Council Communication

TAX OBLIGATION SETTLEMENT AGREEMENT - GEPPETTOS
Meeting Date:	September 7, 2004		Primary Staff Contact:	Mike Franell, 488-5350 franellm@ashland.or.us
Department:	Administration		Secondary Staff Contact:
Contributing Departments:	Legal, Finance
Approval:	Gino Grimaldi

Statement: Ron Roth and Kathleen MacMichael own Geppetto's Restaurant. They also co-own, together with Mark Rosenkranz, the Plaza Café. In March 2001, Kathleen suffered a knee injury that resulted in their financial hardship, which in turn lead to delinquencies in the food and beverage tax payments from the two restaurants. With taxes, penalties and interest they owe over $53,382. Ron and Kathleen are requesting the City grant a hardship case relief from the penalties incurred and enter into a payment plan for judgments and outstanding tax and interest amounts.
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Background: Prior to January 2004, the City food and beverage tax ordinance provided that any payments received would be applied first to penalties and interest, then to the oldest outstanding tax obligations, then to current taxes. This resulted in a situation where once a taxpayer got behind, unless they paid their entire obligation of taxes, penalties and interest, even if they paid each future quarter in full and on time, they would still be receiving substantial penalties. Since March of 2001, when Kathleen had her accident, Geppetto's and Plaza have paid or been assessed penalties totaling over $17,500 on delinquent payments. Many of these penalties came even though the current period's taxes were paid in full and on time, because of the allocation formula in the ordinance. At Ron's request, the Council amended the ordinance in January 2004 to allow for period specific application of tax payments. Ron and Kathleen have requested relief from the penalties assessed. They are also requesting to enter into a payment agreement, secured by a mortgage on a rental property that they own for the remaining outstanding taxes and interest.
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Council Options: • The Council can accept the proposed settlement agreement. • The Council could propose amendments to a settlement agreement. • The Council could reject any settlement offer and direct staff to pursue collection efforts. • The Council could reject any settlement offer and direct the entire debt be turned over to a collections agency.
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Staff Recommendation: Because of the accident suffered by Kathleen, and because the proposed settlement agreement secures the outstanding obligation with a mortgage on property that has plenty of value to protect our interests, staff proposes the Council authorize the Mayor to execute the attached proposed settlement agreement.
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Potential Motions: I move the Council authorize the Mayor to execute the attached proposed Tax Obligation Settlement Agreement.
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Attachments: Please click on the link below to view the following attachments:      • Tax Obligation Settlement Agreement

Tax-Settlement-Attachments.pdf (258.7KB)

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