[thought some of y'all might find this of interest ....]

Collection firm wants 33% raise

Web Posted: 02/08/2006 12:00 AM CST
Elizabeth Allen
Express-News Staff Writer

For years, the law firm of Linebarger, Goggan, Blair & Sampson has collected delinquent taxes for hundreds of local governments across Texas, making money by charging taxpayers a 15 percent fee on top of back taxes.

Now the firm wants more, and it's asking Bexar County for the right to take 20 percent, even though three years are left on the current contract.

Bexar County and the hospital district last year turned over $14 million in late taxes for Linebarger to collect, making the firm's potential take $2.1 million at 15 percent. At 20 percent, it could earn up to $2.8 million from that account.

About 73 percent of delinquent accounts are collected in the first year, Bexar Tax Assessor-Collector Sylvia Romo said.

Linebarger says its other clients have agreed to the increase, but the firm is getting some resistance from county commissioners.

"I am not for increasing from 15 percent to 20 percent on a pretty significant portion of Middle America and those who are struggling to be there," Precinct 4 Commissioner Tommy Adkisson said.

Adkisson, County Judge Nelson Wolff and Precinct 3 Commissioner Lyle Larson all questioned the timing of the firm's request, since it could have asked for the increase when it renewed the contract in December 2003, beating out two competitors.

The Legislature in 2001 gave Linebarger and other tax collection firms the authority to seek the increase from their clients.

Carri Baker Wells, Linebarger's director of operations, said the firm is changing most contracts at midterm rather than at renewal.

That bothers Larson.

"For them to come in and basically lowball a contract, and then try to elevate the percentage halfway through the contract -- I think it's going to be difficult for the court to agree to those terms," he said.

Precinct 1 Commissioner Sergio "Chico" Rodriguez said he needs more information, adding, "I'm not committed to that one yet."

Clif Douglass, the firm's managing partner, said Linebarger needs to increase fees to keep up with operating expenses. He said the company doesn't have estimates on how much more a 5 percent increase would bring.

"In a nutshell, the fee had been 15 percent for over 25 years," Douglass said. "Obviously, our law firm has expenses like every other business, and in some instances our expenses have increased over 500 (percent) or 600 percent over 25 years."

However, as taxes have gone up, so have revenues from Linebarger's 15 percent.

Linebarger didn't ask for the fee increase in 2003, when it was bidding for a five-year contract, because it likely wanted to keep a low profile, Larson said.

At the time, a City Hall corruption scandal snared then-firm partner Juan Pena of Edinburg. Pena was sentenced to 30 months in prison and a $1 million fine for bank fraud and bribery charges. Two city councilmen and another lawyer also went to jail.

No other member of the Linebarger firm was accused, but it was an uncomfortable situation. Douglass acknowledged the scandal was one factor in delaying the fee increase.

"As you can imagine, that was an extremely difficult time for our law firm statewide, especially for (Baker Wells) and me in Bexar County," he said. "Each contract that got renewed was an accomplishment (and) every one of our tax contracts have been renewed.

"But we also wanted to see what kind of impact that kind of modification was having statewide," he said.

Where the firm raised its fee, it has increased collection rates, Douglass said. He wouldn't say by how much.

"We were not told specific numbers," he said.

Asked if including the fee increase in its 2003 bid might have imperiled the contract, Douglass said, "I really don't want to speculate on what might have been. ... We just at the time were focused on getting the contract renewed."

But it might have made a difference to Wolff.

If one bidder had said it would take 15 percent and another said it would take 20 percent, Wolff said, "I would have gone with the 15."

Adkisson, sitting in the county judge's office, said he isn't sure when Commissioners Court will take up the item.

"We have not had a chance to thoroughly discuss it," he said. "I don't see this thing coming up for --"

"For three years!" Wolff interrupted with a booming laugh.

I have folks who are concerned that the delinquent tax attorney's fee payments are apparently being paid directly from our tax assessor-collector to the delinquent tax attorney without being approved by Commissioners Court. The contract sets out that the attorney's fees which are paid "belong to" the delinquent tax attorney so the current procedure is based upon the "fact" that the fees never really belong to the County anyway. The Auditor checks it our after the fact and there's no allegation that any money is being improperly paid. How is this handled in other counties and is CC approval required?