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Bob Enever: Swept under rug

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— It has come to my attention that the City Council recently has discussed the underpayment of city sales and use tax by developers and builders. I understand this may amount to more than $5 millions of revenue the city has failed to collect. I also understand the recent city manager was trying to audit and understand this problem when he was fired.

An ordinance, which passed first reading, reportedly tries to sweep this all under the rug by exonerating all unpaid fees, including those for buildings not yet finished, from the provisions of a city ordinance that has been on the books for many years.

Ask yourself the question, "What would be the result if a retailer was found to have under-collected and under-paid state sales tax?" I think the answer would be restitution or criminal charges. How is this different?

As far as I am aware, the Pilot & Today has failed to make the public aware that it has lost $5 million. Is this some kind of conspiracy of silence? Are the council and the newspaper serving all the citizens of this city or only a select few? The newspaper could now make amends by doing and publishing a thorough investigation. The council could make amends by giving its unstinted support to the investigation.

Bob Enever

Steamboat Springs

Comments

Steve Lewis 6 years, 2 months ago

All, Thanks for the most coherent of conversations. The Pilot changes to this site are bearing fruit.

And the The Sunday Pilot article on this topic is good journalism. But in fairness its disturbing that if Bob Enever hadn't run it by their nose a second time, they would have slept through this. Maybe Tom Reuter, new owner of The Local, will find a niche is available in the watchdog business.

Reading Cari's quoted intention to approve the giveaway to developers, I couldn't resist reaching to a stack of campaign promises in ads from the Fall council election:

"Cari will treat each taxpayer dollar as a precious resource". Sound familiar? The promise appeared in dozens of Cari's Fall ads.

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JLM 6 years, 2 months ago

In the same manner that one files one's Federal taxes and supplies documentary information to the taxing authority, a contractor can fill out a tax calculation return providing the requisite information as well as the calculation of the tax. In addition, the contractor can provide a copy of the final contract payment. This type of analysis is routinely done to provide full replacement cost insurance coverage. In this manner then the City or County only has to audit those returns which on their surface do not appear to be reasonable. Construction costs are generally quite parametric (i.e. a hundred feet of sidewalk with subsurface radiant heating costs the same for all contractors to build within just a very tight tolerance).

Convenience or ease are not equitable tax principles. Everybody should pay their fair share.

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Steve Lewis 6 years, 2 months ago

tele, Taxing a project is not an "old transaction", if they are still delivering materials onto the project site.

The open permit audit would only garner payment from projects which are underpaid. As I said above, I really think this can be as simple as formica turning to granite. Maybe there are more significant valuation differences, but I don't see any crime here.

On the other hand, you keep referring to the intentional underpayment. If that exists, please explain again your rationale that those intentional underpayments be forgiven.

And isn't it just wrong that Steamboat voluntarily waives this tax revenue in the midst of painful budget cuts because tax revenues are falling?.

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Steve Lewis 6 years, 2 months ago

I left a word out, in a sentence above. correction:

Taxing project materials is not an "old transaction", if they are still delivering materials onto the project site.

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JLM 6 years, 2 months ago

If the law is in place and even if the SBS Building Department failed to enforce it correctly, the tax must be paid.

Someone should file a mandamus action to compel the City of SBS to enforce its own rules.

The fact that it is difficult or awkward or a bit untimely has nothing to do with collecting taxes. Every citizen has the expectation that their taxes are only their fair share and that no other citizen has received favorable treatment.

Someone at the City should be held accountable and it should be done now.

I was a developer and a contractor for years (but a taxpayer for a lot longer) and this would not be the first time that such an awkward issue reared its ugly head.

Of course the contractor will pass along the cost to the building owner, if possible; but, frankly it is not the City's problem. Taxes must be paid even if it is inconvenient.

I urge a local attorney to file a mandamus action whereby you can compel the local municipality to enforce its own rules (and you can collect attorney's fees).

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JLM 6 years, 2 months ago

Further to my earlier post, there are many taxes and other business costs which are determined by audit after the fact. A classic example is workers' comp insurance which is typically estimated and then paid based upon actual hours worked.

The enforcement mechanism should be that the City of SBS should file a tax lien on the properties involved and that no new building permits should be issued to any company or individual who has an outstanding obligation.

If the SBS Council wants to be conciliatory they can allow payment over a period of time as in any tax collection action.

Citizens of SBS should demand payment of all taxes particularly something of this magnitude.

The City has a legal relationship with whomever they have issued the building permit to and nobody else. This "contractual privity" allows them to look only to the contractor or builder to solve the problem. There is certainly an "equity" argument availabe to the builder to pass this cost along to the property owner but the builder and owner have to work that out themselves. It is not the City's problem though they also have the tax enforcement mechanism (not dissimiar to what a tradesman has in the form of a statutory mechanics' lien) to demand payment.

Publish, explain, play by and enforce the rules impartially; but, if something goes wrong go back and correct the mistake in the favor of the taxpayers. Discipline the folks who made the mistake and ensure it never happens again.

One of the primary duties of local government is to enact and fairly collect taxes thereby ensuring everybody pays their fair share and not a cent more.

And, have a nice damn day!

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Steve Lewis 6 years, 2 months ago

Bob, I agree the Pilot has decided to stay away from this one. You are not their first prompt.

Their July 9 Viewpoint, "Council, Lanning must part ways", acknowledges Lanning's audit, "Hermacinski and Councilman Scott Myller have complained about the manner in which Lanning has handled certain situations, including... an audit of the estimates the city uses to determine taxes paid by contractors."

In the commentary to that article on the web, I asked: "Lanning's employment aside, does the Pilot have no interest in what his audit of project valuations at the building department would show?" Apparently not, though they confirmed they read my post.

So I called the building department in July to ask about the audit. They explained the problem with such an audit is the builder would have already turned the property over to an owner, at a price not adjusted for this audit. So the builder would be unfairly penalized for the county's new position on a fee already assessed. If the new owner were targeted, he would likely sue the builder.

I agreed such an audit was unfair and figured the Pilot must have reached the same conclusion - a messy story going nowhere. But today, prompted by your letter, I find the City was seeking to audit ONLY OPEN PERMITS. If you had a C.O. you would have no audit.

That is a completely fair audit, and assesses over $4 million of dollars in fair tax revenue the council would forgo with this new ordinance. How, at the same time, can council plan to cut our community organization's funds by half to save less than a million?

The Pilot's recent editorial warning community organizations to "tighten their belts" combined with the Pilot's silence on this uncollected tax?

Unbelievable.

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Fred Duckels 6 years, 2 months ago

This publication overlooks many discrepencies, too bad Oak Creek is not on the favored list.

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Steve Lewis 6 years, 2 months ago

tele, Your rationale is the same I would apply to a post C.O. project, per my entry above. But a project still being constructed with no C.O. does not have the burden you describe.

As I understand it, the audit Lanning started would apply only to open building permits.

You put a good standard forward: "the party benefitting from the construction can pay the upcharge". Its my understanding this condition would be met with Lanning's approach.

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Steve Lewis 6 years, 2 months ago

I would expect a builder's pro-forma anticipated the full use tax and, if pre-sold, his sales price did too.

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Steve Lewis 6 years, 2 months ago

I don't see criminals here and don't like the term "misrepresenting". In a changing market formica can become granite and in-field changes frequently improve a built product.

The Use Tax is not a new program. Its a law that was loosely enforced. Changing a precedent of poor tax enforcement (in a time of painful budget cuts) is municipal prudence. Audits on open permits simply means the party benefitting from the construction will pay the tax.

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