Yachats Finance Committee suggests using $600,000 from urban renewal district to help build new library

 

By GARRET JAROS/YachatsNews

YACHATS – With sharpened pencils and a well-oiled abacus, the Yachats finance committee Tuesday divined a path for the city to better manage tax collection while also opening the municipal wallet to help pay for a new library.

City manager Bobbi Price will take the committee’s recommendations to the city council which will decide whether to allocate $600,000 for the library, adjust how vacation rental home income is reported, and whether unused rental licenses should be revoked.

There was also discussion about dropping the hammer on the only restaurant in town that refuses to pay its food and beverage tax or even acknowledge the city’s efforts to collect what with interest and penalties now amounts to $10,844.

The clock is ticking to start work on the library if it wants to hold onto a $250,000 grant from The Ford Family Foundation that expires if the project does not begin by June. A $20,000 grant from the Roundhouse Foundation specifies work needs to begin by July.

The Yachats Library Commission has been discussing how best to make upgrades to the 50-year-old library for five years. Until last fall, a plan to renovate and expand the building on West Seventh Street to the tune of just over $1 million seemed straightforward enough. Plans were drawn to expand from its current 1,200 square feet to 2,400 square feet and fundraising ramped up.

But that changed in November when soil tests revealed the ground the library sits on is too unstable to support expansion without major and expensive foundation work. The project’s design company determined it would be less expensive to demolish the building and rebuild on the same site at an approximate cost of $1.46 million – about $500,000 more than the city and Friends of Yachats Library have via grants, donations and $265,000 currently set aside in the city budget.

The commission began looking for more grants to cover the increased cost while also consulting with the finance committee.

Finance committee member Tom Lauritzen broke out the city’s spreadsheets and dug into the numbers to see if the city could move funds around to accommodate the shortfall in construction costs.

At Tuesday’s finance committee meeting Lauritzen announced “I think I have a solution” and then proceeded to lay out a plan.

“They have done a phenomenal job of raising money on their own,” he said of the library commission and Friends group. “They’ve raised close to a million dollars.”

They even approached the Oregon Legislature during its special session in February and March to see if the state would provide the funding shortfall, Lauritzen said, but did not make the cut.

“So, I read through the urban renewal plan that is on the city’s website and it allows us to create projects that are … within the urban renewal district,” Lauritzen said. It also allows urban renewal district funds to be used for rejuvenating and repairing public buildings, he added.

Lauritzen explained that by amending the urban renewal plan for fiscal 2024-25, money can be re-directed to free-up $600,000 more for the library.

Dipping into funds designated for “sewer plant, pump stations and other improvements” will make the difference without affecting the long-term revenue over the life of the urban renewal plan that funds those projects. Lauritzen said the finance committee’s long-term revenue forecast to pay for water and wastewater projects will reach $27.8 million by 2042.

“It will have a minimal impact on our 20-year plans, probably not even measurable,” Lauritzen said. “The interest alone might pay for that over a 20-year period.”

The solution means the city and its library commission will not be burdened by further fundraising or risk losing the grants. A much smaller version of the library will move to Room 7 in the Commons during construction.

The finance committee supported Lauritzen’s idea which will now be forwarded to the city council for consideration.

Vacation rental licenses

The committee will also recommend to council to amend the ordinance on how vacation rental earnings and subsequent tax payments are reported. Under the current ordinance third-party companies like Home Away and Expedia are allowed to pay the 9 percent tax on homes they manage in a lump sum without specifying which license holders they are working with.

The finance committee made it clear during its December meeting that giving that latitude to third parties leaves the city in the lurch for determining not only which of the 125 permitted licenses are being used but also whether owners are under-reporting income.

The committee is recommending that each license holder be held responsible for reporting how much money is collected directly by the homeowner, collected by third-party management companies, the rental’s total income and the total tax due.

That will force homeowners to declare, under penalty of perjury, they have no separate income other than that reported by third parties, Lauritzen explained.

The committee will also suggest that the city require that license holders report a steady income and that if no income is reported over four quarters (one year) the license will be revoked. A review of tax payments from active licenses showed average earnings from each contributes $3,000 in tax revenue a year.

Another issue to clear up is whether a license can be passed down through a family trust. The committee believes it should not be and wants to the ordinance to reflect that.

The committee also wants to bring penalties for missed and late payments in line with those for food and beverage taxes. But the current language on how interest is assessed – whether it can be charged only on the principle or on accrued penalties for example – will take further study, it determined.

Food and beverage tax

Much has changed since the finance committee alerted the city manager in December that multiple Yachats restaurants were delinquent in paying the 5 percent tax on prepared foods and beverages they collect from customers and forward to the city to pay for the wastewater treatment plant.

At that time, four restaurants or food carts were missing anywhere from one payment to two years in payments that totaled $45,000 in unpaid taxes and much more in penalties and interest. Under Oregon law, the business names are not public record and committee members do not refer to them by name.

But co-owner of Beach Street Kitchen stepped forward publicly to explain how a change in who managed its books led to an oversight in accounting for two years that resulted in missed tax payments totaling $5,100 – but more than $40,000 when penalties and interest were added. The interest was later waived by the city council.

It was determined that turnover and confusion among city staff and managers the preceding five years contributed to mismanaging the collections.

But the idea of lessening the severity of penalties and interest was dismissed Tuesday by committee members, who said they give collection efforts “teeth” and now with proper management collections should not be a problem.

Currently a $100 penalty is applied for a delinquent quarterly payment plus 10 percent of the tax due. If it goes another 30 days without being paid an additional penalty of $100 as well as another 10 percent against the unpaid tax. That formula continues until the payment is made.

Under the guidance of Price all but one restaurant has now paid what it owes, or in the case of Beach Street – is making its payments based on an agreement with the city. A second to last restaurant to make good in February for a missed quarterly payment of $16,565 from the summer of 2022 that was chalked up to business error, Price said, and they “were very receptive” to making the payment.

The sole restaurant that has not paid and which was described only as the “establishment on the north end of town” owes $10,844, of which only $173 is for taxes. The restaurant last made a payment in August 2021 but continues to operate. The last income it reported to the city was in December 2021.

Price said the owner has not acknowledged what is owed and has ignored repeated attempts – phone calls, two letters (one certified and one unclaimed), an email for both license and food and beverage taxes, and her two personal attempts — to collect the debt.

“Unfortunately, nothing indicates if anyone contacted him between February 2021 and when we started contacting him again in November,” Price later told YachatsNews.

The city has contacted the Oregon Liquor and Cannabis Commission about the restaurant and is moving to schedule a municipal court hearing and possibly shut the business down.

• Garret Jaros is YachatsNews’ full-time reporter and can be reached at GJaros@YachatsNews.com