In Texas, private firms cash in on property tax late fees, piling debt onto struggling homeowners

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GARDENDALE — In October, Sarah Rojo found herself drowning in property tax debt.

She owed $23,778 on the “dream home” she built outside Odessa with her husband, Raul, before he died suddenly in 2019.

She owed $5,727 on the home with the limestone trim she acquired from her father, who passed in 2008. And she owed $22,742 on her grandmother’s pink house five blocks away, on the other side of Zavala Elementary, that she inherited two years before.

For being late on her bills, she owed $10,142 in penalties and interest.

And finally, she owed another $7,977 to the private law firm Ector County hired to collect the debt from her.

Her husband’s death, of a stroke at 53, meant the end of their mom-and-pop oilfield electrician business where he worked the patch and she managed the books. Rojo kept up with the taxes on their home for two years by drawing down her savings and working at Goodwill and as a secretary at her church. But once the property became delinquent, with the other homes already late, the fees piled up quickly.

“It had been weighing on me very hard,” Rojo said. “I wanted to pay it myself, but it was not possible.”

Texas has the seventh-highest property taxes in the nation, according to the Tax Foundation, an unwelcome distinction state officials have for years tried to shed as they have repeatedly promised to ease the burden on struggling homeowners like Rojo. Yet when those same Texans fall behind on these taxes, The Texas Tribune found that the state employs one of the most punitive fee structures in America, which allows private law firms hired to collect the debts to charge an additional 20% on top of existing base taxes, penalties and interest.

No other state outsources delinquent tax collection to the degree it happens in Texas, where thousands of entities collecting local school, county and municipal property taxes do so under a system the Legislature created in 1979.

The cottage industry that grew in response is unique to the state — and lucrative. Law firms collecting delinquent taxes in the 100 most populous Texas counties earned at least $184 million in revenue in 2023 — which amounts to billions of dollars over the course of the more than four decades Texas has allowed this practice.

The Tribune calculated the collection fees for a year by obtaining contracts and payment reports through hundreds of public records requests to county tax offices, appraisal districts, cities and school districts. That sum, which is an undercount because some of the smaller counties in that group did not provide their figures, is larger than the annual budget of Beaumont.

Almost all the fees went to just three Texas firms: at least $128 million to Linebarger Goggan Blair and Sampson, followed by at least $28 million to Perdue Brandon Fielder Collins and Mott and at least $18 million to McCreary Veselka Bragg and Allen.

State Sen. Judith Zaffirini, D-Laredo, said the Tribune’s findings raise concerns about the financial burden placed on Texans, “many of whom are already struggling to pay their property taxes.” She said lawmakers should consider reforms, including lowering the fees law firms can charge.

“The fees imposed by third-party collection firms can compound the financial challenges faced by delinquent taxpayers,” Zaffirini, a member of the Senate Finance Committee, said in an email. “This system should balance the need for efficient tax collection with fairness and compassion, ensuring that Texans are not penalized excessively for falling behind on their payments.”

The appetite for reform among Republicans, who control every lever of state government, is unclear. Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Dustin Burrows — three of the loudest advocates for property tax relief this legislative session — did not respond to interview requests.

A House committee chaired by Burrows in 2020 examined the state’s system of allowing outsourced delinquent tax collection and endorsed it as a success.

Outsourcing is near-universal among taxing entities. But in 2023, Harris County — the most populous in Texas — began transitioning to in-house delinquent collection. Its leaders made that decision after discovering that more than two-thirds of overdue homeowners lived in poorer, majority Black and Hispanic precincts.

Travis County has never outsourced, concluding that doing so would subject taxpayers to needless extra fees with no added benefit for the government.

“It behooves me to never lose sight of the fact that there are people who are living on the edge,” said Travis County Tax Assessor-Collector Celia Israel, adding that her office maintains a collection rate near 100%.

Outsourcing tax collection is an attractive option to local governments because it is free for them, as the law firms draw profits directly from delinquent taxpayers. County tax collectors said the firms have expertise and technology — like software and call centers — that they lack in their own offices.

Layne Young, chief appraiser for the Ector County Appraisal District, which handles tax collection there, acknowledged the extra 20% charged to the county’s delinquent taxpayers can be onerous. He said the best way to avoid it is to pay on time.

“We’re following what the tax code currently regulates us to do; if the legislators want to change something, we’ll follow that as well,” Young said.

Republican Rep. Brooks Landgraf, who represents Ector County, where Rojo lives, declined to comment. Landgraf was one of the 66 House co-sponsors on a priority bill in 2023 to lower property taxes.

Some tax industry professionals are skeptical outsourcing is worth the extra cost to delinquent taxpayers.

Art Martinez de Vara, a Bexar County tax attorney who served as chief of staff to former Republican state Sen. Konni Burton from 2014 to 2015, said most tax cases are a relatively simple area of law and based on public records local governments already possess. He said taxing entities could likely provide the same service at a much lower cost than the fees the Tribune found.

“My politics, I tend to prefer outsourcing items, usually because of efficiencies,” Martinez said. “But I think with that amount of revenue coming in, it’s definitely worth looking at a governmental solution to that.”

Property taxes are the main funding sources for Texas counties, cities and school districts. For much of the 20th century, elected county tax collectors did a poor job, hobbled by antiquated technology, artificially low appraisals and accusations of selective enforcement, according to legislative testimony and the state comptroller. Robert Mott, a former partner at Perdue Brandon, told a House committee in 2020 that when he began his career at the comptroller's office in 1977, many entities were collecting less than 90% of their current-year taxes.

The Legislature in 1979 formalized a practice of outsourcing this work to private law firms that some taxing entities were already doing. Two years later, lawmakers allowed the firms to collect a fee directly from delinquent taxpayers.

The difference in approach is as much moral and political as it is economic: Should the cost of delinquent collection be spread out over all taxpayers, or should that burden, however large, be borne solely by the small group who fall behind?

Avoiding extra costs for the “good taxpayer” who pays on time, is a major argument for the firms, who say they’re providing an efficient service that taxing entities would otherwise have to hire staff to do.

Linebarger Goggan Blair & Sampson, the dominant player in the industry, has collected court fees, overdue toll charges and other debts on behalf of local governments since 1976. But about 60% of its business in Texas comes from collecting delinquent taxes for more than 2,400 entities, Edward Lopez, Jr., a partner at the firm’s Dallas office, said in an interview.

Outsourcing achieved the Legislature’s goal of improving collections; Lopez said the current collection rates in the state's largest counties exceed 98%.

The firm uses a number of tactics to encourage debtors to pay, including phone calls, letters and, for some clients, in-person visits. Its tools include proprietary software, which Linebarger touts as the industry’s best, that can track down evasive debtors. Lopez said the goal is to secure payment in full or commit the debtor to a monthly installment plan. If those efforts fail, the firm can file a lawsuit against the debtor to win a judgment for the owed taxes and fees. And if the debtor still fails to pay, the firm can arrange for the property to be sold at a tax sale.

Lopez said 96% of the accounts the firm collects on it does so without taking debtors to court. But he described lawsuits as an essential tool, where cases can be far more complex than critics contend — especially when a business or a bankruptcy is involved. He recounted a compromise he negotiated between Dallas County and the Roman Catholic Diocese of Dallas where the church agreed to pay taxes on five-sevenths of a parking garage — the days of the week it wasn’t using the structure for religious purposes.

Lopez said the 20% maximum fee is reasonable. He declined to provide the firm’s profit margin for delinquent tax collection but said the Tribune’s revenue finding must be placed in the context of the significant costs Linebarger incurs to perform the work. In the past year, he said the firm sent 2.1 million letters, made 712,000 phone calls and posted 2,700 properties for tax sales.

“We only get paid if we collect it. We don’t get paid by churning in hours,” Lopez said. “I have cases that I’ve worked on for 20 years … that we’ve never been paid on, and that has happened quite a lot.”

Michael Berlanga, a Certified Public Accountant, real estate broker and property tax consultant in San Antonio, said the law firms overstate the complexity of delinquent tax collection. While the firms had a massive technological advantage 40 years ago, when few tax offices had computers, financial software and data storage are now cheap and widely available.

“Linebarger, over decades, has convinced the taxing authorities ‘we’re more efficient than y’all are,’” Berlanga said. “When’s the last time… the performance of Linebarger was audited against the supposition that ‘We would have collected that money anyway?’”

A Perdue Brandon representative said the reason 252 of the state’s 254 counties outsource delinquent tax collection is because it is an efficient public-private partnership. The revenue generated by the attorneys fees, the firm said, is evidence of this and represents their success in collecting far more in taxes that go back to government coffers “at no cost to the entities or the taxpayers who timely paid their taxes that were used to provide necessary services for their communities.”

McCreary Veselka Bragg & Allen did not respond to interview requests.

The taxing entities that do in-house collection say they’re protecting taxpayers, too — the ones who are most at-risk of losing their homes.

Delinquent taxpayers already face steep fees mandated by state law. Once a property becomes delinquent on Feb. 1, a 6% penalty applies, increasing 1% per month up to 12%. Interest accrues at 1% monthly until the tax is paid.

This means that after six months, an unpaid $5,000 tax bill would balloon by 18% to $5,900. With a 20% attorney fee, which can be charged beginning July 1, it would jump to $7,080.

Israel, the Travis County tax assessor, said local governments need to balance the need to collect the taxes that fund services with a compassion for families that are often in crisis.

Travis County studied whether to outsource in 2005, concluding that doing so would not improve collection rates but would charge debtors unnecessary fees. The tax office, which collects for 150 taxing entities in the county, estimates the model saves delinquent taxpayers more than $10 million annually.

There are other outliers. Aldine ISD, a district of 57,000 students that straddles working-class neighborhoods in north Houston, moved to in-house collection in the 1980s. The district collected delinquent taxes more quickly while sparing debtors the extra fees simply for paying late, said Annette Ramirez, who worked as a tax attorney there for 23 years.

“These taxpayers … we’re accountable to them. We’re really just helping them get through this,” Ramirez said. “Nobody wants to be in the position that they’re in.”

The district would recoup costs from debtors only when they had to file a lawsuit, and those fees paid for the whole tax litigation department, she said.

Ramirez last year was elected Harris County tax assessor-collector, where she is overseeing the transition of the state’s largest county to the in-house model. The county attorney estimated the switch saved debtors $8.8 million in fees the first year, while collection rates remained the same.

Jonathan Fombonne, deputy county attorney, estimated that in-house delinquent tax collection costs the county $10 million annually. Spread out over the county’s 4.8 million residents, he said that’s the equivalent of a few dollars on the average homeowner’s tax bill.

The Legislature has repeatedly highlighted property tax relief during the past four sessions. Last session, Abbott touted passing the largest property tax cut in Texas history, and in February he listed property tax relief as his top legislative priority.

“Taxpayers in the state of Texas have been burdened with an oppressive property tax system that takes too much money out of their pockets,” the governor said at a 2019 bill signing.

Lawmakers have consistently supported the outsourcing model — which digs further into the pockets of homeowners who become delinquent. The original outsourcing statutes capped the maximum collection fee at 15% but lawmakers raised it to 20% in 2001 at the request of the law firms. Of the 88 outsourcing contracts obtained by the Tribune, 70% permit the firms to collect the maximum fee.

The Texas House Ways and Means Committee in 2020 reviewed the delinquent collection system, holding a hearing that included testimony from the top three firms and local tax collectors.

Mott, the former partner at Perdue Brandon, testified that outsourcing has been the “biggest success probably in privatization in Texas” because of how the law firms improved collection rates.

“The system ain’t broke, so please don’t try to fix it,” Matthew Tepper, the president of MVBA, urged the committee.

The committee heard no testimony from anyone representing delinquent taxpayers, the group responsible for paying the new fees outsourcing created. Its report noted taxing entities are not required to hire third-party collectors, and recommended no changes to the outsourcing system.

The law firms are well-positioned to protect their interests inside the Capitol. The top three have 26 registered lobbyists for the current legislative session, while Linebarger leads with $440,000 in campaign contributions to legislators and statewide elected officials since 2023.

The effort extends locally. In Dallas County, Linebarger and its current and former partners are the largest political contributor to Tax Assessor-Collector John Ames, accounting for 41% of his contributions the past two years. The firm earned $21.1 million in 2023 in Dallas County, its most valuable relationship with any county tax office.

Ames said the contributions would have no influence on his opinion if county leaders sought his input on whether to renew Linebarger’s contract. He praised the firm’s professionalism and service.

Across the state, less than 5% of property owners fail to pay their taxes on time each year. Seven delinquent home and business owners who spoke with the Tribune said they were hardworking Texans stretched thin even before facing the harsh fees. They each described a recent financial hardship: a job loss, a death in the family or a season where sales plummeted.

In Montgomery County, north of Houston, a tan ranch house with a leaking roof near the center of Patton Village has been delinquent much of the past two decades. Roy Bedgood Jr. owned the home in 2000 when cancer killed him at 46 and the property went to his three children, his son Chris said. Chris’ brother planned to move in (he did) and pay the taxes (he didn’t), creating a cycle of delinquency the family has found difficult to break.

Through February, the outstanding bill for the property was $28,000, including $4,700 in fees to Linebarger and Perdue Brandon. Chris Bedgood, a garage door technician like his father, and his wife raised his brother’s children and are also living with their adult son, who has special needs. He’s considering selling other property he owns to pay off the debt but wishes the attorneys fees had not inflated it.

“If the price was lower, I would have already put it on a payment plan and paid it, but it jumped so high so quick,” Bedgood said. “I’m 50 and I really don’t have a retirement plan, and I’ve worked every day of my life. And I don’t do drugs or drink.”

Jennie Treese wants to sell her mother’s brick home on a quiet cul-de-sac in The Woodlands to pay off the $31,000 tax bill — including $5,200 in attorney fees — and put the rest of the proceeds towards the future of her family.

Her mother Mary Treese taught special education in Conroe ISD for many years until failing eyesight forced her to retire. She died in February 2024 without a will, complicating matters for Jennie, her only child.

Jennie is still waiting to be declared the home’s owner by a judge, however. And meanwhile, another year of taxes and attorney fees have been added to the bill. Treese said she doesn’t understand why fees can’t be halted. The firms don’t need to chase her down, she reasons, noting she has called the tax office to advise staff of her situation.

“We have every intention of paying the taxes,” Treese said. “We’ve done all the things responsibly that we need to do.”

Treese said delinquent taxpayers are often unfairly vilified for being irresponsible. After a lifetime of public service, she said her mother, blind in her final years, lost track of her taxes.

“She maintained as much independence as she could, and this is one of the areas in which that failed,” Treese said. “But she wasn’t a villain. She wasn’t a drain on society.”

Bedgood’s state representative, Republican Janis Holt, said she sees no problem with taxing entities being able to outsource for an extra fee. She said she would be open to reviewing legislation that would make it easier for taxing entities to move collection in-house. Republican Rep. Steve Toth, who represents Treese, declined to comment.

Montgomery County Tax Assessor-Collector Tammy McRae was unavailable for an interview. County Attorney B.D. Griffin, who responded on her behalf, said McRae and her staff try to help taxpayers avoid delinquency or minimize its effects by hosting workshops and distributing pamphlets about various payment options, including prepayment, partial payments and deferrals.

In Odessa, Sarah Rojo kept her debt secret from her son Ryan, a Catholic priest in San Angelo, knowing he’d want to help despite a modest income. But after her other son, Raul Jr., died in November after back surgery, she came clean. Together, Ryan and Sarah put together a plan to get her financial life back on track.

They will rent out her father and grandmother’s former homes to secure an income stream. They paid off some of the taxes and plan to enter into a three-year payment plan with Linebarger for the remaining balance. The monthly payments would be around $600 — about $120 higher than if there were no legal fees — which Sarah acknowledges will require an austere lifestyle focused on needs rather than wants. She still works at the church and will take a second job if she has to; a single missed payment could result in her losing her home.

Rojo said she understands her obligation to pay taxes and will meet it. She wishes she asked her family for help sooner and was more proactive; even a high-interest loan would have been cheaper than delinquency. But while the family is committed to paying its debt, the attorneys fees add a burden they see as unnecessary.

“We’re not looking to scapegoat the county or scapegoat the law firm. We got into this mess ourselves,” Ryan Rojo said. “I would just advocate for a deeper sense of justice.”

About this story:

To report this story, the Tribune contacted the tax assessor-collectors or appraisal districts in all 254 Texas counties to determine which outsourced delinquent property tax collection. To obtain the attorney fee records for delinquent property tax collection within the 100 most populous counties, the Tribune sent 334 records requests for contracts with the private law firms as well as payment data. Within some of these counties, some cities and school districts manage their own property tax collection, so the Tribune obtained attorney fee records from these entities directly. The Tribune identified sources for this story from publicly available county delinquent tax rolls. Journalists visited Ector, Montgomery, Franklin, Travis and Harris counties. To conduct the review of delinquent tax collection policies across the country, they contacted state and local tax collection officials in all 50 states.

If you have a tip or experience to share about delinquent tax collection or another form of debt collection in Texas, contact Zach Despart at zach.despart@texastribune.org.

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