TO: Mayor and Members of City Council
THRU: Douglas J. Hewett, City Manager, ICMA-CM
Jeffrey Yates, Assistant City Manager
FROM: Chris Lowery, Strategic & Performance Analytics Manger
DATE: May 5, 2025
RE:
Title
Discussion of City Collection of Property Taxes
end
COUNCIL DISTRICT(S):
Council District(s)
All
b
Relationship To Strategic Plan:
Goal 5: Financially Sound City Providing Exemplary City Services
Objective 5.1: To ensure strong financial management with fiduciary accountability and plan for the future resource sustainability by aligning resources with City priorities.
Executive Summary:
City staff will present findings from an initial feasibility analysis on establishing an internal municipal tax collection office. The review compares current service costs under the Interlocal Cooperation Agreement with Cumberland County-projected to exceed $1 million in FY 2025-with potential operational, financial, and compliance considerations of bringing tax collection in-house. Key factors include staffing requirements, technology needs, customer service impacts, and adherence to state regulations. A recommendation for a comprehensive cost-benefit analysis will also be discussed.
Background:
In 2023, the City of Fayetteville and Cumberland County entered into an Interlocal Cooperation Agreement for tax collection. Under this agreement, Cumberland County receives 0.75% of taxes remitted on time and 1.75% of taxes collected through delinquency. Between 2016 and 2023, the County received an average of $495,000 annually, with projected FY 2025 collections totaling over $1 million. Given this rising cost, City staff have conducted a preliminary analysis to evaluate the feasibility of establishing an internal municipal tax collection office.
The City can collect its property taxes; however, the County must provide valuation, listings, and assessments. Statutorily, the City cannot usurp these functions from the County.
Issues/Analysis:
City staff have conducted a preliminary analysis, including evaluating other municipalities who provide this service, discussions with retired tax administrators, and discussions with the School of Government, to evaluate the feasibility of establishing an internal municipal tax collection office. The following are the key findings of the analysis:
Financial Impact
• Municipalities managing internal tax collection typically benefit from improved cash flow and lower service fees.
• The City of Fayetteville needs a detailed cost-benefit analysis to assess the value of moving in-house, factoring in the existing payment structure to the County and new operational costs.
• Notably, the City would continue to receive property assessments from the County Tax Assessor at no additional charge.
Staffing & Operational Needs
• Effective internal collection requires a dedicated and skilled team. Proposed baseline positions include a Tax Manager, Deputy, Specialists, Analysts, Revenue Technicians, Customer Service staff, an Enforcement Officer, and Systems Support.
• Staffing costs are estimated at approximately $950,000 annually (excluding fringe benefits).
Technology Requirements
• Cloud-based, integrated financial systems are standard in municipalities with in-house tax operations, enhancing efficiency and automation.
• Initial investment in technology is projected at $50,000-$100,000.
Customer Service
• Direct handling of tax inquiries fosters taxpayer trust and responsiveness, but municipalities report increased workload during peak times.
• Continued collaboration with the County Assessor will be necessary for valuation and appeals processes.
Legal & Compliance
• Any internal tax office must comply with the NC Machinery Act and other applicable state regulations.
• Clear coordination protocols with County agencies will be vital to ensure smooth data exchange and minimize taxpayer confusion.
Next Steps
If the City Council consensus is to move forward, a full cost-benefit analysis is recommended to evaluate the long-term financial and operational implications of transitioning to an internal tax collection model. This assessment will guide decision-makers on whether such a move would improve service delivery and reduce overall expenses for the City.
Building out this service, given the tax cycles and the necessary infrastructure, implementation will take at least 18 months.
Budget Impact:
Initial cost estimates indicate that it would cost the City more to provide the services; however, a deeper feasibility analysis is necessary to determine the exact costs.
Options:
City Council is asked to provide consensus direction on the desired next steps.
Recommended Action:
Direction from City Council.
Attachments:
Current Agreement
Presentation