Of the many refrains that have echoed across the city as Los Angeles attempts to close its projected $484 million budget deficit for the 2010-2011 fiscal year, among the loudest is the call to collect the half billion dollars the city is owed by its debtors.
At a January meeting at Hamilton High School to discuss the budget, City Councilmember Paul Koretz, 5th District, was met with cheers and applause from the crowd of 200 people when he touted the practice of publishing the names of the debtors.
However, Jay Handal, chair of the West L.A. Neighborhood Council, asked why the city didn’t simply shut down businesses that failed to pay their taxes.
The Office of Finance has been publishing the list of the city’s top 250 debtors since February of 2009. But the debate continues over the program’s effectiveness at recovering funds, as well as what other measures the city could take.
Jeffery Whitmore, revenue manager for the Office of Finance, said that since the list was first published, the city has recovered $4.18 million from debtors, most of whom previously had not been paying at all.
“Publishing the list, and the subsequent efforts by the city to aggressively pursue large debts, can be credited with bringing some much-needed funds to our city at a time when we’re working desperately to protect and preserve key city programs and services,” Koretz said. “The City Attorney’s Office and other relevant city departments and offices needs to continue to devise and implement the best strategies for collecting from the big debtors who are severely delinquent in paying their debt to the city.”
Whitmore said that in addition to the publication of the list, his office is also referring cases to the city attorney for litigation, making small claims filings, revoking certain permits, and employing collection agencies. In addition, he said the City Attorney’s office is currently working to prepare an ordinance “that would allow the city to expand its use of liens, particularly on unsecured liabilities such as business taxes.”
For the moment, though, the city’s options for trying to collect funds from debtors remain limited. The city’s top debtor, Sohrab Sahab, whose company, Prestige Parking, owes the city an estimated $72 million, has been charged in criminal court. But Sahab has claimed bankruptcy, and the City Attorney has admitted that, whatever the results of the criminal proceedings, the city is unlikely to receive any funds from him anytime soon.
Meanwhile, 17 other parking lot operators and valet companies, including Prestige Parking, still retain their Los Angeles Police Department Commission approved permits, despite owing the city hundreds of thousands, or in some cases millions, of dollars, and the city doesn’t currently have the authority to shut the businesses down.
“I want to see enforcement and I want to see it through process,” Handal said. “I want to see an ordinance change, which would give the Office of Finance the power to suspend or revoke permits for companies with outstanding debts. The council has to take action, the Office of Finance has to take action, and I think everyone on the top 250 list should have their permits suspended immediately.”
Handal also said that in conversations with the City Controller’s Office, he was informed that the cost and manpower involved in building cases against debtors is another reason why many of the businesses have been allowed to continue to operate.
Stuart Waldman, president of the Valley Industry and Commerce Association, has long advocated for a more fundamental change in the way the city collects the money it’s owed.
“Right now, each department collects its own debts,” Waldman said. “Some do a very good job, others don’t. The Fire Department is busy protecting the public, so they don’t necessarily have the manpower or the time to go after people who don’t pay their ambulance fees. We’ve proposed creating a single city agency that all the debt would go through, which would have the power to collect it.”
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