Two years ago, New Orleans’ inspector general criticized the city for paying a private company too much to collect past-due property taxes.
Since then, a new contractor has taken over, and the city appears to be paying more than twice as much as it was under the deal Inspector General Ed Quatrevaux ripped in 2013, records show.
Over eight months recently, the records show that Archon Information Systems, the new vendor, billed the city about $918,000 in collection fees to collect about $12.8 million in delinquent taxes.
But those fees were only part of the payments to Archon, according to invoices and check records provided by the city in response to a public-records request. The invoices also show two charges that neither the city nor the company would explain.
In total, Archon’s billings from June 2014 through January — eight months — came to about $3.15 million.
By comparison, the city paid the previous contractor, Strategic Alliance Partners, about $3.3 million for the same service over a period of 19 months.
Over that time, SAP charged an average of $175,000 to collect $1.8 million each month, The Lens determined. On a monthly basis, Archon’s total charges, including the additional, unexplained items, are more than double SAP’s charges: about $394,000 per month.
While Archon’s base fee works out to 7 percent of its total tax collections, the figure shoots up to 25 percent when everything charged by the company each month is included. The city’s contract with SAP, which Quatrevaux said was a bad deal, called for fees of 9.5 percent.
In his 2013 report, Quatrevaux concluded that the work for which the city paid SAP $3.3 million was worth less than $300,000.
SAP was closely connected to Archon. SAP used Archon as a subcontractor, and Archon’s CEO was a founder of SAP.
The payments to Archon aren’t based on a percentage of collections but rather a series of flat fees established in the contract with the city. The Lens calculated the percentages to compare rates with the previous contractor.
As Quatrevaux’s report noted, collection costs are borne by city taxpayers when they pay their delinquent property taxes.
Quatrevaux declined comment on the city’s payments to Archon, saying his office is in the middle of a follow-up review on the collections contract.
It’s unclear precisely what services are covered by the fees on Archon’s invoices. The firm has a separate contract with the city to conduct a large auction of delinquent properties that the city has been unable to offload at tax sales. But the fees do not appear to be related to the auction. The auction process began in March, and the invoices for tax-collection records the city provided to The Lens run only through February.
Each invoice is just a few lines long and lists three charges, including a “collection fee.” The two other charges are labeled “tax code 51”and “tax code 66.” Those two charges make up more than two-thirds of Archon’s billings.
City officials did not respond to a request to explain those charges.
Archon is required to submit detailed monthly activity reports to the city. The Lens requested them on May 20; the city has not provided them.
The legality of paying fees to collect past-due property taxes has been called into question.
In 2014, the Louisiana Supreme Court overturned a New Orleans law, written by Archon CEO Bryan Barrios, that enabled private companies to collect 9.5 percent of tax collections.
The court ruled that only the city — not a contractor — is authorized to collect taxes, and even then it can collect only taxes, interest and actual costs, not penalties and fees.
The ruling applied only to the New Orleans law. Other parishes continued to use similar fees to pay contractors under a 2009 state law. The 2014 decision echoed one from 2008, when the court had earlier declared the city’s practice unconstitutional.
Barrios declined comment for this article.
Last year, Mayor Mitch Landrieu signed a contract with Archon that established specific dollar-amount charges for services, rather than paying the company a percentage of collections. The contract makes clear that the city is the actual and sole tax collector, and that Archon is only assisting the city.