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Home My WebLink About2004 01 12 Informational 303COMMISSION AGENDA ITEM 303 January 12, 2004 Meeting REQUEST: CONSENT INFORMATIONAL X PUBLIC HEARING REGULAR MGRDEPT Authorization The Finance Department providing the City Commission with an Update on the Status of MBIA MuniServices Company (MMC) Revenue Enhancement Services Pertaining to the City's Property Tax Revenue Audit. PURPOSE: To inform the City Commission of the status of the Property Tax Revenue Audit. CONSIDERATIONS: • The City contracted with MBIA to perform a Property Tax Revenue Audit on a contingent fee basis in June of 2002. Agenda attached. • MBIA found a few errors amounting to approximately $3,800 in unrealized past tax revenue documented in their Property Tax Revenue Audit report dated June 29, 2003. Report attached. • The City forwarded the information to the Property Appraiser requesting correction of the errors in a letter dated August 15, 2003. Letter attached. • The Property Appraiser replied in a letter dated October 29, 2003 and basically stated that they did not agree with all of the errors noted and the corresponding dollar amount which they determined to be $2,136.70. The Appraiser obtained an opinion from the Department of Revenue that said the Appraiser did not need to repay "immaterial' errors from the past. The Property Appraiser will correct the items on a go forward basis. MBIA was contacted and agrees with the Property Appraisers position and will work with them to determine which items they differed on. FUNDING: Contract was on a contingent fee basis — no monies currently due MBIA. RECOMMENDATION: None — informational only. ATTACHMENTS: ■ July 22, 2002 Agenda Item ■ June 29, 2003 MBIA Property Tax Audit Report ■ August 15, 2003 City Letter to Property Appraiser Requesting Corrections ■ October 29, 2003 Property Appraiser Letter to City (including Dept of Rev opinion) COMMISSION ACTION: COMMISSION AGENDA ITEM I July 22, 2002 Meeting REQUEST: CONSENT INFORMATIONAL PUBLIC HEARING REGULAR X MGR /DEPT Authorization The Finance Department is requesting the City Commission grant the City Manager approval to enter into an agreement with MBIA MuniServices Company (MMC) for Revenue Enhancement Services Pertaining to the City's Property Tax Revenue. PURPOSE: To gain Commission approval to contract with MBIA MuniServices Company (MMC) to perform a property tax review. CONSIDERATIONS: ➢ Objective — To realize all of the tax revenue to which the City is entitled to from the taxable valuations within its jurisdiction. ➢ Scope of Service -: ■ Establish an inventory of every parcel located within the City boundaries. ■ Comparative analysis of the database with the County's database ■ Examine records pertaining to locational coding of properties to ensure that locations are not miscoded to another jurisdiction ■ Examine records pertaining to homestead exemptions to identify any improperly claimed ■ Examine records pertaining to taxable valuations to identify and confirm any errors/omissions ■ For each error/omission/miscoding identified and confirmed, prepare documentation to substantiate and facilitate recovery due from prior periods and prevent recurring deficiencies in current and future years ■ Prepare and forward to the County Property Appraiser and County Tax Collector requests for corrective action of the errors ■ Meet with staff to review and discuss findings and recommendations ➢ Compensation — MMC will receive 35% of the additional tax revenue realized by the City as a result of MMC detecting and documenting the error(s)/omission(s) causing the property tax deficiencies. The 35% will apply to the additional revenue realized by the City during the first 3 years following the correction. MMC will also pursue recovery of revenue for eligible prior periods, if any. For retroactive adjustments MMC's 35% shall apply to the amount of the adjustment. ➢ Term — The initial term of this agreement shall be for 3 years from the date of execution. ➢ Timing and Reporting — MMC is prepared to commence the property tax service within 10 working days following authorization. Annually, MMC. will provide to the City a report summarizing discovery service progress to date. MMC will provide the initial set of property tax discovery service reports within 90 to 180 working days following authorization. FUNDING: No up -front funding necessary. The property tax recovery program is contingent fee based. MMC will receive 35% of the additional tax revenue realized by the City as a result of MMC detecting and documenting the error(s)/omission(s) causing the property tax deficiencies. The 35% will apply to the additional revenue realized by the City during the first 3 years following the correction. MMC will also pursue recovery of revenue for eligible prior periods, if any. For retroactive adjustments MMC's 35% shall apply to the amount of the adjustment. IMPLEMENTATION: MMC is prepared to commence the property tax service within 10 working days following authorization. Annually, MMC will provide to the City a report summarizing discovery service progress to date. MMC will provide the initial set of property tax discovery service reports within 90 to 180 working days following authorization. RECOMMENDATION: The Finance Department recommends that the City Commission grant approval to the City Manager to execute the agreement for property tax revenue enhancement services with MMC. ATTACHMENTS: ■ Draft agreement to provide Revenue Enhancement Services • Company/Service Information COMMISSION ACTION: MBIA MuniServices Company July 29, 2003 Ms. Louise Frangoul Finance Director City of Winter Springs 1126 East State Road 434 Winter Springs, FL 32708 3433 West Shaw Avenue Fresno, CA 93711 559 271 6800 (p) 559 275 0171 (f) Re: 2002-03 Property Tax Audit Report, City of Winter Springs Dear Ms. Frangoul: MBIA MuniServices Company (MMC) has completed its property tax audit for the City of Winter Springs for the 2002-03 tax year. The audit involved a check of all 2002-03 Tangible Personal Property (TPP) assessments located within the boundaries of the City. The review of TPP taxable valuations for the audited period was conducted on a parcel -by - parcel basis. The examination involved additional comparisons of MMC's integrated electronic databases to County assessment data. General Findings The audit found a number of TPP assessments located within the City'that appe %dis have been misassigned to an incorrect Millage Code. Details of the findings are ussed Tangible Personal Property Audit - Specific Findings The assessments shown..on Table 1 represent TPP assessments that appear to have been miscoded by the County to incorrect mill codes in the year audited (2002=03). The review disclosed seventeen (17) TPP' assessments located within the City that appears to be miscoded to an incorrect mill code. The taxable valuation of the 17 miscoded TPP assessments is approximately $219,000. Table 2 shows the assessments that were miscoded to incorrect mill code in the prior year 2001-02. The taxable valuation of the miscoded assessments for the prior year shown is approximately $702,000, for a total value for the 2 years of approximately $921,000. The statute of limitations for corrections related to misallocations'is for the current and three prior years therefore the city should also be eligible for corrections for 2000-01 and 1999-00. 'However, the data was unavailable for these years. Therefore, we will ask that the Property Appraiser review these assessments and make necessary corrections and provide us with the tax information for these years. Ms. Louise Frangoul July 29, 2003 ►, City Tax Revenue Adjustments Page 2 Based on the City's Millage e, total tax revenues resulting from corrections shown on Table 1 would be approxi ately $900. Increased tax revenues resulting from the prior year (2001-02) wo e proximately an additional $2,900, for a total correction amount of approximately 3 800. ax amounts due for 2000-01 and 1999-00 are unknown at this time, but should as well. MMC is prepared to assist you and your staff and with filing of the audit findings with Seminole County. Please contact our office if you require additional information or have further questions. Sincerely, y Stephanie Ontiveros Enclosures �9 ( q� WSrptOldoc CITY OF WINTER SPRINGS, FLORIDA 1126 EAST STATE ROAD 434 WINTER SPRINGS, FLORIDA 32708-2799 Telephone (407) 327-1800 August 15, 2003 H. W. Suber Seminole County Property Appraiser Seminole County Services Building 1101 East First Street Sanford, Fl 32771 Re: 2002-03 Property Tax Audit Report, City of Winter Springs Dear Mr. Suber: The City of Winter Springs has retained MBIA MuniServices (MMC), a firm specializing in the audit of ad valorem property taxes, to review property tax assessment and allocation procedures by the County within the City. MMC has recently completed its .property tax audit of the City taxable valuations and tax revenues for 2002-03. The audit involved a check of all 2002-03 tangible personal property assessments located within the boundaries of the City. General Findings The audit found a number of TPP assessments located within the City that appear to have been misassigned to an incorrect Millage Code. Details of the findings are discussed. below. Tangible Personal Property Audit - Specific Findings The assessments shown on Table 1 represent TPP assessments that appear to have been miscoded by the County to incorrect mill codes in the year audited (2002-03). The review disclosed seventeen (17) TPP assessments located within the City that appears to be miscoded to an incorrect mill code. The taxable valuation of the 17 miscoded TPP assessments is approximately $219,000. Table 2 shows the assessments that were miscoded to incorrect mill code in the prior year 2001-02. The taxable valuation of the miscoded assessments for the prior year shown is approximately $702,000 for a total value for the 2 years of approximately $921,000. The statute of limitations for corrections related to misallocations is for the current and three prior years therefore the city should also be eligible for corrections for 2000-01 and 1999-00. However, the data was unavailable for these years. Therefore, we are requesting that your office review these years and provide assessed value and tax information as well. H. W. Suber Date City Tax Revenue Adjustments Page 2 Based on the City's Millage rate, total tax revenues resulting from corrections shown on Table 1 would be approximately $900. Increased tax revenues resulting from the prior year (2001-02) would be approximately an additional $2,900 for a total correction amount of approximately $3,800. Tax amounts due for 2000-01 and 1999-00 are unknown at this time, but are being requested as well. The City and MMC are prepared to provide your office with any assistance or additional information necessary to expedite the completion of these corrections. If you have any questions please contact Stephanie Ontiveros of MBIA Muniservices at (559) 271-6827. Sincerely, Louise C. Frangoul, CPA Director of Finance City of Winter Springs Enclosures Cc: Jeff Overbay, Tangible Personal Property Manager Stephanie Ontiveros, MBIA Muniservices City of Winter Springs Audit of Tangible Personal Property List of Misallocated TPP Assessments Fiscal Year 2002-03 Table 1 Suggested Allocated Suggested APN APN Account No. Name Situs Address TRA TRA Other TotalValue Exempt Net Value 1 0 26 20 30 5AR 0200 0010 23663 WINCEY CHARLES W 1020 SR 434 E 1000G1 0070WI 1,383 1,383 0 1,383 2 0 34 20 30 505 2700 0030 139964 WINTER SPRINGS DENTAL LAB INC 620 SR 434 W 5 0050V 1 0070" 8,818 8,818 0 8,818 3 0 26 20 30 5AR 01300 0360 239145 JAMES NOREEN 1086 CHEYENNE TRAIL D12 100001 0070WI 2,005 2,005 0 2,005 4 0 34 20 30 5AW 0000 0120 280396 MONTROSE INTL CAR & TRUCK INC 450 GINGER LN 100001 0070WI 21,868 21,868 0 21,868 5 0 26 20 30 SAR 01300 012H 298265 CENTRAL FLORIDA BLOOD BANK 268 E STATE ROAD 434 004OL1 0070WI 24,730 24,730 24,730 0 6 0 34 20 30 5AW 0000 048E 301283 PAPA TONY RESTAURANT INC 541E STATE ROAD 434 004OL1 0070WI 16,985 16,985 0 16,985 7 0 20 30 26 5AR 01300 017K 353813 MAXCAR SERVICE 1313 W STATE ROAD 434 100001 0070W4 9,077 9,077 0 9,077 8 0 34 20 30 523 00000 0100 354399 NATIONAL HOME CARE SERVICES IN 110 SR 419 104 100001 0070WI 107,126 107,126 0 107,126 9 0 07 2131 5JV OP00 0040 373753. MAID TO CLEAN INC 1510 ASPENWOOD ST 0020C1 0070WI 1,210 1,210 0 1,210 10 0 08 2131 5GT 0000 05590 396291 MITZO ENGINEERING INC 1611 WOOD DUCK DR 0050VI 0070WI 1,868 1,868 0 1,868 11 0 34 20 30 530 0000 0030 409110 JET SETTERS HAIR STUDIO INC 175 SR 434 W 0040L1 0070WI 9,888 9,888 0 9,888 12 0 34 20 30 5AW 0000 001B 409458 J C ENTERPRISES INC 280 OLD SANFORD OVIEDO RD 100001 0070WI 140 140 0 140 13 0 33 20 30 515 OG02 0000 440891 GLOBAL REACH INC 300 SHEOAH BLVD 916 100001 0070WI 100 100 0 100 14 0 04 2130 511 OA00 0070 460667 QUALITY CARE PLUMBING INC 1200 BELLE AVE 0060S1 0070WI 569 569 0 569 15 0 26 20 30 5AR OD00 0360 481051 REID DONALD & ANITA 342 MOHAWK TRAIL 100001 0070WI 4,490 4,490 0 4,490 16 10 20 30 506 0000 0270 35 20 30 502 0000 0240 483560 SOLUTIONDEVELOPERSCOM 205 SPRINGVIEW CT 0060S1 0070WI 1,461 1,461 0 1,461 17 0 34 20 30 523 00000 0100 500934 TOTAL CONTROL SERVICES LLC 110 STATE ROAD 419 100001 0070WI 31,989 31,989 0 31,989 243,707 243,707 24,730 218,977 MBIA MuniServices Co WScu02.XLS Page 1 Suggested APN APN Account No. City of Winter Springs Audit of Tangible Personal Property List of Misallocated TPP Assessments Fiscal Year 2001-02 Name Situs Address 1 0 34 20 30 SAW 0000 0100 22400 PREMIX MARBLETITE MFG CO 520 WADE ST 2 0 26 20 30 5AR 0200 0010 23663 WINCEY CHARLES W 1020 E STATE ROAD 434 3 0 34 20 30 509 0200 0200 174474 LAKE MARY CHIROPRACTIC CLINIC 501 W STATE ROAD 434 4 0 34 20 30 SAW 0000 0100 227538 ACROCRETE INC 520 WADE ST 5 0 34 20 30 523 0000 0070 259135 LANCER SALES USA INC 140 STATE ROAD 419 J 6 0 34 20 30 523 00000 0100 354399 NATIONAL HOME CARE SERVICES IN 110 STATE ROAD 419 104 7 0 07 2131 5JV OPOO 0040 373753 MAID TO CLEAN INC IS 10 ASPENWOOD ST 8 0 08 2131 5GT 0000 05590 396291 MITZO ENGINEERING INC 1611 WOOD DUCK DR 9 0 34 20 30 530 0000 0030 409110 JET SETTERS HAIR STUDIO INC 175 W STATE ROAD 434 10 0 34 20 30 SAW 0000 001B 409458 J C ENTERPRISES INC 280 OLD SANFORD OVIEDO RD 11 0 04 2130 511 OA00 0070 460667 QUALITY CARE PLUMBING INC 1200 BELLE AVE MBIA MuniServices Co WScu01.XLS Page 1 Table 2 Allocated Suggested TRA TRA Other TotalValue 100001 0070W1 201,582 201,582 1 OOOG I 0070WI 1,504 1,504 0040L 1 0070WI 13,621 13,621 100001 0070W] 11,514 11,514 100001 0070WI 143,007 143,007 100001 0070WI 316,027 316,027 0020C 1 0070 WI 1,614 1,614 005OV1 0070WI 2,916 2,916 0040L1 0070WI 9,787 9,787 100001 0070WI 160 160 0060S1 0070WI 569 569 702,301 702,301 H. W. "BILL" SUBER, CFA, ASA SEMINOLE COUNTY PROPERTY APPRAIsm October 29, 2003 Louise C. Frangoul, CPA Director of Finance City of Winter Springs 1126 East State Road 434 Winter Springs, FL 32708-2799 Dear Ms. Frangoul: Please reference your letter dated August 15, 2003 regarding the 2002-2003 Property Tag Audit Report performed by MBIA MuniServices. Following receipt of your letter this office undertook what turned out to be an exhaustive study to determine. whether there was any validity. to -the allegations -raise& in the MBIA.Muniservices:report. Our review required several weeks partly because the report that you forwardedr to us had: incorrect real estate parcel numbers and/or tangible personal property accounts associated with the .owners. or business. Once we were able to proceed beyond this .initial problem we found. that .of the. 25 accounts alleged to be in error. only 12 were in fact in error, however, not for the years in question. Upon completion of our review we determined that for all the years 2000 through 2003 the total amount of tax in question is a mere $2,136.70. Our rust action after determining that :there were some errors was to set about -trying to determine if, in fact, something could be,done beyond correcting the tax district codes for the 2003 tax roll. Following a discussion with the tax collector's office we could not find a provision for making corrections prior to the 2003 tax roll. With this in mind I wrote to the Department of Revenue and asked for their assistance in this matter. I gave them as much detail as possible about what we: had found and they. responded in the form of a legal opinion giving us direction.. I have, enclosed a. copy of their opinionfor -your convenience and.I believe -the opinion speaks very clearly as to. our obligation: In making our determination regarding the proper taxing district in which a property or properties should be: placed, we rely on a number of criteria. Among these are annexation ordinances, -occupational license information, information supplied by the property owner/s and other information that PROPERTY APPRAISER SERVICES Your Source for Property Information... Quick, Convenient, Accurate 2 becomes available to us from time to time. Given the amount referenced above which is the tax in error for the total of the three years which is .015 percent of the total amount levied of $13,516,702.00 would seem commendable. There is a much greater loss in property tag collections due to the 4 percent discount granted by law to taxpayers who choose to pay their property tag bill early than this very small amount. We will of course strive to perform even more conscientiously in the future and we always welcome any constructive course to improve our process. I trust this will resolve this issue. to your satisfaction. Uwe can be of any assistance to the City of Winter Springs in the future please do not hesitate to call on us and we will be happy to work with you. Sincerely, W. `Bill' Suber, CFA, ASA Seminole County Property Appraiser General Tax Administration Child Support Enforcement Property Tax Administration DEPARTMENT Administrative Services OF REVENUE Information Services Jim Zingale Please respond to: Executive Director Office of General Counsel Post Office Box 6668 Tallahassee, Florida 32314-6668 Telephone (850) 488-0712 October 16, 2003 H.W. "Bill" Suber, CIA, ASA .Seminole County Property Appraiser Seminole County Services Building 1101 East First Street Sanford, Florida 32771 Re: Corrections of Immaterial Tax Roll Amounts Dear Mr. Suber: -:Thank you for your recent email dated October 1., 2003, in which you inquired about .corrections of substantial numbers of immaterial tax roll amounts under section 197.122, Fla. Stat. Specifically, your question was substantially as follows. The City of Winter Springs retained a company known as MBIA MuniServices (MMC) who supposedly specialize in the audit of ad valorem property, taxes. The City maintains that a check of all 2002-03 tangible personal property assessments located within the boundaries of the City were performed. The City Finance. Director sent us a letter along with a listing of the properties where MBIA indicated we were in error. Of the approximately 25 accounts alleged to be in error we found only 12 and even these accounts were -not in error for the years in question. They asked us to review our records back to the 2000 tax roll which we did. After several weeks of work (mainly because the auditor's had the wrong account and/or the wrong real estate parcel assigned) we developed the values associated with the properties in question that we found to be within the City of Winter Springs. The result of . that research found that there was a total tax amount associated with those properties for the years 2000-2003 to be $2,136.70. Since Winter Springs levied a total of $1.3,516,702.00 for the 2000, 2001 and 2002 tax rolls, this amount of tax represents .015 percent ($2,136.70/$13,516702.00) of the total taxes levied for those years. This calculation now makes the amount even less significant as far as trying to do anything with it. Tallahassee, Florida 32399-0100 Mr. Suber Page Two-. After discussion with the Tax Collector about this issue we were not exactly sure what to do about this if anything. We believe that to expend any more time or taxpayer money on the issue will create an injustice to the taxpayers of Seminole County. We also believe there is no mechanism available to us to even cure this very small problem: Will you please advise us as to what course of action we should take. at this juncture. As relevant to your query, I am advised by the Department's accounting experts that the definition of "materiality" is given for accounting purposes_ An item is material if its inclusion or omission would influence or change the judgment of a reasonable person. It is immaterial and, therefore, irrelevant if its inclusion or omission would have no impact on a decision -maker. In short, it must make a difference or it need not be disclosed. The point here is one of relative size and importance. Source: Intermediate Accounting, 4th Edition; Kieso, PhD, CPA and Weygandt, PhD, CPA (Copyright circa 1983 by John Wiley & Sons, Inc.) and Current Edition. The law in chapter 197, Fla. Stat. would not appear to require that the accounting rules of materiality be disregarded in considering for correction small changes in allocation of value between .a municipality and a fire district. In other words if, in the estimation of your office, the costs associated with such small corrections or reallocations is great in comparison to the dollar amount of the reallocations, these corrections would not be material under generally accepted accounting principles and would not be legally necessary. Thus, it is abundantly clear from this . that if you find that the .015 percent amount and $2,136.70 is not material within generally accepted accounting definitions then you are under no duty to achieve perfection under accounting principles. These percentages and amounts are far below and thus consistent with those the Department has for many years used to determine substantial compliance and de minimis non compliance in the TRIM area which are one tenth of one percent (.10 percent) and $10,000.00. These principles would indicate you should correct the situation for the future; however, past adjustments can be considered in a cost benefit basis and need not be made if costs are great in comparison to benefits as indicated above. w Mr. Suber Page Three I hope this addresses the points you raise. If I may be of any further assistance, please.do not hesitate to contact me. Sincerely, t hen J.. KPer Chief Assistant General Counsel Property Tax Administration /1001-56960