Handbook for Texas Public School Districts PageI of3

X1,':' .i ir'
'!C
.11 i?'i:it-i,lii"
\\'!?li"i{}ii,' t 'i t ,1l"],{l't F\ t ] i: i I lil,..
,le . tt'', t-t l N
5ru\ -tsi
'
. .ll : '

5 fftft- 7 :,;ftitrY'ai v-'&,qco

--r'
\

! tax attorneys.
Worf.closelywith delinquent

PropertyTax Code Section6.30 statesthat if a schooldistrict decidesthat it will not collect its own
delinquent taxes, it may enter into a contract for the servicesof a delinquent tax collection attorney.
The total amount of compensationfor that attorney may not exceed20 percentof the amount of
delinquent tax, penalty and interest collected.

Prior to September| , 2002, Property Tax Code Section 33.07 allowed a taxing unit to chargea
delinquenttaxpayerup to l5 percentof taxes,penaltyand interestowed as of July l, if the school
district has: enteredinto a valid contract with the delinquent tax attorney according to the provisions of
Section 6.30 and the taxing unit delivers a notice of delinquency and penalty to the property owner at
least30 daysbut not more than 60 daysbeforeJuly 1.

The Texas Legislature changedthe percentageallowed under Section 33.07, effective with the taxes
that are delinquent on or after July 2002. The percentageamount is the amount set in the contract with
the delinquenttax attorney(not to exceed20 percent).Section33.08also containsprovisionsfor
collectionof delinquenttax attorneycostson taxesdelinquentat times other than as of July I , yet the
sametwo provisionsnoted in Section33.07apply.

While some may argue that a verbal contract is sufficient, most authorities agreethat a written and
well-definedcontractis preferred.And, the absenceof a contractinvalidatesthe provisionsof Sections
33.07and 33.08 and makesthe collection of theseadditionalfeesquestionable.Attorney General
Opinion No. JM-857 (1988) found that a taxing unit may not apply any of the Section33.07penaltyto
cover costsof collectionthat it incurs; it must usethe entirepenaltysolely to compensatethe attorney
with whom it has contracted.So having a written agreementwith the tax attorney is just prudent
management.

While schooldistrictsare authorizedto seekcompetitivebids for legal services,the law doesnot

mandatecompetitivebids. TexasEducationCode Section44.031(f specificallyrequirescompetitive
procurementof contractstotaling more than $25,000. However, the permissible procurementmethod
"does not apply to a contract for professionalservicesrendered,including servicesofan architect,
attorney, or fiscal agent." Attorneys are not listed in the ProfessionalServicesProcurementAct, Texas
GovernmentCode Section2254.002,as a professionalservicefor which the useof competitivebidding
is specifically prohibited. Therefore, districts may choosetheir method of procurement.

Written cost proposalsmay offer more flexibility and enablethe district to identify reasonablypriced
altematives; cost alone, however, should never be the sole factor used in selectingan attorney.
Experienceshouldalso be considered.For example,a novice lawyer might chargearate of $100 per
hour versusan experiencedlawyer who chargesa rate of $200 per hour. The district might find,
however, that it takes the inexperiencedlawyer three hours to researchan issuefor a cost of $300 in
contrastto the experiencedlawyer being able to addressthe question in 15 minutes for $50. When
selectinga lawyer, a district should evaluatethe firm's experience,training and reputation in the school
law community, as well as the cost. The body of law is so vast that firms specializing in delinquent tax
collection should be rated more highly than firms unfamiliar with debt collection.

http ://www.window. state.tx.us/taxinfo/proptax/handbook/ch4.html 3/B/2A08

 !
Handbook for Texas Public School Districts Page2 of 3

When reviewing proposals,districts should check prospectiveattorneys' references,their statuswith

the StateBar of Texasto ensuretheir licensesto practice law are current and not suspendedand
whether any grievanceshave been filed againstthe attorneys.Districts should be cautious in hiring a
firm that has never representeda school district in the past since the laws, rules and regulationsunder
which school districts operaterequire an attomey with very specific knowledge. The district should
also resist selectingcounselbasedon familial or political affiliations. The selectedattorney must
exerciseindependentlegal judgment to representthe interestsof the district, not to favor any one
personor faction within the district.

In the Comptroller publication, Navigating the Legal Maze, written agreementsor contractsprotect
both parties from lapsesin memory, clearly define expectationsand ensureappropriatepayment.
Contractsshould, at a minimum, contain:

o effective datesof the contract including a beginning date, an ending date and/or a provision for
terminating the contract by either party with some reasonablenotice;
o description of the fee structure,including the amount of any retainer and the activities that will
be performed within the parametersof the retainer;
e attorney'sdutiesand responsibilities;
o parties (by title rather than name) within the district with whom the attorney is authorizedto
communicateand receive assignments;
o professionalliability insurancerequirements;
o billing and paymentschedules,including the frequencyand level of detail expectedon each
invoice for monitoring and verification purposes;
o terms and conditions under which the contract can be terminated by either party; and
o any other agreedto terms or conditions of the relationship not otherwise noted above.

Any contract should provide for termination by either party with some reasonablenotice. With a multi-
year contract,the district may feel compelledto continuethe relationshipeven when that relationship
becomesstrained.Both parties to the contract need to be comfortable and confident of the advice being
given and taken. Therefore, whether the contract is for a set period of time or remains open-ended,it is
in the district's best interestto include a provision fbr terminationwith somereasonablenotice and to
conduct an annual review of the contract and the relationship with the law firm.

Not all contractsfor debt collection are with independentattomeys. For example, in Tom Green
County, the county tax-assessorhas an interlocal agreementto collect delinquent taxes for several
entitiesin the county. The county tax-assessor depositsall collectionsreceivedon behalf of the school
districts into the districts' bank accountsand forwards a copy of the deposit slip to the district so that
the depositscan be posted.

Even with a strong contract in place, the district must monitor collection rates and activities to ensure
that everything is being done to bring delinquent dollars into the district and get foreclosedproperties
back on the rolls in a timely manner.

In 1998,the Comptroller'soffice found that the Wimberley tSD (W[SD) lackeda formal plan and
policies for dealing with tax collections, foreclosuresand the sale of delinquent properties.Although
the delinquent tax attorney was filing suits, the collector could have been doing more. WISD had not
adopteda district policy authorizing legal counselto quickly resell propertiesforeclosedfor tax
delinquenciesand to sell any and all parcelsof real property that had been struck off the tax rolls
becauseof non-paymentof taxes to draw revenuefrom the sale and put the property back on the tax
roll. WISD decreasedits delinquencyrate from 10.5percentin 1997to 8.8 percentin 1999by working
with the delinquent tax attorneysin taking a more assertiveapproachto collections.

Policies by themselvesare not enough. The district must regularly communicatewith its attorney to
http://www.window.state.tx.us/taxinfo/proptax/handbook/ch4.htrnl 311312008
Handbook for Texas Public School Districts Page3 of 3

determinewhat obstaclesexist for collection. In the caseof the Houston ISD, the delinquent tax
attorney was frustratedbecausethe district would not routinely forecloseon certain properties.There
was a fix for the problem, but communication betweenthe district and the tax collecting entities had
broken down. Don't be afraid to ask why things are going as they are, and don't wait for a full-blown
problem to surfacebefore asking questions.Regularly schedulingmeetingsonce a quarter or every six
months is one way to keep those lines of communication open and lets counsel know the
administration is watching.

http://www.window. state.tx.us/taxinfo/proptax/handbook/ch4.htrnl 3l13/2008