Tuesday, May 21st, 2013

Local Debt Recovery Program: Successful Beginnings for Lake in the Hills

The Village of Lake in the Hills has enjoyed success recovering past due debts through the state-assisted Local Debt Recovery Program (LDRP).  The best part, according to Village Administrator Gerald Sagona, is that it took very little effort on the Village’s part to have the state identify over $16,000 in overdue debts so far this year, to be collected by the state and paid to the Village, with some debts dating back as far as six years.

All local governments are eligible to participate in the LDRP, but to date, only about 50 of Illinois’ roughly 6,900 local units are actively participating.  If your government unit has not already taken advantage of the LDRP, it may be in your best interest to get started.

The LDRP was first introduced by a statute effective in January 2012, and it conducted a beta phase with a few local governments, prominently including the City of Chicago.  The general procedure is that a unit of local government enters an intergovernmental agreement with the State Comptroller, which enables the local unit to submit a list of delinquent debtors to the Comptroller.  The Comptroller uses identifying information provided by the unit to obtain “matches” to individuals in the state database.  If a match is found, then any money that the Comptroller would normally pay out to the debtor, primarily through state income tax refunds but also through other state payout sources, is instead deducted to pay the debt owed to the local government.

Administrator Sagona explained that the technical requirements are very minimal, and the Village is able to simply provide the necessary data to the Comptroller in an Excel format.  The money, Sagona explained, is really bonus revenue because the debts are mostly written off, and traditional collection efforts on most of these debts produce negligible results.  Another beneficial aspect of the LDRP is that the Comptroller recovers a processing fee without deducting it from the recovery, as collection agencies typically do.

About 60 to 70 days elapse from the time the Comptroller identifies a source of payment until the government unit receives funds. This is a protest period in which the debtor is notified that the Comptroller intends to deduct the money. The debtor can seek a review of the validity of the debt claimed by the government unit. The Village of Lake in the Hills so far has seen two protests; both were resolved in its favor.

A final consideration is that while the LDRP has the very real capability of assisting in debt recovery, it is by no means a complete answer to all debts.  The record matching process to date has produced less than a 50 percent match rate statewide (Lake in the Hills, for example, has a 46 percent match rate). This means that, for whatever reason, the state commonly cannot match the local government’s records with the same person in the state database.  Local governments can increase the match rate with the Comptroller by providing more detailed personal identification information, but even with perfect records the debtor may not be identifiable for reasons beyond anyone’s control, such as the debtor moving out of state, the information not being specific enough to identify one individual, or the debtor simply falling off the grid.  For good reason, the Comptroller will only match a debtor that it is certain is the correct debtor.

Having experienced the benefit, Sagona sees the LDRP as a significant positive for the Village with very little, if any, downside.


Brad Stewart

Author: Brad Stewart