Consideration and Approval of Transaction Privilege (Sales) Tax Account Write-offs: Delinquent and uncollectable accounts for Fiscal Year 2013.

Generally accepted business practices allow for the write-off of uncollectable accounts. City staff has exhausted collection efforts on the eligible accounts and will no longer actively collect on them. The write-offs only relate to the City's accounting records.  The City does not release recorded tax liens nor does it clear outstanding debts from credit reporting agency records.  As a result, debt that has been previously written-off is occasionally paid  some time later in order to clear a tax lien that has attached to real property, or to clear up a taxpayer's personal credit.  Pursuant to state law, taxpayer information is confidential.

Subsidiary Decisions Points: No subsidiary decision points.

None. Each year, the City anticipates that there will be uncollectable transaction privilege (sales) tax accounts and reserves an amount at year end for these accounts.

Effective governance.

No.

• Authorize the write-off of uncollectable transaction privilege (sales) tax accounts.
• Do not authorize the write-off of uncollectable transaction privilege (sales) tax accounts and continue collection efforts.

Before any account is eligible for write-off, staff must initiate collection efforts on each account after it becomes delinquent. When collection efforts are exhausted, the account is eligible for write-off. If possible, any amounts due are applied to the customer's credit. If placed on the customer’s credit, the amount owed remains active for 7 years after the delinquency date. Application against the credit of the debtor may lead to the recovery of some of the delinquent amounts in the future. This often occurs when customers apply for credit via other avenues (mortgages, car loans, apartment rentals, etc.).

In FY13, the City received approximately $34.4 million in transaction privilege (sales) taxes, transportation taxes, BBB taxes, and franchise fees. The write-offs are 0.29% of the total amount. Each of the write-off accounts no longer operates in Flagstaff.

Pursuant to federal consumer debt collection law, delinquent account information is not subject to public release. Pursuant to state law, taxpayer information is confidential.

Transaction Privilege (Sales) Tax Account Write-Offs (5 Year History)

Write-Off Year	Amt of Write-Off	Annual Amt Billed	% of Amt Billed
FY13	$100,866.05	$34.4 million	0.293%
FY12	$113,481.22	$33.0 million	0.344%
FY11	$109,121.32	$31.1 million	0.350%
FY10	$4,866.76	$26.8 million	0.018%
FY09	$10,345.93	$29.3 million	0.035%

Staff, using billing statements, letters, and telephone calls, has worked the write-off accounts. When customers fail to make payments, they are denied access to future City services and, when possible, the amount owed is applied to their credit.

It is sound financial management practice to reduce assets to reflect their true valuation. Failure to write-off accounts deemed uncollectable overstates the asset value of the City.

Inform.  Yearly write-offs ensure that the City is following generally accepted business practices.

None.