Value outweighs challenges of running a license plate agency

Ashe, McDowell officials share experiences with implementation

By Todd McGee
Communications Director

Over the past few years, several counties across North Carolina have contracted with the Division of Motor Vehicles to operate license plate agencies. While it might seem like a natural fit for a county to operate an agency, McDowell County Manager Chuck Abernathy says there are a lot of issues to consider.

The county enters into a contract with the DMV, which sets all the operating rules and fees, and the county has no flexibility to change the fees to cover unexpected expenses or generate additional revenues if needed.

“It is a very tough function for a county to operate,” Abernathy said. “We had a lot of complaints in the beginning, but every month that we have done it, it has gotten better. I would advise a county that is going to take it on to be very clear that it is a challenge to operate.”

When an opening becomes available, the DMV notifies the N.C. League of Municipalities and the NCACC and also sends a news release to the local media. Local governments and private citizens can apply for the contract.

The DMV usually leaves the application period open for at least 30 days, said Deputy Commissioner Johanna Reese. The entire process – from posting the notification, to awarding the contract, to opening the office – takes four to six months, Reese said. She said the initial contract is for three years with two, one-year renewal options. After five years, DMV will go through the application process again.

McDowell and Ashe counties each decided to apply for the opening because there were no other qualified applicants within the county. Commissioners didn’t want their citizens to have to drive to another county to renew their tags.

Both counties co-located their license plate agency (LPA) in the county office complex. McDowell’s office space is next to the tax office, while Ashe’s LPA operates within the tax office.

“We were fortunate in that we did have space for it, so basically the only additional expense we had was primarily personnel – hiring people in sufficient number to operate it efficiently and serve the public well,” said Ashe County Tax Administrator Keith Little.

Abernathy estimates that the county LPA brings in about $110,000 per year in revenues, enough to cover its direct costs. He said the LPA has a staff of 3.5 employees. The primary benefit to the counties is that it enables the citizens to receive better service, Abernathy said, noting that the office maintains the same 8 a.m. – 5 p.m. schedule as the tax office. Abernathy said the privately run agency closed for lunch and also closed early some days.

Ashe County opened its tag office in March 2007. Little says the change has been positive, even though the LPA does not generate enough revenues to cover its total cost.

“It really has been more of a convenience for the public than anything,” Little said. “It makes it a lot more convenient for them in terms of paying their property taxes. Before, if they were in the tag office and realized they hadn’t paid their property taxes, they would have to get back in the car and drive over here to pay their taxes, then go back and pay the registration. Now they just have to step over to the next counter to pay their taxes.”

The county tax department has 16 employees, and Little said three are dedicated to working with the LPA. He said one tax department employee who previously worked at the privately run LPA before it was shuttered by the state could also help out if needed.

The arrangement has been a win-win for all involved, Abernathy and Little said. Citizens get better, more accessible service, and the state gets the benefit of the county’s internal controls to ensure that the financial irregularities that caused the DMV to close some of the local offices do not happen again. Reese said the internal auditing controls within a county provide an “extra security” enhancement.

“We provide some good oversight to the state,” said Abernathy. “The commissioners wanted to do this because they were concerned about the service to citizens, so they are real pleased with it. The state is well-served by the counties running it.”

Little said that while the LPA in Ashe County has yet to generate enough revenue to cover costs, he believes that may change when the state institutes the combined registration-property tax system that was passed unanimously by the General Assembly in 2005.

Under that legislation (H1779), which combines the license plate renewal with the property tax bill and requires that property taxes must be paid before the registration can be renewed, the amount that counties receive for each transaction is scheduled to increase by nearly 50 percent, Little said. In addition, because county employees will now be in charge of collecting the data from vehicle owners, they will better know which questions to ask and will be more careful to enter the data correctly.

“Once that implementation takes place, it will be a big advantage to have the license plate agency under the same roof as the tag office,” Little said. “You will be able to create better communication between the license plate agency and the vehicle owner. What I think will be the most advantageous for us is getting the correct information from that vehicle owner when they come in to renew the tag. I feel like we will be more conscientious to get that information correct. If we know the vehicle situs is not correct or we don’t get the right mailing address, we won’t get the tax dollars.

“I am going to involve my license plate agency folks who are not now involved with the tax side to get them involved from start to finish. I feel like we will be able to better handle those day-to-day issues because they are in the process from beginning to end.”

The combined registration-property tax system was originally scheduled to go into effect July 1, 2009, but has been delayed because of technical issues and other factors.

Combined registration/property tax system will add convenience

H1779 (Property Tax Paid with Vehicle Registration) sailed through the N.C. House and Senate in 2005 with unanimous support, but the legislation has encountered some choppy waters since.

The intent of the legislation is to change how property taxes are collected on automobiles, going to a system that will combine the registration renewal with the payment of the property taxes.

Under the old system, a car owner could avoid paying his property taxes by ignoring the renewal notice and instead going to the DMV and purchasing a new license plate. Because the DMV computers did not communicate with the county tax office, the DMV would not necessarily know if the county had placed a stop on the vehicle.

“The reason we are doing this is the effectiveness of putting property tax stops on cars hasn’t worked,” said Rep. Dale Folwell, who was the prime sponsor of the 2005 bill. “It didn’t work yesterday, it doesn’t work today and it’s not going to work tomorrow.”

The new system was originally scheduled to go into effect July 1, 2009, but has since been delayed due to technical issues and other factors. Rep. Folwell remains hopeful that the system will eventually come to fruition on its revised implementation date of July 1, 2013, and notes that the problem – low collection rates on motor vehicle property taxes – the legislation is intended to address still exists.

“The impetus was that only 70 percent of people pay their property tax on their vehicle by their due date,” said Rep. Folwell. “We have hundreds of county employees in the state who do nothing but chase down these unpaid bills, and that’s how we get our collection rate from 70 percent to about 89 percent.

“But that leaves another 11 percent on the table, and that equates to about $85 or $90 million a year that never gets collected for cities, counties and fire districts across the state.”

Folwell said streamlining the registration renewal with the collection of property taxes will also make citizens’ lives easier.

“We need to cut down on people’s interactions with government as it relates to renewing the tag on a vehicle and paying the property taxes,” said Folwell.

Henderson County Assessor and Tax Collector Stan Duncan wrote an article for the November 2011 issue of CountyLines on the benefits and upcoming budget impacts of the combined registration renewal and property tax collection system. The article is online at www.ncacc.org/countylines/2011/11/mvcollections.html.