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| Anatomy Of Loveland Use Tax Audits On March 4, 2008 the City Council directed staff to prepare several scenarios of how the remaining cases of unpaid Use Taxes might be settled by the city. 13 builders remain accused of underpaying Use Taxes on 22 or 23 permits (total). Here is a rough summary of the audits today. 4,000 building permits were issued during period audited 750 Indicated problems with Use Tax calculations paid when permit was issued 700 settled mostly in 2007 by staff negotiations many over trivial differences in calculations 22 or 23 remaining unsettled by 13 builders who now appear ready to fight the city Here is an example using the numbers reported from one building permit where the auditor discovered the builder only paid half of the taxes owed. Below are three different cost estimates and an illustration of how these changes determine the final tax owed. In this case, the difference between the city estimate and the builder's original estimate is minimal resulting in a $700 difference. The issue is no longer the slight difference between the city's outdated table estimates of construction costs when the permit is pulled but instead the large difference between that number and the actuals once the job is completed (material is estimated here at 50% but the final audit numbers will be slightly different). 1. The City of Loveland used a dated table that underestimated the job at $235,000 resulting in a Use Tax estimate of.....................$3,525 2. The builder estimated the job would cost $280,000 thus a fair estimate of the Use Tax was........................................................$4,200 3. The actual cost of the project grew to $428,000 thus the adjusted Use Tax owed was really around..........................................$6,420 Each of the above numbers represent the different scenarios the council asked the city manager to present. If the Council determines it is reasonable to waive the difference between the city's estimate and the builder's original estimate, the builder in this case would have to pay only around $700. If, however, the City Council directs staff to waive the TOTAL difference between the estimate provided by the city at the time of issuing a permit and the final number, the builder in the case above would owe approximately $2,220 dollars on this one permit. If the city settles with builders by ignoring the taxes owed by law, it may create a claim against the city from other taxpayers who complied with the law and are seeking equal treatment under the law. Especially if the companies allowed to ignore the law are personal acquaintances or business associates of members of the city council. |
Loveland Use Taxes History and Overview |
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| Councilman David Clark (right) told staff during the March 4, 2008 meeting that they should first consider the current economic downturn in the building industry before calculating what builders owe in unpaid Use Taxes. Clark's overall comments indicated he believes the city is to blame for unpaid Use Taxes |
| OOOPS........... Mayor Gene Pielin blundered by asking staff to state (with builders present at a public meeting) on March 4, 2008 what amount the city would be willing to settle the matter. The Finance Director carefully side-stepped the inappropriate question in an attempt to preserve for the city the ability to negotiate the final settlements or hold out to be paid the actual Use Taxes from the projects as required by law. |