Key Takeaways

• In 2005, Wilmington saw a significant opportunity to boost  revenues by strengthening the Finance Department’s auditing and collection capacities. 
• In 2007, five new positions assisted in the collection of $2.9 million in additional revenue at a cost of $500,000. The benefit-to-cost ratio for the new positions was 5.8.

Background

Wilmington is the largest city in Delaware. Much of Wilmington’s economy is based on its status as the most populous and readily accessible city in a state that made itself attractive to corporations with business-friendly policies.

Financial Problem

In 2005, the city saw significant potential to boost its revenues by strengthening its Finance Department’s auditing and collection capacities.

Policy

The Finance Department’s “Plan for Change,” introduced in late 2005, initially focused on improved collections of delinquent payments on a variety of taxes and charges (e.g. wage tax, water/sewer charges, parking citations). The initiative evolved over several years and focused increasingly on auditing wages and net-profit taxes.

Financial Impact

In FY 2007, measures implemented under the Plan for Change generated revenue of more than $8.2 million:

• $1.1 million through enhanced wage tax collections as a result of the city’s reinstituting the state matching process where city residents were identified through their annual state filing and then compared to the city’s wage tax database.  
• $1.4 million by increasing the sheriff’s sale collection activity which resulted in increased collections of water and sewer charges, real estate taxes, and vacant housing fees.  
• $700,000 in increased delinquent collections by creating a new collection letter and strategy to address entities with past-due balances for business licenses, net profits, wage taxes, and head taxes. 
•  $800,000 through use of cutting-edge booting and collection technology to increase parking citation collections.
• $4.2 million in utility initiatives that included auditing the utility billing database for conversion to Wilmington’s new financial software, and final implementation of radio auto-read equipment which allowed for more accurate utility readings, plus a reduction in staff.

Long-Term Effects

By the end of 2008, the plan accounted for $20 million in revenue. Until this point, one dollar invested under the Plan for Change yielded thirteen dollars in revenue. By 2009, Plan for Change revenues had climbed to over $30 million. 

The Plan for Change contributed additional revenue to the city budget until at least 2014. As the initiative matured and focused increasingly on auditing wage and net profit taxes, the pool of non-compliant taxpayers shrank, as did revenues. This attests to the initiative’s success but has also forced the Finance Department to carefully allocate auditing expenses.