A Texas law firm and its Memphis associates were paid $5.8 million to collect back taxes for the city of Memphis for two years.
The Dallas-based firm, Linebarger Goggan Blair & Sampson, got the no-bid contract from Mayor Willie Herenton in 2004. Prior to that, the city attorney's office had been doing the job on a budget of $150,000. Shelby County Trustee Bob Patterson has said his office could collect back taxes for both the city and county for much less money than the city is spending.
City Attorney Sara Hall, appearing before a City Council subcommittee Tuesday, defended the Linebarger deal.
"Yes I do, absolutely," she said when asked if approved of it. She said Linebarger has hired six lawyers in Memphis, including a former employee of the city attorney's office and the county trustee's office who specialized in delinquent tax collections.
Hall would not say how much money has been paid to individual Memphis lawyers who work with Linebarger. She said the only public disclosure required is the amounts paid to Linebarger, which is under contract through 2007. Some city council members apparently believe Herenton cronies are reaping a windfall.
Hall said, however, that Linebarger collected $26.5 million in delinquent taxes during its first year. The baseline number used by the city was $20.6 million a year, the amount collected by the city attorney's office in 2003-2004. Linebarger's fee was $4.6 million, but the firm refunded $1.5 million to the city due to the discovery of what Hall characterized as a system failure in the City Treasurer's Office. Prior to that, the city was ready to terminate the deal, Hall said. Last year Linebarger's fee was $2.7 million.
But Hall said that after paying the adjusted fee, the city is getting more back taxes than it was before. She estimated the net gain after court costs at $1.5 million a year. Asked by council members Jack Sammons and Dedrick Brittenum about having Patterson do the job, she said the county tends to concentrate on properties outside the city limits of Memphis and then "flip" or resell the property after collecting the county taxes. She said the city is more careful about working with poor people in the inner city and trying to get delinquent property into the hands of someone who will take care of it.
"The county is beating the city to the punch," said Brittenum.
Hall said delinquent tax collections typically decline after the first two years when an outside firm takes over because owners realize they have to pay up or