Back taxes still owed
The tax man is still knocking on the front door of City Hall – and the raps are getting louder.
According to the El Dorado County Assessor’s Office, four years of back taxes are owed on the building at 1900 Lake Tahoe Blvd., which the city has leased from a private owner for the past 15 years.
Dennis Crabb, city attorney, protested the original $18,374 tax bill earlier this year, saying the public agency is exempt from paying property taxes even though it does not own the building.
But his request for the county to waive the tax bill and cease future taxing of the property was recently denied by the county counsel’s office.
“With taxes, there are procedures that need to be followed, and they are no different if you are a city or an individual,” said Edward Knapp, chief assistant to county counsel. “You don’t just say ‘I don’t think I should be paying those taxes’ – that’s not the right procedure. I know the city has been complaining, but I am not aware that they have undertaken the formal steps necessary to challenge the taxes.”
That process includes first paying the outstanding tax bill, Knapp said. Until taxes are paid, he said the county would proceed with the normal collection process, which includes levying fines and eventually repossessing the property.
Despite Crabb’s claim, Knapp said he was not able to find any law exempting a public agency from taxes on a building it rents from a private owner. In fact, in at least four cases he found, the private property owner was fully assessable, regardless of the usage of the building.
“We are always happy to consider facts and circumstances that might alter our opinion, but based on what we know now, I am not aware of any such authority,” Knapp said.
Crabb’s argument is based on a liberal interpretation of the state taxation code, which says no property taxes are due on a building “belonging to” a public agency.
Because the city has occupied the building housing City Council Chambers and staff offices since 1982, Crabb said the building essentially “belongs” to the city.
That’s true, said Knapp, and the county is not disputing that claim.
“We are not attempting to tax the city’s interest on the building – it is exempt because it is a public agency,” he said. “But that does not exempt the property owner from paying taxes. Any side agreement he may have with the city is none of our business.”
Under the city’s “triple-net” lease agreement with property owner William Floyd, any taxes on the building are the city’s responsibility.
If the county’s position stands, the city would pay about $4,500 per year in taxes on the building.
Meanwhile, the municipality is in the midst of a $1.4 million budget crisis, the plan for which includes the elimination of about 15 employee positions and downsizing several departments.
“There has been no property tax assessed by El Dorado County on that building since it has been there,” said Kerry Miller, city manager. “Since that was an error on the county’s part, how can they possibly come to the city in times of downsizing and say now you owe us this money?”
Knapp said the county’s position is that taxes should have been paid to the county for the past 15 years, so the four-year bill – the legal limit for back taxes – was properly assessed.
“As far as what can be done to solve the city’s budget problem, the person to call is John Upton – that’s a policy decision,” he said.
Knapp did suggest the possibility of the city asking the county for money to supplement the cost of the taxes.
“The Board of Supervisors can spend tax money they get any time they want, but they can’t decide who pays taxes and who doesn’t,” Knapp said. “If the board decides to give money to the city of South Lake Tahoe they could do that – as long as there’s a public purpose.”
The city’s options in dealing with the situation will be discussed in closed session Tuesday morning, Crabb said. Any action or direction the council takes will be made public following the closed meeting.
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