 percent of its property taxes annually. The tax clerks have been in the tax office for more than 30 years. They have established strong relationships with the local taxpayers. They told the review team that they liked to "adopt community members" by taking an interest in their personal lives, keeping track of important dates and happenings and by making it as enjoyable as possible to come into the office. The atmosphere is friendly and receptive. In a small community like Kerrville, stopping by the Tax Office not only provides taxpayers with the opportunity to pay their taxes but also to visit with long-time friends.
One of the unique factors that enhance the overall environment of the Tax Office is the cat. A stray cat has taken up residence in the Tax Office. This cat has been written up in Texas Monthly and is extremely popular with the local residents. The superintendent credits the extremely high collection rate to the two clerks and the popularity of the cat. The Kerr County Tax Appraiser has a collection rate of 95.08 percent and charges 1 percent of collections in fees. According to the assistant superintendent of Business and Finance, the County simply cannot provide the same level of service at a competitive cost.
KISD has created an atmosphere that encourages area businesses and residents to pay their property taxes.
The district does not have a plan for performing tax collection services should the current employees retire. The tax clerks staffing the tax office are approaching normal retirement age. The clerks have extremely manual procedures for completing their job duties. The tax receipts are filed in copy paper boxes. Although the tax clerks can maneuver through the office effectively, it would be difficult and time-consuming to train replacement clerks to perform the job duties in the same manner.
The Tax Office does not have access to the latest technology tools. The computers in the office are networked to the district mainframe but are old and slow. The staff does not have access to spreadsheet applications, nor is there a printer in the office. It could be prohibitively expensive to update the technology in the office and develop new procedures. There is no question that the environment in the Tax Office will change once these two clerks leave district employment.
A large number of districts have interlocal agreements with a local governing firm for collecting property taxes on their behalf. Usually the same firm is responsible for collecting delinquent taxes as well. The governing firm provides the district with a tax collection report each month. KISD has been in discussion with Kerr County officials, but district officials have been hesitant to transition when the existing process has been so successful. A one percent drop in the collection rate would reduce the district's cash flow by approximately $175,000 annually. This would be problematic given the district's precarious financial position.
Review tax office operations and develop a long-term plan.
The assistant superintendent of Business and Finance should continue meeting with the Kerr County Appraisal District to keep the option open to have the county collect taxes on the district's behalf. It is unlikely that the County will be willing to collect taxes without charging the district a collection fee. However, the costs to bring the Tax Office up to date with respect to technology and training new staff may be so prohibitive that the County will become a viable alternative.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The Purchasing supervisor, the tax assessor-collector and the Instructional Technology director meet to identify possible Tax Office technology improvements. November 2002 2. The assistant superintendent of Business and Finance meets with the Appraisal District periodically to discuss the possibility of establishing an interlocal agreement. January 2003 and Quarterly Thereafter 3. The staff accountant evaluates the cost of keeping the Tax Office open once the staff retires. February 2003 4. The assistant superintendent of Business and Finance prepares a cost comparison between refitting the Tax Office and turning the tax collection duties over to the County. March 2003 and Quarterly Thereafter 5. The assistant superintendent of Business and Finance periodically reviews the operations of the Tax Office and performs a cost analysis to determine if it would be better to modernize with district personnel or to contract it out. March 2003 and Quarterly Thereafter
This recommendation can be implemented with existing resources.