A Texas law firm and its Memphis associates were paid $5.8
million to collect back taxes for the city of Memphis for two years.

The Dallas-based firm, Linebarger Goggan Blair & Sampson,
got the no-bid contract from Mayor Willie Herenton in 2004. Prior to that, the
city attorney’s office had been doing the job on a budget of $150,000. Shelby
County Trustee Bob Patterson has said his office could collect back taxes for
both the city and county for much less money than the city is spending.

City Attorney Sara Hall, appearing before a City Council
subcommittee Tuesday, defended the Linebarger deal.

“Yes I do, absolutely,” she said when asked if approved of
it. She said Linebarger has hired six lawyers in Memphis, including a former
employee of the city attorney’s office and the county trustee’s office who
specialized in delinquent tax collections.

Hall would not say how much money has been paid to
individual Memphis lawyers who work with Linebarger. She said the only public
disclosure required is the amounts paid to Linebarger, which is under contract
through 2007. Some city council members apparently believe Herenton cronies are
reaping a windfall.

Hall said, however, that Linebarger collected $26.5 million
in delinquent taxes during its first year. The baseline number used by the city
was $20.6 million a year, the amount collected by the city attorney’s office in
2003-2004. Linebarger’s fee was $4.6 million, but the firm refunded $1.5 million
to the city due to the discovery of what Hall characterized as a system failure
in the City Treasurer’s Office. Prior to that, the city was ready to terminate
the deal, Hall said. Last year Linebarger’s fee was $2.7 million.

But Hall said that after paying the adjusted fee, the city
is getting more back taxes than it was before. She estimated the net gain after
court costs at $1.5 million a year. Asked by council members Jack Sammons and
Dedrick Brittenum about having Patterson do the job, she said the county tends
to concentrate on properties outside the city limits of Memphis and then “flip”
or resell the property after collecting the county taxes. She said the city is
more careful about working with poor people in the inner city and trying to get
delinquent property into the hands of someone who will take care of it.

“The county is beating the city to the punch,” said
Brittenum.  

Hall said delinquent tax
collections typically decline after the first two years when an outside firm
takes over because owners realize they have to pay up or