THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Friday, August 26, 1994 TAG: 9408240186
SECTION: PORTSMOUTH CURRENTS PAGE: 10 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY JUDY PARKER, STAFF WRITER
LENGTH: Long : 164 lines
IN CITING WHAT some private citizens consider to be a little known city code, the Commissioner of the Revenue's office is back-billing, for three years, folks who have failed to obtain business licenses for properties they lease as residential rental units.
Some individuals who have received the notices say the requirement to have a business license is news to them.
Janie and William Crutcher have been landlords of a rental house in Hodges Manor for nearly 20 years.
``The first time I heard about this license was a couple weeks ago,'' Janie Crutcher said.
``A friend of mine told me her son had received a notice that he owed the city money on his rental property, and she wanted to know if I'd gotten my notice yet. I told her, `No'. I'd never heard of such a thing.
``Shouldn't the city be required to notify people about licenses before they start sending out bills?
``I don't mind paying what I rightfully owe, but I don't like being jerked around,'' she said.
``And I really don't like being billed for a three-year period,'' Crutcher added. ``That's really unfair.
``This city has just gone to the dogs.''
Since late July, 600 to 700 property owners have received form letters from Commissioner A. James Fillion, notifying them that for each unit of residential rental property they own, they owe the city $12.
The letters read in part, ``Under the license code of the City of Portsmouth, persons in the business of renting residential property in Portsmouth are required to make application for Business License.
``Our records indicate that you have not paid rental tax on property listed in the supplemental list enclosed. The total amount owed is $(blank).''
Fillion's office fills in the blank.
As if the notices aren't big enough surprises, the delinquent and unlicensed are being billed for fiscal years 1991 through 1994.
Fillion defends the surprise delinquent summertime bills. ``We've never had a complete list of all the owners of rental property in the city.
``Names can turn up in several places, like water department turn-ons, assessments and tax rolls. But there's never been any procedure in place to create one master list.
``This time of year, we have a lull in our workload. So my staff has been able to work on putting a list together.''
Just how accurate and complete is the commissioner's current list?
Well, that's something Fillion's not willing to bet City Hall on.
``This office is charged with collecting all the taxes due the city.
``But, frankly, I don't know the total number of people who own residential rental property in Portsmouth.''
If all 600 to 700 property owners who've been billed pay the $12 per unit business license, however, Portsmouth will collect as much as $300,000, Fillion estimates.
While Code 20-79 has been on the books since 1973, other residential rental property owners, such as the Crutchers, say they too, never knew about the business license requirement.
Richard Brooks, who has owned residential rental property in the city since 1984, said he'd never been notified of the business license requirement.
Until he received his notice for a delinquent fee of $528, he'd never been billed for one either.
``I'm a guy who follows the rules, and I'll pay whatever I owe. But how can I be expected to pay a tax I don't know anything about?'' Brooks asked.
``I'd like to know if the city is collecting from churches and government agencies that own rental property. Or is the city just going after the little guys?''
According to Fillion, since the business license requirement was added to the city code in 1973, owners of large numbers of rental properties, such as Fairwood Homes, have consistently paid the applicable license fee.
Some property owners, such as Brooks, while challenging the legality of the license requirement, are more disturbed about the city's attempt, by backdating to 1991, to demand payment for more than just the current fiscal year.
``It's common knowledge that if you own a dog you have to buy a license. But the city spends money every year putting ads in the paper reminding people about that.
``Now, here's a license nobody knows anything about. And when the people in City Hall realize they've messed up, they try and stick it to people like me,'' Brooks said.
Assistant City Attorney Eugene White says his office has received several calls from irate rental property owners concerning the bills issued by Fillion's office.
``I didn't know anything about these bills until we started getting calls,'' White said. ``Even some of my personal friends have complained.
``Unfortunately, I have to tell them that ignorance of the ordinance doesn't let them off the hook,'' White added.
White said the city's authority to backdate might be explained in Section 58.1-3980 of the Virginia State Code.
``Basically, that code allows for anybody who believes they've been unfairly assessed, to go back three years to seek a refund.
``So, I guess, if an individual can get a refund for a period of three previous taxable years,'' White said, ``a city can go back and tax for the same period of time.''
While White's interpretation of the state code seems to dismiss any sort of arbitrariness on Fillion's decision to bill for three years, the commissioner admits, ``We're just trying to collect money owed the city.
``There was no particular reason why we chose to start with 1991.
``I'm just hoping people will comply and pay as promptly as they can,'' he said.
Fillion is quick to point out that the city is not charging any of the delinquent property owners penalty charges or late fees.
``There are some individuals who owe the city several thousands of dollars. This office will work with anyone who makes a good faith effort to pay.''
Of the five South Hampton Roads cities, Portsmouth is the only one which requires a business license for residential rental property owners.
I'm surprised there hasn't been a huge uproar about this,'' said Phil Black, who owns rental property in the Rollingwood neighborhood.
``To my knowledge, I've never received any information about the need for a business license under these circumstances,'' said Black, who also is a continuing education instructor for local real estate brokers.
``Rental laws and operations are things we discuss in class, but this is something I'm not familiar with.''
Real estate appraiser Joseph Carmichael of Portsmouth's Carmichael Associates is one rental property owner, however, who's glad the city is enforcing the business license code.
``I know many people in this city who have never paid a dime,'' Carmichael said. ``Rather than put up with the hassle, I've paid mine consistently through the years.
``For a long time, I've felt that it's been extremely unfair of the city not to pursue everybody. But the city has been very inconsistent.
``Maybe now they've decided to crack down.'' ILLUSTRATION: Staff photos by MARK MITCHELL
Richard Brooks said he'd never been notified of the business license
requirement. That is, until he received his notice for a delinquent
fee of $528.[cover photo]
Since late July, 600 to 700 property owners have received form
letters from the city notifying them that for each unit of
residential rental property they own, they owe $12.
Richard Brooks, who has owned residential rental property in the
city since 1984, said he'd never been notified of the business
license requirement. Then he got a bill for $528.
Graphic
CITY CODE
The Portsmouth City Code, under Section 20-79 - Rental of
Residential Property, reads:
(a) ``Every person engaged in the business of renting residential
property, including houses, apartments and dwelling units, shall pay
an annual license tax of twelve dollars ($12.00) for each such
unit.
``(b) For the purposes of this section, the phrase `engaged in
business' shall mean a course of dealing which requires the time,
attention and labor of the person so engaged for the purpose of
earning a livelihood or profit and implies a continuous and regular
course of dealing, rather than an irregular or isolated transaction.
The business of renting houses, apartments or dwelling units shall
be construed to mean the renting of buildings or portions thereof,
each designed for residential occupancy as a single dwelling unit by
one (1) family, but not hotels, motels, mobile home parks,
lodginghouses or boardinghouses for which a license is otherwise
required by this chapter.
(Code 1973, 20-68)
by CNB