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Loveland Use Tax Audits Come to A Head - Council Considering 3 Alternatives
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About 1 dozen builders are holding out on Loveland and not coming to agreement with the city regarding the Use Tax the city says they owe from recent audits. The Use Tax is the 3% builders pay (instead of sales tax) on all materials used in constructing new homes and commercial buildings in Loveland. When the building permit is issued the builder pays a deposit based upon an estimate of the cost of the project. The truth is some builders (for reasons not entirely clear) paid an amount that was far below the actual tax they owed at the end of the project but were never questioned. Years later, the City of Loveland is now trying to correct the errors which were made worse by some faulty data used to assist in the estimates.



This is a complicated issue and we encourage everyone to please read the background data provided at LovelandPolitics main page on Use Tax.



What should the city do? 1. Collect the tax as the law requires and not make any after the fact exceptions. 2. Forgive the minor amount of difference between the city estimates and the builder's. 3. Forgive all the hold-outs who may have intentionally underestimated their project cost in order to avoid having to pay the actual tax owed.

2008-03-06 05:38:37 GMT
Comments (24 total)
Author:Anonymous
Is this a joke? I read the code and it seems very clear to me what taxes they should pay. The story you should report is how and who already had their tax forgiven by the "negotiations." Is that not public information???? Any attorneys out there who could let us know whether this deserves a Freedom of information request?
--Mimi
2008-03-06 05:57:37 GMT
Author:Anonymous
Too many guys whove been around a longtime are not doin to well nowadays. They should look in the mirror and ask would they do this for themselves. I think the city should stop puttin the good guys out of business and just forget the audits for awhile excepot for those big guys running the big outfits.

I aint no don marostica so we don't get nothin back from the city ever so why should I tell them when they make a stupid listake on my taxes
--Arnold
2008-03-06 06:44:37 GMT
Author:Anonymous
Arnold, ignorance of the law is no excuse. You pay the taxes you owe period.
--Don V.
2008-03-06 16:23:14 GMT
Author:Anonymous
What authority does the city have to "settle" tax debt with solvent companies that might have submitted intentionally misleading data? I thought this was tax fraud - the kind with no statute of limitations?
--C.J.
2008-03-06 21:52:02 GMT
Author:Anonymous
Most of the reason for the underpayments was due to the City using an outdated valuation table in calculating the cost of materials and the tax due at the time of permit. This problem resulted from an incompetent staff, namly Don Williams when he was the manager of that department before becoming City Manager, putting into place a seriously outdated cost table. He did this of course to stay in favor with the contractors who he serves first and foremost above citizens. To come back on the contractors now is not fair, they paid what the City said they owed at the time, to now audit them and say they owe more is crap. They need to forgive the past due and institute an accurate method of collecting the fees which they have done but about four years too late. It was an incompetent staff, Don Williams, and his successor Greg George (a lap dog that only did what he thought Williams wanted which was a cheap cost table to favor the developers) that are responsible for this mess.
2008-03-07 01:18:56 GMT
Author:Anonymous
Either way, the city has lost thousands of dollars over the inability of the city manager to do his job. Notice Loveland Commercial and McWhinney are not complaining. They don't appear to be complaining which tells me someone needs to go and open the books for public review on these stinkers.

I am tired of living in Pottersville. Where is our George to fix all this mess?
--Grace
2008-03-07 06:41:58 GMT
Author:Anonymous
You are correct with regards to the city using an outdated table when the fees were first computed. The builders were given one amount (from the outdated table) and then a higher amount based on the correct table after the error was discovered. This was for those user fees from 2004 to 2006.

Because it was a city's error, council decided at a study session to waive the increase in fees based on the difference in tables used during this period. It would not eliminate any increase in user fees based on an inappropriate amount submitted by a builder when the permit was issued versus the final valuation of the project.

Don Williams was not manager of development services (building department) when the wrong table was used. Again, the incorrect table was used between 2004 and 2006. He became City Manager in 2002.

--ouch/rousey
2008-03-07 14:10:24 GMT
Author:Anonymous
Thanks for the clarification. Just two questions -

1. Doesn't the code and the permit itself plainly state the estimate determines only their deposit but not actual taxes owed? -- which cannot be known until after the project--

2. Doesn't the code also specifically mention the city manager as the party responsible for creating the appropriate "rules and regulations" in order to ensure those taxes are paid as required under by law?

I cannot tell the IRS that whatever my employer withdrew for federal taxes during the year is all I have decided I need to pay. Why would you allow some builders to pay the actual tax who did submit the required forms after their project was completed while others are being allowed to ignore the city code?

Seems terribly unfair to me since the estimate was never intended, told or otherwise commuicated to be their final tax obligation.
--Walter
2008-03-07 19:02:31 GMT
Author:Anonymous
Question #1: Yes

Question #2: I don't know for sure, although the argument could be made that the city manager (with direction of council on some issues) would be responsible for most decisions...As President Truman said; "The buck stops here". But I believe that any good manager should not micro-manage and it's difficult at best to check on every department all the time...you have to assume that your staff is doing the proper job. Staff did, however, come before council and related to us the problems that arose with the two different tables.

This is not a cop-out but I oversaw all inspections, public education and investigations with my fire department...but mistakes were sometimes made by members of the department...it happens. When mistakes were made, they were corrected but I not sure I should have had knowledge of each event prior to notification by those who worked under me.

Does that make sense? Not sure how else to word it. (I even confuse myself sometimes)...That's a joke for those who hate the city council.

Walter, I'm not sure we're allowing anyone to ignore paying the proper amount. Granted, the difference between the amount quoted to the builder and the amount that should have been quoted based on the appropriate tables will be waived (unless council changes its mind). The reason, as I understand it, (and I'm not a builder, developer or contractor) is that some homes or projects have already been sold and the user fees were computed into the selling price based on the inappropriate tables.

Some builders were not told of the new table until after the sell of the property. There was no way to recoup the additional charges.

Your IRS example makes sense but if the IRS tells me I owe a certain amount and I pay that amount and then 2 years later they tell me that I owed differnt amount, I would probably fight it (against the IRS? Yeah, right!). That's what some of builders are upset with.

Again, does that make sense? Sorry, kinda of in a hurry...getting ready to leave.
--ouch/rousey
2008-03-07 22:40:09 GMT
Author:Anonymous
To Rousey, and Walter, I absolutely know for a fact of first hand knowledge that Don Williams was the Director of Development Services at the time the incorrect table was put into place which goes back to 2002 when Williams was Director, not 2004. This is not second hand or hearsay knowledge. As I have said before on this blog I know certain facts but because of the threat of retribution cannot be precise about my identity or exact background. But I can tell you I know these things as a matter of first hand knowledge. The Development Services Director oversees the Building Department and it was Williams' responsibility to ensure that the correct table was put in place. This mistake was continued under Greg George (Williams’ and McW’s lap dog) who took over the Development Services Department on an interim basis and then permanently when Don was hired as City Manager. Williams, the Building Official, and the new Director of Development Services knew of this mistake and never took action to make a change. This lower valuation table favored contractors so you can read between the lines as to why the practice was never corrected. The failure to keep an accurate table in place has resulted in a loss of revenue and a big fat mess for everyone. This would be the definition of incompetent and unethical management if ever one existed. In any other City heads would roll over this type of error, but they have not and you have a Councilman on this site covering up and making excuses for what the City has done, again, an amazing set of facts. Even if you argue that Williams was only a Manager at the time a detail that directly affected City revenues would not fall into the category of micro-management. If anyone has any doubts about the facts of this I would urge them to go do the research, this is something that should be reported by the papers if we had a true investigative press. Thanks only to this site and the ability of people like me who know the facts, are we able to see inside this f-ed up City that is run by Don Williams and the developers.
2008-03-08 02:12:46 GMT
Author:Anonymous
P.S. there seems to be a thread in here that the valuation differences and revenue losses that were forgiven as a resulted of the use of the wrong table were relatively small, that might be the spin the City's finance folks are putting on this to cover up the errors, but that is not the case. The table was seriously out of whack with actual costs and that comes directly from the Building Officials mouth. This table was in place during a time when building material costs where increasing rapidly due to global demands created by China and the hot housing market up until 2006. And, they continued using this table up until the early part of last year even during the time the audits were initiated, when the audits came in and this mess hit the fan they finally fixed the table only just before taking the mess public. Also, as proof of Williams' responsibility, the reason staff was not reprimanded or fired is exactly because he knew of use of the outdated table and his culpability, if anyone was fired, he'd have to go too, he knows he was ultimately responsible. A related issue here was the abrupt departure last year of the Assistant City Manager that oversaw the City’s finances. That is another story that needs to be opened up by this site and some investigation as to the reasons he left and details of his "severence" package. Where did that money come from and how could that large of an appropriation have been made without some public disclosure. Appropriations like that would normally need to be made as an ordinace of Council, especially considering where the money came from if I am correct. Please, GUCH, look into that mess too, its much, much bigger and much more interesting, trust me. On that one I don't even know all the details but would love to know how they did it. If that one came out Rousey would have to do some real splainnin. He might actually have to find out the actual facts for a change.
2008-03-08 02:52:10 GMT
Author:Anonymous
Thank you Ouch/Rousey for your detailed response. Yes, of course, a manager doesn't know every detail but I am really referring to the overall process that appears flawed.

Of greater importance is the latter issue. The building permit, city law, a specific form given to the applicant and staff direction always tells the builder to calculate the actual use tax owed as 3% of materials once the project is finished so they can settle on the difference from the original estimate.

At no time, that I am aware, was I ever told nor anyone else that the estimate somehow satisfied my total liability since the city has no way to know my material costs. Just like income tax it is on the honor system and the builder must disclose these facts to the city to properly calculate the taxes.

A perfect analogy is if your employer accidentally under withholds your federal tax deductions and results in you owing more at the end of the year.

You may have moved, given birth or come down with TB but none of these external issues is relevant to the fact you owe the tax.

What I believe some on the Council may misunderstand is the current circumstances of the builder is immaterial as to whether or not they owe use taxes. The builder had to pay for those materials and knew exactly what they cost. Multiplying that number by 3% is the only calculation they needed to do.

The only exception MIGHT be if they detrimentally relied on a city employee who falsely told them the deposit based on an estimate was payment in-full. This isn't what I read here nor did I hear it at the meeting.

Dave Clark told staff builders are having a bad year so consider that in their calculations? Are you kidding? You don't see why this is outrageous to those of us who paid the taxes we owed last year.

Can I now apply to the city for a refund from my real tax i paid to the lower estimate the city gave me when the project began?
--Walter
2008-03-08 05:38:33 GMT
Author:Anonymous
Walter, if you are buying what the Council and administration offer up on this, then you are a fool. If you are offered a table of costs, and told the City will accept that for the purposes of calculating your fees then you are going to use that, just like an income tax table. And, no, if you paid your true amount like some folks did, you are not going to get a refund. That's again a result of the incompetent management of this whole thing, among others. You and the citizens of Loveland need to vote the rest of the old gurad out and clean house at City hall and get this City under professional management. Loveland is a big town now and has too much at stake to leave the City to good old boy management and a Council that has engraciated itself to the community of developers rather than the citizens it is supposed to represent.
2008-03-09 16:07:53 GMT
Author:Anonymous
Walter: Some of the council is in favor of paying the total (and final) use taxes up front....except it creates a problem when a developer or future owner decides to add to the building thereby increasing the total cost of the project and an increase in materials purchased.....not sure what the final outcome will be.

Again, I'm not aware of the city forgiving any use taxes on projects that had a final cost over the estimate use tax which was paid to begin with.

And yes, it is my understanding that if you overpaid, the city will refund you the difference. And no, they would not pay you the difference between the real/final tax paid and the lower estimate that you paid when the project began.

I think we may be in agreement and saying the same thing.

Are you sure Dave Clark said that? I would be supprised if he did or it was said in some other context.

Anonymous: The tax table in 2002 was not incorrect..any table the city adopts and uses is the correct table until it is replaced. It was only incorrect when a new table was adopted in 2004. The city failed to use the new table unitl 2006...this and the failure to tell developers of the new table in a timely manner caused the problems.

Also, Anonymous, as always, the counicl and city manager is in bed with developers and should be voted out and a total 'cleaning house' at city hall is needed.....start your countdown...I have 1 year and 9 months to go...I'm sure we'll all see your name on the ballot as my replacement??
--ouch/rousey
2008-03-09 19:26:57 GMT
Author:Anonymous
Glad to hear you're buying Williams' crap as usual, nothing new there also. I am counting down the days, Rousey. I may be back in a different way when its finally time to clean house and Rousey in Loveland. I suppose you're proud of this mess? Any way you cut it, at a minimum, its symptomatic of incompetence even if you don't buy the argument the table was purposefully kept out of date.
2008-03-10 00:33:06 GMT
Author:Anonymous
Yes, Dave said it at the last Council meeting to Alan when he finished presenting. It was right around the time Rene ran upstairs to get Council direction from 2006 and remind Council what it was - remember that part of the meeting? This is because staff was afraid Council was trying to run from its own direction after the builders spoke.

As a response, Dave Clark noted that construction was better in 2006 and since than the market conditions changed - therefore - he stated the direction might now be different. As a follow-up, he turned to Alan and asked him to please consider this in their calculations of the three alternatives the council was asking for to settle the rest of the cases.

My point is simple - this comment revealed a certain disrespect buy Councilman Clark (or gross misunderstanding) about the law.

Staff should have reminded Council that they determine amount of tax, who will be taxed and when it is collected. If they find the tax too onerous it is Council that needs to make the change not staff.

Councilman Skowron proposed a great idea but was shut down by the anti-democratic Mayor Pielin. Skowron asked whether the builder’s IRS filings (perhaps a schedule C) doesn’t already capture the cost of materials of any non-subcontracted part of the job. He wasn’t allowed to finish speaking before the Mayor said you were only going to discuss the past. A few minutes later, both Heckel and Clark were allowed to talk for nearly 30 minutes about how to handle this in the future.

--Walter
2008-03-10 20:32:29 GMT
Author:Anonymous
If everyone agrees the city failed to collect the taxes as required by law, and the guy who was in charge was Don Williams, and this went on for years, the answer is easy. Recruit a professional city manager who understands city finance.
--Gaye
2008-03-11 20:53:28 GMT
Author:Anonymous
"both Heckel and Clark were allowed to talk for nearly 30 minutes about how to handle this in the future." Heckel is a developer/builder. Clark is a developer/builder. Marostica a developer holds the strings on Don Williams not controlled by McWhinney, does anyone, except Rousey doubt who runs this community?
2008-03-12 04:11:51 GMT
Author:Anonymous
No.
--Jim
2008-03-12 04:40:33 GMT
Author:Anonymous
What about our two new members of the city council and measure 2C? I voted for Kent Solt and signed the reform thing but did it get us anything different? I read in the paper they are with Don Williams on some junket this week.

I feel kinda stupid for expecting them to make a difference and stand-up for the little guy in this town. If I didn't pay my taxes there would be hell to pay. Where is the justice?

Maybe they are just afraid of Mr. Potter now like all the others. Too bad really.
--Carl
2008-03-13 14:31:08 GMT
Author:Anonymous
Carl - who is Mr. Potter?
2008-03-13 14:32:43 GMT
Author:Anonymous
You know, Donald Williams. This is Pottersville and he is Mr. Potter from "It's A Wonderful Life."

Only everyone is still waiting for George Bailey to save the common man and expected this from Kent Solt or Cecil Gutierrez.
--Carl
2008-03-13 14:36:01 GMT
Author:Guch
A comment had to be removed since it violated the policy of this website. Attacks on people for purely personal reasons (like the size of one's belly) are not allowed.

Please try and follow the two simple rules below;

1. Comments must be relevant to the blog topic
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As an example, claiming a public official erred in doing X,Y,Z is allowed while mocking a personal trait of an individual person (like the size of their belly) is not welcome.

Thanks
2008-03-17 15:28:31 GMT
Author:Guch
A comment had to be removed since it violated the policy of this website. Attacks on people for purely personal reasons (like the size of one's belly) are not allowed.

Please try and follow the two simple rules below;

1. Comments must be relevant to the blog topic
2. Every post must be signed (even if only a nickname)so others can identify you when making follow-up comments or when you post again.

We strive to keep this forum as open as possible and never edit the content of any posting. However, if you fail to adhere to these simple rules or try and use this website to make gratuitous or purely personal comments about anyone - your posting will be removed.

As an example, claiming a public official erred in doing X,Y,Z is allowed while mocking a personal trait of an individual person (like the size of their belly) is not welcome.

Thanks
2008-03-17 15:28:31 GMT
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