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Automating assessment information for improvement districts: the City of Tempe's award-winning system.

To keep track of capital improvement district financing and individual assessment information in Tempe, a fully automated, integrated system was developed that has significantly increased productivity in billing and collections.

Some capital improvements or services provided by local government are intended primarily to benefit a particular group of property owners rather than the general citizenry. These are undertaken at the property owners' initiative and authorized by special assessment petition. Typical special assessment capital improvements are streets, sidewalks, parking facilities, curbs, gutters, and water or sewer main construction.

The City of Tempe, Arizona, uses special assessments within designated improvement districts to help pay for certain infrastructure improvements which benefit the property owner and the community. Tempe currently services more than $40 million in improvement district debt by assessing 340 taxpayers on a semiannual basis for infrastructure improvements made on their behalf.

Arizona state improvement district statues set forth specific procedures for billing and payment application to protect citizen's rights. These statutes and improvement district debt dictate greater-than-ordinary accounts receivable requirements: assessment receivables track principal, interest, delinquency fees, title search fees and public advertisements fees for delinquency and auction notices. Receivable terms range from 10 to 20 years at fixed or variable rates of interest. Specific statutes govern assessment delinquencies to ensure that every opportunity is provided for payment and notification given prior to the assessment being sold at public auction.

Capital improvement special assessment projects have two distinct phases - the initial phase of financing and constructing the project and the second phase of collecting the assessment principal and interest levied against the benefitted properties and repaying the cost of financing.

To keep track of improvement district and individual assessment information for the purpose of billing and collecting the assessment principal and interest, the City of Temple developed an information system that provides the accounting division with a fully automated, menu driven, inter-active system.

A new system was needed to correct inadequacies of existing methods and ensure compliance with every methods and ensure compliance with every aspect of state statutes regarding the specific application of payments for principal, interest and other itemized charges and property auction process. The city's previous system had become woefully inadequate for accounting needs because of changes in the city's policies on accepting payments and follow-up procedures on collecting penalties, advertisements and title search fees. Excessive time was being spent fielding taxpayer inquires, reconciling accounts and posting payments. Many of these old system deficiencies, including the inadequacy of a receivable audit trail, were commented on by the city's external auditors in their letter of recommendations to management.

Temple's old system for tracking special assessment information, designed and developed in a technological environment that is outdated today, did not allow for efficient data access nor reliable and flexible editing and maintenance functions. User requirements had expanded far beyond the scope of the system's capabilities. Staff had to choose between using current technology and building a new system having true database files and block mode screen vs. modifying the old, technologically obsolete system. The decision was to build a new system. Research on a new system began in the fall of 1987, programming got underway in the spring of 1988 and data were converted from the old system during the summer of 1989. The first billing/receivables on the new system began in the fall of 1989.

Designing the Program

This program was developed entirely inhouse with a project team comprising accounting, systems and programming staff. No software purchase costs or consultant fees were paid.

To begin the design, the accounting staff developed a list of required system data fields. System processes and necessary reports also were itemized to give the programming staff as much of an idea of what was needed as possible. Some of the items identified were: Data fields - * owner name, address and phone

number; * person to be billed (if different from

owner) and mailing address; * street address of property and county

book, map and parcel number; * ID number and individual assessment

number; * type of improvement; * dates of first billing, last billing and

interest calculation (from present bond

date); * amount to be assessed (principal); * terms of bond (years) and number of

installments; * interest rate (fixed, adjustable)and term

(monthly, semiannual, annual); * payments; and * debit and credit adjustments. Process - * annual principal billing, semiannual

interest billing; * payment application; * delinquency billing; and * auction. Reports - * amortization schedule; * billing history schedule; * accounts receivable schedule; * delinquent list; and * year-end report for financial reporting.

Accounting staff also visited other local cities to learn what they were using to track special assessments and found that staff at those cities considered most of the systems that they were using less than desirable. Some strong points of the other systems were incorporated into Tempe's planning, and the initial design list was modified to include other enhancements as "wish list" additions. Some of those additions include: * prior owner of prior address of owner

and date of change; * current balance and future balance due

totals; * certificate of sale number, date of sale

and new owner; * deed issued, to whom, date and address; * automatic property split calculation; and * automatic mailing list.

Staff's design goal for the new special assessment system was to cover every piece of information from the setup of an improvement district to billing, delinquencies, auction process and the final payment on the assessments. The flowchart in Exhibit 1 shows the many steps involved in the billing process. The auction process is still more complex. The success of the comprehensive design of the system can be credited largely to the attention to detail shown by the accounting staff and its diligence in providing a clear audit trail through the system. Internal controls were also a high priority to avoid accidental and intentional corruption of data.


The communication of the accounting department's needs and wishes as well as the explanation of the improvement district/special assessment statutes and required processes required extensive coordination between accounting staff and programming staff. Frequent meetings were necessary to ensure that what was being programmed was what the accounting staff envisioned.

The system design process encountered several major obstacles. The first one that had to be overcome resulted from the complexity of sequential payment billing and application required by Arizona improvement district statutes. Unlike an ordinary accounts receivable system, the special assessment system had to handle complicated timing and payment application restrictions for annual principal and semiannual interest, penalties, property advertising and title search fees. Careful analysis of the payment application process was made in conjunction with the city attorney's office to ensure compliance with statutory provisions.

The conversion and reconciliation of the data from the old system to the new system presented another obstacle. The problem was partly due to the inadequacies of the old system vs. the extended capabilities of the new system. One of the reasons for a new system was to itemize the various components of each billing and apply payments in a set priority. The old system lumped all components into one sum due and did not provide taxpayers information on outstanding receivable balances; this presented difficulties for reconciling past due accounts after conversion to the new system.

As the integrity of some data in the old data base was questionable, it was imperative that all converted data be both accurate and complete to ensure the reliability of information from the new system. Extensive historical research into prior billings and assessment records was needed to resolve many discrepancies.

Not only were data converted to the new system, but additional property information was researched and added as well. Book-map-parcel number, legal description and owner address were added to assessment number and mailing address to provide greater information concerning the property and to improve billing accuracy. Much of these data were collected from the city's land use management system.

Prior to putting the new system into actual practice, a letter of introduction was mailed to all taxpayers which briefly explained the new system. A sample bill was enclosed in order for the taxpayers to familiarize themselves with the more detailed billing and receivable information of the new system. The letter asked the taxpayers to review the information on the sample bill and report any changes in mailing address or change of ownership of the property. This mailing helped ease customers into a new system and resulted in many calls that provided much needed update information prior to billing on the new system. This updating of mailing addresses improved the accuracy of delivery of the first billing and helped reduce delinquencies by more than 90 percent.

System Overview

Tempe's on-line special assessment information system is user friendly and menu drive. While it is fully automated, it has various built-in checks and exit options to help prevent erroneous processing and has flexibility in the areas where it is most needed. Almost all the screens in the system are supported by help screens that assist a user who may be in doubt about what to enter or what needs to be done.

The system's main menu offers nine options (see Exhibit 2). The first provides improvement district master information, such as bond date, interest rate, type and description of improvement. Selection two maintains all the detail information on each assessment within any improvement district. The taxpayer's property and contact information is maintained here along with payment amortization schedules, payment history, current billing information and auction process history (if any). Both areas serve as quick on-line reference when answering taxpayer inquires about their assessments.
Exhibit 2

The process and report generator, the core of the information system, provides the ability to select various sequential billing or payment or final registers. related tentative or final registers. Tentative registers are used to allow for accounting staff's review for errors before final information is posted to taxayer records. The final registers represent hard copy verification of system input and process output for audit verification and provide quick reference for taxpayer inquires. When the final billing register is requested, customer bills also are created; these include both semiannual amounts due and total assessment balance.

Billing and reports are key areas where the automated system greatly increases the speed of processing. The system also provides the flexibility to request individual or limited reports directly, rather than standard sets of reports that have to be initiated by information system's personnel. Exhibit 3 lists the various partial, tentative and final reports available through the process and report generator.


The area most in need of flexibility is the area of payments. On the new system, payments an be easily processed whether they are early, late, partial or payment in full. The system has the option of applying the payment either automatically or manually. Payments are entered via a batch mode process. Once payments are entered and they match the batch control totals, payments are posted to individual accounts and payment history reports printed.

Billing and receivables can be adjusted by using table driven adjustment entries. Debit or credit adjustments are made based on an extensive list of qualified reasons which help document an assessment's historical audit trail. Additional adjustment codes may be added or modified using a cod and report-maintenance function.

One key assessment process that became automated was property splits. Often a developer will initiate a development/ assessment and subsequent subdivide and sell portions of the original improvement district. When this is done the original assessment also must be subdivided and assessed to the new property owners. Property splits are a time-consuming process when performed manually, due to the many calculations which need to be done, but the automated system performs these tasks from the user's input on one simple screen.

Other processes automated in Tempe's information system are the creation of a payment (amortization) schedule, and the creation of a mailing list which is used to print form letters and create mailing labels. The system has been designed to run Native Mode in Hewlett-Packard's MPEXL environment on the HP 3000 minicomputer product line. Written in COBOL, it employs Hewlett-Packard's IMAGE Database Management Systems. Data entry is managed by Hewlett-Packard's VPLUS/3000 screen handler, which permits instantaneous edit checks and data verification during the on-line entry process.

Costs and Benefits

Staff-hours expended in the development of the special assessment information system amounted to 950 hours for accounting and 2,150 hours for programming personnel. In addition, approximately $350 was spent on new bill design, printing and other incidental costs. Subsequent to the installation of the system, staff hours have been reduced for semiannual billing, payment application, property split calculations and reconciling the system. Additional revenues of approximately $3,500 annually are expected due to correct application of delinquent penalties and some costs that had previously been waived due to the inability to bill correctly. The new program also has decreased the amount of programming costs required for maintenance of the system. Total net tangible savings are estimated to be $15,000 annually.

The system provides much greater property information, detailed billing and accounts receivable information to the property owner and on-line updating and inquiry capabilities. Information provided on bills and accurate billing data have reduced returned bills by more than 90 percent. This added reliability of the data and more timely and precise billing serve to protect citizens' property rights and help avoid public auction of property for nonpayment of assessment due to inaccuracies in billing, incorrect payment application per statute or due to mailing address problems.

Strong internal controls and a documented audit trail which ensures compliance with improvement district statutes and safeguards taxpayer special assessment payments are other strengths of the automated system. Program maintenance and operations also have been greatly enhanced.

Summary of Results

This reliable system for special assessment receivables has significantly increased productivity due to the reduction in staff hours previously required for performing property splits, billing, printing of reports, reconciling of the system, and researching and answering property owner inquiries. As a result of automation and the ease of use, postings are up-to-date, the accounts receivable history (from one to 20+ years) of an assessment is available at the touch of a few computer keys, and the detection and correction of errors is a faster and simpler process. The increased productivity, primarily the result of the accuracy and related greater reliability of data on the new system, translates to significant cost savings calculated in staff hours that can now be utilized on other tasks.

The increased amount of property and receivable information provided on the semiannual bills plus program changes such as on-line inquiry debt amortization schedules on demand and automated property split calculations, all resulted in improvement to the quality of service provided to the property owners. The speed and ease of data inquiry allow staff to respond accurately and instantly to citizen inquiries.

Copies of the user and technical manuals for Tempe's special assessment information system are available at $10 each. Program code also is available on magnetic tape for a nominal fee. If interested, write to City of Tempe, Attn. Special Assessments Accounting Division, 31 East 5th Street, Tempe, Az 85281.

CRAIG CLIFFORD, CPA, accounting manager for the City of Tempe since 1985, served previously as budget manager and as field auditor for the city's financial services division. He is a member of the GFOA's Special Review committee and has undergraduate degrees in accounting and business management from Arizona State University and a MBA from the University of Phoenix.
COPYRIGHT 1991 Government Finance Officers Association
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Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Author:Clifford, Craig
Publication:Government Finance Review
Date:Dec 1, 1991
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