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Member Relations Corner: Maximize Debt Setoff revenue 

by League Manager of Member Relations and Education Rob Shepherd

The NC Local Government Debt Setoff program, a program jointly run by the League of Municipalities and the Association of County Commissioners, is in its 13th year of operation. Since its inception in 2002, the program has returned more than $240 million in outstanding debts to participating North Carolina local governments, with more than $57 million returned to participating municipalities.

With each passing year, the number of local governments participating and the number of debts collected has steadily increased, which typically results in more municipalities’ debts recovered through the Debt Setoff program. However, this year, there has been a substantial drop in the amount of collections. The primary cause for the decrease are the changes that the General Assembly made to the 2014 personal income tax withholding tables and tax laws.

Many taxpayers first became aware of this change when they filed their 2014 Income Tax Returns this year and were surprised when they realized they would be receiving substantially smaller tax refunds than previous years or realized they would owe additional taxes to the state. As a result, the year to date collections (as of June 16th) are about 50 percent lower than in calendar year 2014. These amounts differ from municipality to municipality with some newer participating municipalities in the program realizing an increase in collections. The League staff strongly encourages participating municipalities to closely monitor the Debt Setoff program collections and adjust your budget forecasts accordingly.

While it’s discouraging to many local governments to see this revenue stream decrease, this program continues to be the single most effective way to collect outstanding debts owed to local government. As a reminder, there is no cost for municipalities to participate other than the staff time needed to gather the necessary information and to submit it to the Debt Setoff program.

In September, the League of Municipalities and its Debt Setoff program partners will offer a series of six workshops across the state. There are two sessions at each location. The morning session (10:30 - 11 a.m.) is designed for staff of local governments who are not currently participating in the debt setoff program and have not completed the required contractual forms, staff who have attended but want a refresher course on how the program works, or staff who are currently participating in the Debt Setoff program but it is a new responsibility. The afternoon session (1 - 3:30 p.m.) is intended for staff representatives participating in the Debt Setoff program and will include important program updates and information on any changes to federal or state laws affecting the program.

The dates and locations for this year’s workshops are as follows:

• September 15 – Wilmington

• September 16 – Washington

• September 17 – Raleigh

• September 22 – Asheboro

• September 23 – Hickory

• September 24 – Waynesville

For more information or to register, click here. Please feel free to contact Wanda Veasey at (919) 715-2218 or Melissa Smith at (919) 715-3927.