The Covid-19 pandemic has affected both the residential and business communities worldwide. Unemployment rates are high and overall businesses have been closed and or operating at reduced levels. As a result, residents and businesses alike are having difficulty paying their taxes, rent, and fees for services which typically result in fines and penalties.
City staff has been contacted by its customers requesting payment waivers and/or extensions to the payment deadline to avoid the late fees and/or penalties. Listed below are the various categories of payments and suggested guidelines to address these requests.
TAXES
Transient Occupancy Tax
The stay at home order has affected travel and tourism. Hotel and motels in Brea are operating at reduced capacity or are closed. Upon occupancy, operators collect a 10% Transient Occupancy Tax (TOT) off the gross amount collected for the room charge. This tax is meant to be a pass-through, however, to help manage cash flow, some operators are requesting payment extensions. Depending on the amount of the TOT collected, establishments report and remit the tax collected on a monthly or quarterly basis. Monthly payments are normally due by the end of the following month, and quarterly payments due by the end of the month following the close of each calendar quarter end.
To date, there have been two requests to defer payments and there are payments outstanding from February and March 2020. Staff recommends that payment of TOT collected during the months of February and March 2020, and currently unpaid, may be paid by July 31, 2020 to avoid penalty or interest. Additionally, for establishments required to report and remit monthly, the due date for the payment of TOT collected during the months of April through June 2020, is recommended to be extended to the last day of the third calendar month following the close of each monthly reporting period. For example, TOT collected in April 2020, and paid monthly would be due on July 31, 2020 and so on. For those establishments required to report and remit on a quarterly basis, the payment for the quarter ending June 30, 2020 would be due no later than September 30, 2020. While payment dates are recommended to be extended, all establishments would still be required to file their reports on a timely basis. All payment dates would return to their regular due dates for tax collected beginning July 1, 2020.
Business License Tax
To date, there are approximately 674 in-City delinquent business licenses. This is approximately 13% of the businesses licenses that were identified for the 2020 renewal process and is typical for this time of year. The City did not charge the delinquent fees in February because of the transition to the third party administrator. Delinquent fees were assessed on March 1 for all outstanding business licenses and the City stopped assessing these fees again in April due to the COVID-19 pandemic.
To date, there have been no requests from City businesses to to waive their business license tax or extend the deadline for the renewal and payment of the tax. The City has lost approximate $7,350 from not charging a late fee for delinquent accounts for the months of April and May. Since there have been no requests for payment extension, staff recommends that the City continue working alongside with its third party administrator, HDL, with individual businesses on a case to case basis to get their business licenses renewed and pay their business license tax no later than June 30, 2020 with no late fees or penalties assessed. Additionally, staff recommends the City Council ratify the already waived late fees and authorize the waiver of these late fees to continue through June 30, 2020. For new businesses, the City through its third party administrator, HDL will continue to work with them to obtain and pay for their license in a timely manner.
LEASES AND RENTS
The City has several long-term leases in the Civic & Cultural Center as well as other City-owned facilities and properties. There are currently two tenants requesting extensions for their lease payments. These are considered real property negotiations and will be considered separately by the City Council.
AGREEMENTS
Franchise agreements and maintenance/service agreements include utility franchises and pipeline agreements, bus shelter operator, and maintenance and valet agreements for the Downtown for which the City receives payments. Currently, there is one request for relief from payments from the bus shelter operator. The request is to waive the City's revenue sharing agreement through December 2020; this would be a revenue loss of $15,627. This revenue has a direct impact on the Senior Transportation and Art in Public Places Programs. Staff does not recommend waiving this revenue rather working with the shelter operator to pay within 90 days of the original due date.
FEES FOR SERVICE
This category has been subdivided into two categories: permits and services.
Permits
Permits include: Fats, Oil, and Grease, Engineering, Planning/Building, Parking, Fire Inspections and Alarm Billing. Certain fees are billed when the service is provided (e.g. fire inspections) and are required to be paid within 30 days. If not paid by the due date, a penalty or late fee is assessed on a monthly basis until paid in full. In this category, there have been one request to waive a permit fee, a fire inspection permit. Similar to business tax collections, late fees have no been assessed since April 2020. The City has lost approximately $2,346 in revenue by not charging late fees for April and May 2020. Staff recommends the City Council ratify the already waived late fees and authorize the waiver of late fees to continue through June 30, 2020 and provide a payment plan on a case to case basis not to exceed three (3) months from the date billed.
Utility Billing
Pursuant to the State Order, the City has suspended service disconnections until further notice. Additionally, the City stopped assessing late fees on delinquent water accounts as of March 20, 2020. Late fees are typically assessed on accounts that exceed a $10 balance. Through May 20, 2020, the revenue lost to not collecting late fees is approximately $96,733 to the Water Enterprise Fund. In comparison to the corresponding months last year, delinquent accounts rose by 11% in March, 31% in April and 1% in May. The dollar amount past due increased by $218,355 or 140% in April and $131,338 or 57% in May. The percentage increase in delinquent accounts has been seen most in Multi-Family, Manufacturing, and Commercial Accounts. However, the majority of the past due dollar amount is related to resdiential accounts.
While disconnections and late fees have stopped, there is still a need to work with customers to pay their unpaid balances. It is not recommended that water usage be forgiven as this will place a burden on the other rate payers. Currently, customers are encouraged to pay whatever they can to help address the past due amount. A message to water bill customers was provided on the latest water bill for all customers to contact the City by June 15 to arrange for a payment plan. Under the City's current practices, a payment plan will stop late fees (as it is recommended the City Council resume late fees for Utility Billing in July) from being applied through the term of payment plan.
Staffs' recommendation is to make arrangements with the account holder to pay their July bill (for water usage and other services provided from May 6 to June 4) in full. Any past due amount from March - June would be paid for over the next six (6) months. Additionally, all new bills moving forward would need to be paid on-time. This plan is similar to payment plans that were made prior to the COVID19 pandemic.
Staff conducted a recent survey with local water municipalities. Most cities, like Brea, have not addressed any past due amounts since customers have not been subject to shut-off. There is a concern that if customers can barely pay their current bill, they will have little or no resources to pay any past due amounts. However, the past due amounts need to be addressed at some point because the amounts are simply increasing. Any shutoffs will be screened to ensure they comply with any State or Federal mandates as well as the City's Discontinuation Policy. Again, these dates are subject to change pending on the overall status of this pandemic.
FINES
Thus far, other than parking citations, there have been no requests for waivers or payments for booking fees, traffic and DUI Reimbursements, and Code Enforcement Violations. As mandated by the Assembly Bill 503, parking ticket recipients are allowed to pay for citation fines via an optional payment plan. There are currently 15 active payment plans for parking citations. Staffs' recommendation is, if needed, to work with individual requests in this category on a case to base basis. |