Business Taxes Recommended for Write-off.doc - City of Edmonton

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					                                                                 Agenda Item No.:__E.1.k.________

Business Taxes Recommended for Write-Off

                                                          outstanding accounts in the years 1995
                                                          to 1997 and the write-offs decreased to
Recommendation:                                           2.15% of the levy. For the period July 1,
That Council approve the write-off of                     1997 to December 31, 1999, the
$295,336.10 in uncollectible business taxes               write-offs were further reduced to 0.49%
and penalties covering the period January 1,              of the levy. In the year 2000, the
2001 to December 31, 2001.                                write-offs have been reduced to 0.37%
                                                          of the levy. In the year 2001, the write-
Report Summary                                            offs were 0.41% of the levy and, through
This report recommends the write-off of                   our efforts, we have been able to collect
uncollectible business taxes and penalties                $8,946 that was previously written off.
covering the period January 1, 2001 to                   A Request for Proposal was sent to the
December 31, 2001.                                        public to determine if there was any
                                                          interest from collection agencies in
Previous Council Action                                   pursuing some of the outstanding
At the May 21, 1996 Council meeting, the                  inactive accounts classified as “not cost
following motion was passed:                              effective to collect” in the 1997 and
    That the General Manager of Finance                   1998 Write-Off Reports. Results of this
    annually recommend to City Council the                proposal indicated that a maximum
    Write-Off of all uncollectible business               recovery of 12% less 50% commission
    taxes in accordance with generally                    would be $25,560 and it was determined
    accepted accounting principles.                       the City would not proceed with
                                                          collection agencies.
   In 1987, the Finance Department                   Budget / Financial Implications
    assumed responsibility for Distress               Outstanding business taxes have been
    Warrants and Notices of Seizure related           evaluated and an accounting allowance for
    to business tax. There was a large                bad debts has been established. The balance
    backlog of files requiring collection             of this allowance as at December 31, 2001
    attention.                                        was $506,433. After allowing for a
   On July 18, 1989, Council approved a              write-off of $295,336, an allowance of
    budget adjustment for the Finance                 $211,097 remains.
    Department which included adding
                                                      Justification of Recommendation
    resources to address the long outstanding
    business tax accounts.                            Administration has reviewed all inactive
                                                      outstanding accounts on the City’s tax roll
   With establishment of the Business Tax
                                                      and all methods of collection have been
    Collection office in 1991, a substantial
                                                      exhausted. The recommended write-off will
    improvement in collection of taxes has
                                                      close all uncollectible business tax accounts
    occurred. For the years 1988 to 1994,
                                                      to December 31, 2001.
    write-offs were 7.40% of the levy. The
    City commenced actively pursuing

Routing:              Executive Committee, City Council
Delegation:           Larry Benowski, Paul Boutin, Dick McLean
Written By:           Dick McLean
March 27, 2002        Planning and Development Department
File: 2002PDA010      (Page 1 of 2)
Business Taxes Recommended for Write-Off

Background Information Attached
1. Write-Off Criteria
2. 2001 Business Tax Write-Off Report

Background Information Available on
1. A listing of Business Taxes
   Recommended for Write-Off will be
   available for viewing in the Councillors’
   Library and the Office of the City Clerk.

                                          (Page 2 of 2)
                                                                                     Attachment 1

Write-Off Criteria

1. “Bankruptcy” – the taxed party has formally declared Bankruptcy through the courts. A
   Trustee was appointed and a Proof of Claim has been submitted by the City. No further
   monies are expected.

2. “Legal Opinions and Settlements” – the balance of the taxes are considered uncollectible in
   the opinion of the Law Branch. Settlements have been made with taxpayers after taking into
   account assets owned and financial stability of debtor.

3. “Limited Company Out of Business” – the taxed party was an incorporated entity which
   ceased operation. There were no assets located to which the claim could be attached.

4. “Not Cost Effective to Collect” – the costs of further collection efforts would likely fail to
   recover expenses.

5. “Proprietorship Out of Business” – the taxed party was a non-limited entity, and the
   person(s) responsible for payment cannot be located.

6. “Receiverships” – the taxed party has been placed into Receivership (voluntarily or by a
   creditor). A claim has been filed by the City with the Receiver Manager and no further
   monies are expected.

                                      Attachment 1 - Page 1 of 1
                                                                                 Attachment 2

2001 Business Tax Write-Off Report

A recap of the 2001 Business Tax Write-Off Report defining the categories is as follows:

 Class                   Category                      Number of    Amount of        Average
                                                       Accounts     Write-Off

   1       Bankruptcy                                       24     $ 34,616.60      $1,442.00
   2       Legal Opinion and Settlements                     5       20,101.66       4,020.00
   3       Limited Company Out of Business                 207      180,340.12         871.00
   4       Not Cost Effective to Collect                   402       11,969.61          30.00
   5       Proprietorship Out of Business                  126       47,297.12         375.00
   6       Receivership                                      4        1,010.99         252.00
                                                           768     $295,336.10      $ 385.00

                                     Attachment 2 - Page 1 of 1

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