The Austin Chronicle

The Range War at Commissioners Court

Officials take sides over law firm's proposal to privatize tax collections

By Amy Smith, May 6, 2005, News

When Travis Co. Judge Bill Aleshire left public office in 1998, few people believed that the county's most colorful political maverick would quietly fade into private life, although there were undoubtedly many hoping – even praying – that he would. "Peace and quiet is not my top priority," Aleshire told the Chronicle before retiring to pursue a law degree at age 49. "I do take pleasure in agitating."

Now a private practicing attorney specializing in administrative law, Aleshire has characteristically thrown himself into a Travis Co. scuffle or two in the years since his departure. Yet nothing compares to his current muckraking crusade to derail a well-oiled lobby campaign to privatize the county's delinquent tax collection system.

In this battle, Aleshire is working against a longtime friend and political ally, former County Attorney Ken Oden, who left office two years ago to work for the Austin-based law firm of Linebarger Goggan Blair & Sampson, the largest private collection contractor in Texas and among the top firms of its kind in the country, with collection contracts in Los Angeles, Chicago, Philadelphia, and New Orleans – everywhere, it seems, except its hometown. The firm has lusted after the county's lucrative delinquent tax business for many years, only to get run off by Aleshire and other county officials. Now, as we first reported last week ("Linebarger to Travis County: Have We Got a Deal for You!"), with Aleshire out of the picture (sort of), and armed with Oden's wealth of institutional knowledge, Linebarger Goggan has embarked on its most elaborate privatization push yet. Five years ago, Oden himself spurned a similar pitch from the same law firm. Now, as a member of that firm, he's leading the effort to nab a piece of the county's collections business – a move that is testing the loyalties and friendships he forged during his 17-year run as county attorney.

As a veteran public servant, Oden is more accustomed to being associated with the "good guys" rather than the folks he once angrily denounced as "money-grubbing whores." (He says he doesn't recall uttering those words, but that if he did, he did so in jest.) He defends his role in the firm's current privatization endeavor, and says he wouldn't be seeking the county's business if he didn't believe in the merits of what his firm is offering. To this end, in what could be unprecedented in the realm of local public-private courtships, Oden's firm has fashioned a sort of quid pro quo offer that carries a unique economic development incentive: In exchange for the county's delinquent tax collection business, Linebarger Goggan would anchor its first national call center in Austin, which would serve as the lifeline of the firm's collection business.

The center would locate roughly in the vicinity of the firm's flagship office in South Austin, just east of I-35, and would hire about 130 employees to start, Oden says, with 100-300 additional hires within 24 months. "This is a proposal that is not just motivated by financial gain but by the desire to do something good for the community," he says, explaining that there is a "day-and-night difference" between this proposal and the one he turned down as county attorney. "I would not ask the county to approve a proposal that I rejected while I was in office," he says. "I didn't think the private sector ever came to the county with a package that justified full privatization of the collection service." The economic incentive is, Oden says, "the cherry on top" that the firm needs to really wow the commissioners.

Commissioner Karen Sonleitner was immediately skeptical. "It's entertaining, but it sounds like a diversion," she says. "I'm interested in the merits of the entire package, which we haven't seen. This is not going to be the basis for making a comparison to the county's record." County Judge Sam Biscoe, on the other hand, said the proposal is worth serious consideration. "It's new and different, but the question is whether the [entire proposal] beats our in-house effort."

At first glance, it's hard to beat the county's overall property tax collection rate, which includes more than 80 taxing jurisdictions and yet stands at a respectable 98.5%. But "it can be beaten, and we can beat it," Oden says. And he offers new information showing his firm with a 99% collection rate for the Round Rock Independent School District. In 2002, the county collected 98.53% of taxes owed, leaving a delinquent balance of $3.8 million; in 2003, a 98.56% collection rate left a balance of $4.1 million (some of which is collected in subsequent years). The dollar amount represented by a .5% difference in the delinquent balance would vary from year to year, but in each of those two years, it would have exceeded $1 million on the more than $250 million annually collected in property taxes.

Biscoe has said he won't act on any proposal from a firm whose numbers come within a whisker or two of the county's rate. Nor does he want to go against the wishes of the two people responsible for the program – tax assessor Nelda Wells Spears and County Attorney David Escamilla – both of whom want the system to remain under the county's control. "But if the facts show there is a substantial advantage [to privatize]," Biscoe goes on to say, "then I think they'll come around." He recalls that when the privatization issue came up five years ago, Oden "acted like any county attorney would – he balked at it. But I think toward the end he starting coming around."

Oden indeed has come full circle since his initial opposition to privatization. Armed with inside knowledge of the county's collections program, he has crafted an argument that lays out how a private firm could save taxpayers more than $10 million over five years because, Oden argues, it would automatically whittle the number of lawsuits the county brings against overdue taxpayers, and would allow the county to reduce the number of in-house attorneys and other costs associated with filing the lawsuits. (See "Collecting the Delinquents," p.38.) County Attorney Escamilla takes issue with these claims of his mentor and former boss. "Even if there are more lawsuits, that's not a bad thing – it just means we're enforcing the law." For the most part, though, he adds, "Our emphasis is not so much on lawsuits but on working with taxpayers to promote compliance."

We Get Letters

The Linebarger Goggan privatization effort began earlier this year, much the way most other lobby efforts begin – very quietly. Commissioners Margaret Gomez and Gerald Daugherty (who accepted more than $14,000 in political contributions from the firm in 2002) accepted the bait and, without so much as a courtesy call to Escamilla or Spears, rushed the item onto the county commissioners' March 8 agenda, and thus set the privatization wheels spinning.

In one of the sillier but revealing moments of the get-out-the-vote drive, several prominent citizens, among them former Mayor Gus Garcia and KVET radio host Bob Cole, let themselves get roped into a letter-writing campaign that had them taking a sudden interest in the wonky workings of the county's tax collection system – one of the few times in its 25-year history that anyone outside of county government gave this particular policy matter as much as a passing nod. In their letters, all of which looked to be wrought upon the same template, they expressed concerns about the existing tax collection structure and encouraged commissioners to consider other alternatives – that is, privatization. The letters, Oden now acknowledges, were written at the request of his firm, which provided the talking points used to call into question, among other things, the number of lawsuits the county brings against minority taxpayers living in East Austin neighborhoods (see box below).

"That is not a fair thing for anyone to say," Spears shot back. "It is a blind system – there's no way to tell if [the delinquent taxpayer] is a minority." Moreover, Spears says, her office targets delinquent taxpayers beginning with high-dollar accounts and working down the economic ladder. A review of properties by ZIP codes does show a greater concentration of delinquent accounts in East Austin than in the rest of the city, she says, but the report also shows the vast majority of East Austin property owners pay their taxes on time. People who aren't able to pay can make installments over 36 months. "My job is to collect the taxes," she says. "I don't know of any other way to do that more fairly. This is the money that taxing entities need to operate on."

After the initial frenzy for privatization, the time line laid out by County Judge Sam Biscoe effectively slowed the process. First, the county issued a prebid "request for information" from Oden's firm and two other potential bidders, to determine whether a private collector's services could outperform the existing operation. This week, a committee of county number-crunchers began evaluating the firms' responses and will make a recommendation to the commissioners within the next week or so.

Eliminating the Competition

Travis is the only major county in Texas that has resisted privatizing its delinquent property tax collections. Both Spears and Escamilla argue that the reasons for keeping the system in-house boil down to two things: 1) accountability to the public, and 2) the county's consistently high tax collection rate. "I'm not opposed to the county going out and looking at what private firms can offer," Escamilla says, "but this business is extremely competitive and scandalous at times. I want to make sure the county and the [commissioners] court have a well-planned, open-government process." And as he sees it, the importance of an open process was made more crucial by the fact that commissioners have already made one bad move by allowing "at least one of these firms too much influence in setting the agenda."

If the Commissioners Court decides to go the privatization route – over Aleshire's dead body – such a contract could fetch millions of dollars a year for the lucky law firm that picks up the most lucrative component of county government. "I think it's wrong, and I think it's scummy," Aleshire says, unconvinced that a for-profit firm can out-perform Travis Co.'s overall tax collection rate. Aleshire bristles at the notion of a for-profit firm milking the very system he created and honed as part of his campaign promises to voters during his tenure as county tax assessor, in the early Eighties. By most accounts, he modernized and computerized what was then an antiquated collections office operating in the Dark Ages of giant ledger books and hand-scribbled entries. He continued keeping close tabs on his "baby" during his iron-fisted reign as county judge, a seat he held for 12 years before heading off to law school at the University of Texas.

When it comes to political rhetoric, Aleshire has never been a shrinking violet, but in this instance it's also clear that the very nature of the collections industry gives him the creeps. "I have always gone off like a rocket whenever I see these bounty hunters," he says, sounding just angry enough to spit. The term "bounty hunters" is not just metaphorical, because state law allows only private attorney contractors – not taxing entities – to impose and pocket a 20% "bounty" on every delinquent taxpayer, regardless of whether they perform actual legal functions in a given case, such as filing lawsuits to recover what is owed. By contrast, the law holds a tighter rein on public taxing jurisdictions by limiting their bounties to collecting attorneys' fees and court costs in successful lawsuits.

Clearly, state law is written for, and too often by, private firms like Linebarger Goggan, which maintains a well-armed team of lobbyists and plenty of friends in the Legislature to carry the bills it needs. Rep. Fred Hill, R-Richardson, has a well-established reputation as a conservative Republican, but is no friend of the collections industry. He can usually be counted on to cast "pro-government" votes – especially pro-local government – in a chamber that has turned decidedly anti-government in the past two years. In 2003, Hill sponsored a bill that would have wiped out the monopoly that private firms have on the business by allowing county attorneys the option of imposing up to a 20% markup on delinquent property taxes. Unlike the private firms, though, the money raised from these fees would go directly into the county treasury. Not surprisingly, Hill's legislation passed out of a House committee but died, predictably, in the Calendars Committee – the last checkpoint before major bills move to a floor vote, if they're lucky.

In this session, a few sentences buried in a massive housekeeping bill pertaining to the property tax code (HB 3071) threatened to stamp out altogether the practice of county attorneys collecting court costs and fees on successful legal claims. Aleshire and others immediately suspected Oden's firm of "holding a gun to the county's head" to force it to move to privatization. The offending language has since been removed from the bill (Oden says his firm was wrongly accused of foul play), but there is still the lingering fear of its reinsertion as an amendment on the House floor. Another bill, HB 3255, could mess with the county's collections system by adding new restrictions on what the county could charge other jurisdictions to collect their property taxes.

Herding the Official Cats

There is yet another obstacle to the privatization bandwagon, although its effect on the current maneuverings remains unpredictable. If Linebarger Goggan does manage to pick up the county contract, the value of the new account could substantially deflate if a number of key taxing entities respond by opting out of the county's umbrella. The Austin Independent School District – the largest taxing jurisdiction in the bunch – has already notified the county that it would seek a waiver from its contract "to select its own legal counsel" should the county decide to partner with a private firm. The city has also weighed in on this matter, as has Lago Vista ISD. All three advocate maintaining the status quo. As AISD general counsel Mel Waxler wrote in his April 18 letter, "The district respectfully wishes as a courtesy to be directly involved in the consideration of any possible change in current practice, a practice with which AISD is extremely satisfied because of its efficiency, tax collection rate, and treatment of taxpayers."

Similarly, Barbara Qualls, the Lago Vista school superintendent, told the Chronicle she sees no reason to change from the existing system when her district's overall collection rate has increased from 88% to almost 93% in the last two years. "It's still not as high as we would like, but I've seen an improvement in services under David Escamilla and [chief collection attorney] Elliott Beck," she said.

In response, Biscoe tried to allay the concerns, responding to Waxler: "I believe your alarm is premature, as the [process] is informational, and will simply enable us to determine whether another collection model would generate substantially more dollars for our residents and help us do a better job of meeting other appropriate public policy objectives."

Friendly Fire

In the last week, the loud privatization arguments subsided somewhat as a review committee began weighing the proposals from competing law firms. But murmurs of protest persist, along with mounting fear of a last-minute, anti-county floor amendment on any tax-related bill considered in the final days of the legislative session. Unlike the Austin City Council, where the prevailing centrist consensus tends to limit the public feuding, there is sufficient ideological division on Commissioners Court to make visible the ongoing squabbles, which tend to play out in full color on Cable Channel 16 like family feuds. Two of the commission's March meetings were entertaining cases in point: Tax Assessor Spears laid into Commissioner Gomez for blindsiding her on the privatization proposal; Sonleitner nettled Oden for changing his stripes after leaving the county for the private sector; Daugherty went on a tirade against an unnamed person [Aleshire] for sending commissioners a borderline-condescending e-mail that questioned why they would "wreak havoc on the best tax collection system in any county in Texas."

Oden, for his part, says it's no fun being on the receiving end of taunts and allegations of would-be profiteering at the expense of county taxpayers. "It hurts my feelings, but I understand that there are logical concerns [about privatization]. I know that [Aleshire] created this system and mothered it along over the years. But I have said all along there is nothing good or evil about which process you choose." Still, Oden says he's surprised by the level of acrimony that has shaped the debate. "I came up in politics, so I'm a little toughened to it, but it has surprised even me."

To add even more irony to the political context, Oden was hired as Linebarger Goggan's ethics czar and assigned the task of restoring the firm's integrity in the wake of a 2002 bribery scandal involving a former name partner, Juan Peña, who ran the firm's Edinburg office. "They wanted to make a serious effort to ensure that that kind of conduct didn't happen again," Oden says. "We established a standard of ethics at the firm that's one of the highest standards in the country." Whatever the history of his move to Linebarger, Oden does acknowledge that he knew when he joined the firm that he'd eventually return to his old turf to solicit its rich delinquent tax business. As it happened, Peña was sentenced to 30 months in prison and fined $1 million dollars on March 31 – two days after Oden and Dale Linebarger went before the commissioners seeking the county's business.

There is understandable resistance to Oden or anyone else taking that business. Aleshire is continuing to bombard county officials and news reporters with lengthy e-mails documenting the evils of "scummy bounty hunters." The feud has splintered Oden and Aleshire's friendship; they haven't spoken since they got into a huge row over drinks at the Brown Bar last month, which ultimately concluded in a prolonged debate over the telephone. "Oh, it was ugly," Aleshire recalls, sounding mildly remorseful.

Oden says he expects the two to make amends when all this is over. "Bill's never let facts stand in the way of a good witch hunt," he says, chuckling a little. "But I would never forsake a friendship over a damn government contract." end story

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