San Jose Could Hire Collection Agencies

Municipalities in the state of California are continuing to have problems with large deficits.

A week after the Vallejo, Calif., City Council voted to file for bankruptcy (“Vallejo, Calif. Files for Bankruptcy,” May 8), the city of San Jose was reportedly planning to turn to outside collection firms to try to address a multimillion-dollar deficit, according to The Mercury News. The city council was expected to vote tonight whether to hire a pair of collection agencies to help recover an estimated $21 million in outstanding debts from individuals and businesses.

The newspaper reported that the city fell behind on debt collections due to staffing cuts, but had stepped up its efforts as the budget shortfall grew. The city reportedly recovered $7 million in delinquent payments in the last quarter. San Jose plans to give up on some debtors – primarily those with the oldest delinquencies – while turning others over to outside firms, who will earn fees of 9.9 percent to 14.75 percent of the recovered debts. A statue of limitations law makes collection of debt older than four years unlikely.

According to The Mercury News, half of the outstanding debt is less than two years old.

City Finance Director Scott Johnson didn’t return calls to insideARM.