Why Cities Should Find Equitable Ways to Impose and Collect Fines and Fees

In 2013, Valarie Whitner of Pagedale, Missouri was arrested and fined for an unspecified building code violation in her home. She and her partner amassed at least $2,400 worth of fines and fees resulting from a long list of minor complaints, such as unmowed grass, peeling paint on their home, and failure to recycle. The city even threatened to demolish the couple’s home, along with 37 other properties, due to city code violations and safety hazards.

Unfortunately, Whitner’s story is not unique, especially across low-income communities of color.

Too often, when cities collect revenue through building violations, court fees, traffic violations, administrative fees, and fees for services, fines and fees can multiply creating a cascading sequence of consequences for families with little to no savings. Unpaid fines and fees can result in loss of employment due to an abundance of court appearances, tarnished credit, suspension or loss of a driver’s license, and even jail.

This is a very complex issue for cities – but one that the National League Cities (NLC) is tackling head-on over the next two years.

With support from JPMorgan Chase and Co., NLC’s Institute for Youth, Education, and Families is launching Cities Addressing Fines and Fees Equitably (CAFFE). The initiative will provide technical assistance and grant funding for six cities to assess the negative impacts of municipal fines and fees on residents’ financial health; and implement equitable collections strategies that help reduce debt.

A No-Win Situation for Cities and Residents

The U.S. Justice Department’s Ferguson Report, issued in 2015 after a white police officer shot and killed Michael Brown in Ferguson, Missouri, found that the city has relied heavily on fines and fees as a primary source of revenue, which came at the expense of the city’s most vulnerable populations. Even more alarming was that nearly 90 percent of the total number of citations and summons between 2010 and 2014 were given to African Americans.

Sadly, Ferguson is not alone.

A 2017 U.S. Commission on Civil Rights report reviewed census data from 20,000 cities and found a positive correlation between cities’ black and Latino populations and their reliance on fines and fees.

While Ferguson’s report brings to light glaring equity disparities within the criminal justice system, the reality for many cities is that they rely on this revenue stream to fill tight budget holes so that vital city services don’t get cut.

However, municipal collections practices can be very costly for cities. The high cost of external debt collectors and low rates of collection provide can exacerbate city budget shortfalls. A 2015 report by the White House Council of Economic Advisors found that relying on criminal justice fines and fees to fund government services is ineffective because of the inability of many offenders to pay.  In New Orleans, the Vera Institute found that the cost of jailing offenders who could not pay fines and fees far outweighed the revenue generated.

Challenging cities to apply an equity framework to fines and fees

The City of San Francisco’s Financial Justice Project is currently on the front line of this effort.  Led by City Treasurer José Cisneros, the Financial Justice Project has had tremendous success working with community organizations, advocates, city and county departments, and the courts to assess and reform how fines and fees are impacting low-income San Francisco residents.

Some initial findings from the project’s 2017 task force report revealed that fines and fees disproportionately impact low-income Americans and people of color in San Francisco.

As a result, the city has taken several actions to address these findings, including passing a new ordinance which abolishes criminal justice fees; “right-sizing” penalties using an “ability to pay” adjustment tool; and reducing traffic violation fees for residents receiving public assistance. NLC is partnering with the Financial Justice Project to share their knowledge and expertise with cities during a phase of the CAFFE project in which cities will  examine their own fines and fees structures.

New options for families in debt

The CAFFE project will draw upon lessons learned from NLC’s Local Interventions for Financial Empowerment Through Utility Payments (LIFT-UP) initiative, which helped five cities reduce residents’ water utility debt by integrating financial coaching and restructured debt terms into their collections practices.  An evaluation of the program found positive impacts on water utility customers’ payment patterns and reductions in water service termination.

Using an approach like LIFT-UP forces city officials to take their residents’ financial situations into account, which in the long term can be a more fruitful collections approach.

This model applied to municipal fines and fees has the potential to reduce residents’ debt while improving collection rates for cities.  NLC’s CAFFE initiative will help cities reassess collections of municipal fines and fees with a focus on ensuring equity in how fines and fees are imposed and collected.

And, as Valerie Whitner’s case ultimately shows, cities will need to find equitable solutions to this very real problem.

Whitner fell into “a cycle of debt,” as fines and fees exhausted her family’s finances—pushing her to rely on payday loans for her day-to-day expenses.

So, Whitner and her partner, along with others impacted by the city’s practices, filed a class-action lawsuit against the City of Pagedale challenging its policies and practice of targeting residents to generate revenue.

After two years of litigation, the city has agreed to substantial structural reforms to its ticketing, housing code, and court system, including repealing ordinances that burden residents with unfair fines and fees.

Engaging city leaders around a new equity framework can shift the narrative on municipal fines and fees collection practices and create much needed changes so families like Valarie Whitner’s can move forward with their lives.

To stay updated or learn more about this project, contact Denise Belser at belser@nlc.org.

About the authors:

Denise Belser is the Manager for Economic Opportunity and Financial Empowerment with NLC’s Institute for Youth, Education, and Families.

Iman Sherif was an Economic Opportunity and Financial Empowerment summer intern with NLC’s Institute for Youth, Education, and Families.