Plastic's Fantastic, Say Tax Officials

Riverside County, Calif., engineered an automated telephone and credit card tax payment system that is gathering momentum.

by / May 31, 1996
Riverside is the first county in California to use an automated system that enables taxpayers to pay their current secured property tax bills with a credit card and Touch-Tone telephone. Taxpayers have seemingly embraced the system, spurred by its convenience as well as frequent flyer miles, discounts on new vehicles and other premiums offered by credit card companies.

From Nov. 1 -- when the system officially went online -- through Jan. 18, the Treasurer/Tax Collector's Office recorded 4,395 transactions totaling more than $8.4 million.

Treasurer/Tax Collector R. Wayne Watts said that the number of credit card transactions for the first installment of 1995-96 secured property tax bills due Dec. 10 "really surprised us. The system has been an outstanding success."

The interactive voice response system has already been modified to better accommodate the volume of telephone calls anticipated from property owners before the second installment deadline of April 10. Although the system is available 24 hours a day, seven days a week, the bulk of the property owners who used the system to pay their first installments called during regular business hours or early evening -- and often heard a busy signal.

"We had no idea what kind of response there would be because this service hasn't been offered before," explained Willie Greer, chief of the county's Voice Networks Division. "The Treasurer/Tax Collector's Office accepted the Discover Card in the past, but people had to walk up to the counter and the card had to be swiped through an electronic system. Once we opened the service to Mastercard and Visa, we just opened the flood gates. It's been quite a learning process."

Both the taxpayers and county benefit from the system, according to Watts. "There are a lot of people who like to control how they make that payment," he said. "When they pay electronically, they don't have to worry about their payment getting lost in the mail or losing a postage stamp. They can pay up to the very last day and hour before the tax deadline, plus receive all the benefits that come with the card."

The system also fits Watts' vision of using technology to reduce administrative costs and provide accurate information to taxpayers as efficiently as possible. It is comprised of a personal computer that extracts information from the county's IBM mainframe and plays it for the caller.

"It's very costly to manually process checks and respond to inquiries," he said. "We are trying to encourage people, especially the new generation who are very computer-oriented, to use any electronic medium not only for accessing information, but making payments."

Customers who now show up in the office with a credit card are directed to a special telephone installed in the lobby with a direct connection to the system.

The idea of paying property taxes by credit card was raised during the recession a couple of years ago. A number of property owners asked if they could pay their tax bills in monthly installments without delinquent penalties. "We always recited the law, which says you can pay in two installments due Dec. 10 and April 10," Watts said.

If state law was changed to allow more installments, the cost of revamping the county's computer system and hiring additional staff to process multiple payments would be staggering. "It made more sense for customers to make credit card payments," he said.

Credit cards were discussed during meetings of Southern California treasurers/tax collectors. But according to Watts, the idea stalled because Visa and Mastercard didn't think there would be enough volume to make it worthwhile.

The dilemma of recouping the fee credit card companies charge merchants for allowing their customers to pay via credit card also needed to be resolved. By not recovering the cost of accepting credit cards, the county could be accused of giving away public funds.

Two years ago, Riverside County agreed to participate in a pilot with Discover Card. Under the two-year arrangement, the county charged a $5 transaction fee to cover its costs. In return, the county accepted only Discover Card.

Discover Card holders had to physically go to the Treasurer/Tax Collector's Office, where the transaction was handled by a clerk. Taxpayers also had the option of mailing their credit card numbers or giving them to a clerk over the telephone.

With little advance publicity, the office began accepting Discover Card in November 1993. The number of credit card payments increased to 5,096 for a total of more than $5.5 million in fiscal year 1994-1995. Watts questioned whether the staff time required to process less than 1 percent of the tax roll was worth the effort.

He had two other concerns as well -- the amount of time it was consuming, and security. "The number of people who gave us their credit card numbers over the phone and through the mail surprised us," he noted.

Watts opted for an automatic system activated by a Touch-Tone phone that would allow him to meet his customers' demands to pay their taxes by credit card. It also gave Watts the security he wanted. "We truncated the last four digits of the credit cards so they were not available to any county personnel," he explained.

The system is a variation of a pilot project in the county Assessor's Office that allowed customers to use their Touch-Tone telephones to automatically access information about their property.

"We built an interactive voice response system which would take an assessment number from a customer's Touch-Tone telephone to query the database in the Assessor's Office," Greer said. "The system would give the caller the assessed value and any exemption associated with that property.

"The treasurer/tax collector wanted a system which would give callers, using the same assessment number, the tax due and the status of payments. We demonstrated that capability beginning in September 1994, and it went very well."

The next step was expanding the system to automatically accept credit cards over the telephone. Visa and Mastercard informed county officials that they would participate if a third party verified status of the cards and provided customers with a confirmation number. The county contracted with Imperial Bank and US Audiotex, which have developed automatic systems in other counties that accept credit card payments over the telephone for traffic citations and other fines.

Customers are charged a $15 "convenience" fee for each transaction. "It truly is a convenience fee," said Keith Boucher, vice president of Imperial Bank's Business Development Office. "The taxpayer doesn't have to drive to the Treasurer/Tax Collector's Office, park, go into the building, stand in line and write a check. They can do it from their home." In regard to credit card premiums, the average taxpayer earns a nickel toward a point value for every dollar he or she charges. "For example, if you paid $2,000 in taxes, you will receive $100 worth of points," he said.

While an analysis of transactions by dollar amount showed the largest single payment by credit card was $15,000, most payments were in the $500 to $3,000 "middle class" housing range.

Encouraged by the initial response, the county plans to better publicize the system. County officials are also exploring the possibility of property owners being able to pay their taxes directly from an automated teller machine.

Used with permission of California County.

For more information on the Riverside County system, call Darlene Holz, assistant treasurer/tax collector, at 909/275-3998.