Falling on Their Assets
Budgetary news is pretty bleak in most cities these days, so it's no surprise that Mayor Wellington Webb has been tightening the belt.
But in one section of his proposed $769 million budget for 2003, the mayor went beyond mere tightening: He plans to ax the city's entire Asset Recovery Unit. The administration believes it will save $810,500 next year by eliminating all fifteen jobs (plus another, unfilled full-time position) in the collection unit -- a group of non-attorneys working in the Civil Litigation Practice division of the city attorney's office.
Most of the unit's work had been performed under a contract with Denver Health, a spinoff of Denver Health and Hospitals. But after that agency decided in January to become quasi-independent, the city attorney's office recommended scrapping the collections unit. And late last month, City Attorney J. Wallace Wortham informed the unit's staffers that after December 31 they could start collecting something different: unemployment.
"It was the hardest thing I've ever had to do since I've been in office," says Wortham, who promised to help find other city jobs for the displaced staffers.
But those staffers are concerned about more than their own jobs: They're confused by a move that doesn't add up financially for the city.
"In a recession, this is one area where business goes up," says one Asset Recovery Unit employee who asks to remain anonymous. "I don't think anyone thought it out. This was a horrible decision."
Last year, the group collected about $5.9 million. The bulk of it, however -- some $5.2 million -- was recovered for Denver Health, according to Denver Finance Office Director Margaret Browne. In return, the medical authority paid the city up to $330,000, depending on the number of hours the unit worked tracking down deadbeats.
In order to cut costs, Denver Health has been considering other collection options for years. "We had this contract since we became a separate entity in 1997 and have been looking at this for a while," says Darlene Ebert, Denver Health's general counsel.
According to Assistant City Attorney Stan Sharoff, who oversees the collections unit but says he was not consulted regarding the move to cut it, keeping the unit was apparently no longer economical for the city.
Yet others see the move as a false economy.
"It would have made much more sense to downsize than kill it; we still bring in money," says the anonymous employee.
At least twenty city departments use the unit's services, which include sending out letters to deadbeats and seeking court judgments. Just last week, the city's treasury department forwarded about a hundred uncollected checks to the unit, insufficient-funds payments on everything from speeding tickets to dog fines.
If given a chance, the anonymous employee insists, the unit could bring in more revenue: "We could also market ourselves more and get more business."
And the bad economy isn't the only factor that makes prospects for the collections business look good. The unit spent nearly two years locating and then purchasing a $70,000 Wincollects computer program, a Windows-based software system that can handle high-volume, low-amount collections. After hundreds of man-hours, that system has just become operational.
"I don't know what will become of that. That could just be money, and hours, wasted," says the employee.
In another case of bad timing, members of the asset unit will move from their current offices in the World Trade Center to the new Wellington E. Webb Municipal building at the end of November -- an expensive move when, less than two months later, the unit will be eliminated altogether. "Basically, we'll be in there to look at this nice office for a month," says the employee.
Sharoff says the unit will begin wrapping up its work at the end of October, when it will stop taking new accounts. And that concerns unit staffers, because there will be a number of regular payments coming in from wage garnishments that must be processed by someone.
City Auditor Don Mares, who was not part of the decision to eliminate the unit, says he's curious about the cut. "As a general practice, I would hope -- before they cut what sounds like a high number of employees -- that they would have an analysis of the cost benefit of the decision," he says.
The city has yet to calculate the economic impact of the action, Browne says. Late last week, she was having a hard time pinning down the city attorney's office for a meeting to discuss all the ramifications.
"We have to decide what's the best way to collect this $680,000," she acknowledges. "Is it more cost-effective through contracting it out, or leaving a skeleton crew in the city attorney's office? After all, it's their responsibility."
If Denver starts using private collection agencies to track down its debtors, Mares wonders if that will cost the city more than it saves, because those agencies typically keep a third or more of collections -- and often resort to more harassing tactics than the asset unit, which does things in a strictly legal way. Mares also questions the long-range benefits. "To take well-paid jobs and then give the work to lesser-paid workers is not good," he says.
The budget, which Webb submitted to Denver City Council last week, won't be finalized until October 21. But that's not much time for the Asset Recovery Unit to save their assets -- and potentially the city's.
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