Thursday, April 20, 2000

L.A. business tax snafu

By Alexa Haussler, Staff Writer

In its second major snafu in a year, the Los Angeles City Clerk's Office lost track of millions of dollars in checks and threatened to revoke the licenses of 11,000 business owners for failing to pay their taxes.

The blunder, which officials chalked up to an inexperienced supervisor, cost taxpayers at least $13,700 in direct costs, and fueled sentiments that the city is anti-business.

"There were a group of payments that had been received by our office that we were not aware of," said Sylvia Nesbit, manager of the tax and permit division of the City Clerk's Office.

Nesbit and other officials declined to offer many details of how they could have failed to credit the business owners with paying their taxes.

It was not clear whether the checks were misplaced for a while and were finally cashed too late -- with the threatening letters already having been sent out and angry business owners calling to complain.

Last year, City Clerk Michael Carey's office blamed human errors for omitting proposed police and fire projects from pamphlets sent to 1.3 million voters before city elections.

In this case, the problem occurred when the office sent delinquent notices after the Feb. 29 deadline for paying business taxes, the source of more than $300 million in revenue for the city.

On April 12, the city sent delinquent notices to 98,000 of the 230,000 businesses that pay the tax -- which varies from $75 to millions, depending on the size of the business.

The letters strongly admonished business owners that operating without paying business taxes is a misdemeanor crime.

"You are hereby notified to appear for (a) hearing . . . to show cause why your certificate should not be suspended or revoked," the notice states.

Rod Flory of Santa Clarita and his wife, Kay, got the delinquency notice last week, more than six weeks after he mailed a $160 check to the city for Kay's hairdressing business in Granada Hills.

"I was going, 'OK, what are they sending us now? We already paid them,' " he said.

Flory said he was disturbed by the "threatening nature" of the letter because he sent the payment Feb. 18.

"First thing I did was call the bank to see if the check cleared, and it didn't clear until April 4," he said. "I guess they were admiring my check, I don't know."

Nesbit declined Wednesday to say specifically who caused the error.

"We have identified the problem and we are taking corrective action," she said.

But an e-mail sent by Nesbit to Flory in response to his complaint attributed the problem to a "newly assigned supervisor."

According to the e-mail, which Flory provided to the Daily News, Nesbit stated that her office had to bring in additional staffers to field calls after the erroneous notices were sent.

"We did get a number of calls, in which we explained the situation," Nesbit said.

She said the city will not send out correction letters because the notice included a line in the fifth paragraph informing the taxpayers to disregard it if the payment had been sent.

"This was something that was corrected as quickly as we possibly could," she said.

There was no comment Wednesday from Mayor Richard Riordan, who was elected on a platform that called for making Los Angeles more business-friendly.

The tax snafu occurred as the city is attempting to simplify its maze of business tax codes.

Councilwoman Laura Chick has called for the city to upgrade an outdated tax computer system and improve city services to new businesses.

Ross Hopkins, immediate past chairman of the United Chambers of Commerce of the San Fernando Valley, laughed when a reporter told him of the blunder.

"I'm not surprised," he said.

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-- Ray Strackbein (Ray@Strackbein.com), April 20, 2000