Local Government Debt Setoff Program
www.ncsetoff.org
NCLM contact: Wanda Veasey
North Carolina local governments have collected more than $25 million in overdue debt since 2002 through the N.C. Local Government Debt Setoff Clearinghouse, a joint project of the League and the N.C. Association of County Commissioners. Participating local governments submit outstanding delinquent debts of $50 to the clearinghouse. If an individual is due a personal income tax refund from the N.C. Department of Revenue, the debt, along with a fee, will be deducted from this refund. There are requirements to notify the individual that the debt setoff process will be started and of the available appeals process. For more information about how the program works, go to www.ncsetoff.org.
The League and the Association obtained enabling legislation to establish the debt setoff clearinghouse and selected a contractor to operate the service. Since inception of the service in 2002, $25,758,430 has been collected and returned to counties and municipalities. Of that total, just over $10 million has been collected so far in 2006.
The debt setoff program began in North Carolina in November 2002 as a way for local governments (counties and cities) to submit any outstanding delinquent debt totaling $50 or more that is at least 60 days old to the N.C. Department of Revenue. That debt, according to League Director of Finance Tom Medlin, can be "any type of debt owed to a city. It can be water bills, sewer bills, parking tickets, fines, taxes - any kind of city-administered service in which a fee is charged."
The local government can combine outstanding debts that are under $50 to then be submitted to the debt setoff program. For instance, a person could have $25 in parking tickets and a $30 utility charge that was never paid. Combined those equal $55 and can be charged against the debtor.
Program helps cities and towns collect bad debts
Local governments have another tool to help collect outstanding delinquent debts of $50 or more. This service is a joint project of the N.C. League of Municipalities and the N.C. Association of County Commissioners, made possible by legislation enacted at our request several years ago (N.C.G.S. 105A-1- through 105A-16). (Click here to go to www.ncsetoff.org)
As defined in Chapter 105A of the General Statutes, the following "local agencies" are authorized to participate in the program:
Here is how this service works
• The N.C. Local Government Debt Setoff Clearinghouse has been established by the League and the Association.
• Any municipality or county can decide to participate in the clearinghouse.
• A municipality submits the debt to the clearinghouse.
• the debt must be at least 60 days old.
• the amount must be $50 or greater.
• the city or town must have given proper notice of the debt to the debtor and what the rights of appeal are .
• the city or town must furnish to the clearinghouse the debtor's name and social security number.
• The information on the debts will go from the clearinghouse to the N.C. Department of Revenue.
• If the debtor is due a refund on North Carolina state income taxes, the municipal debt will be withheld (also called debt setoff) from that refund. If the person owes money to a state agency, the state has priority on collection.
• The money due the municipality is distributed through the N.C. Capital Management Trust Fund. A municipality must have an account with the trust fund to participate in the program.
Debtor pays collection assistance fee
NCACC and NCLM are pleased to report an exciting new change in the NC Local Government Debt Setoff Clearinghouse for 2003. We sought and won legislative authority this year to charge the debtor for the $15 collection assistance fee, beginning January 1, 2003.
T he League and the Association have contracted with Five Star Computing, Inc., in Columbia , S.C., to run the program. This company has run a debt collection program for South Carolina local governments for five years.
Above is just the basic information about this new program. For interested cities and towns, additional information is available, including the required Memorandum of Agreement and Understanding about the N.C. Local Government Debt Setoff Clearinghouse, participation forms, sample letters that must be sent to debtors, and other information. Managers, finance officers and attorneys need to examine this package to determine if this program would be good for an individual city or town.
