Norfolk officials spar over business tax payments

NORFOLK

Commissioner of Revenue Sharon McDonald has allowed about 20 businesses to pay their business license taxes in installments that for some stretch out over a year.

Treasurer Thomas W. Moss Jr. calls the practice illegal and might ask the courts to intervene.

The payment plans have allowed the businesses, some of which have contributed to McDonald's political action committee, to save money by paying interest but not penalties.

Norfolk businesses are supposed to pay their license tax in full by March 1. According to Moss, it's the city treasurer - not commissioner of revenue - who has the authority to offer late payment plans.

Chesapeake Commissioner of Revenue Ray Conner is the only other commissioner in South Hampton Roads who negotiates payment plans, a duty he said is spelled out in the Chesapeake city code. Others said they do so largely only when taxes are appealed.

McDonald said Moss and his staff have been aware of the payment plans for years.

Moss denied that, saying he learned McDonald was approving installments only this summer when he heard of a car dealer being granted a payment plan.

McDonald defends the practice, saying it helps struggling Norfolk businesses to stay afloat. She said the practice dates to the late Sam Barfield, who retired as commissioner of revenue 12 years ago.

"I'm a firm believer that the easier you make it for people to pay their taxes, the better off we're going to be as a city," she said. "I'd love to be able to see everyone have the option of having a payment plan.

"That's obviously not my decision. That's the treasurer's decision."

Gary Owens, a license inspector in the commissioner's office, said he oversaw payment plans under Barfield. "They were doing payment plans when I came here 23 years ago," Owens said.

Replied Moss: "What difference does it make how long it's been going on? That doesn't make it right."

Moss said he's been trying to meet with McDonald since August. McDonald canceled a Sept. 10 meeting to discuss the issue. She said she did so because a key employee who works on the payment plans is out on an extended sick leave.

Unless she reschedules soon, Moss said he will ask a Circuit Court judge to restrain McDonald from offering payment plans.

The dispute marks a very public break between two powerful politicians who had been close allies. Moss, former speaker of the House of Delegates, and McDonald, in her third term, are running for re-election on Tuesday as Democrats and have endorsed each other.

Moss is running unopposed. McDonald is being challenged by independent Doug Knack. McDonald went against her party in 2005 and endorsed Moss when he ran for treasurer as an independent.

Moss released information on the dispute in response to a Freedom of Information Act request from The Virginian-Pilot.

Treasurers and commissioners of revenue have similar jobs, but for the most part, commissioners assess taxes and treasurers collect them. Business license taxes are assessed on gross receipts of all Norfolk businesses and produce about $27 million in revenue per year.

City Attorney Bernard A. Pishko, whom Moss requested to mediate the issue, said neither the treasurer nor commissioner have stated powers to implement payment plans. He said they both have implied powers.

McDonald said the payment plans were made a part of a $1 million billing system instituted recently by both offices. McDonald provided a document from the new system she said proves that to be true.

However, Assistant Treasurer Amy Ortega said the document refers to payment plans on surety bonds and not ordinary businesses. McDonald disagreed.

Moss said he became aware that McDonald was granting payment plans in July when his office contacted Bay Chevrolet owner Walter Wilkins. When Wilkins was told he was behind on his business license taxes, he responded that McDonald had put him on a payment plan.

Wilkins has been allowed to pay those taxes over 12 months. He pays 6 percent interest on the balance. He is allowed to avoid the penalty, which is 10 percent of the taxes due. McDonald said she charges a penalty only if a business misses the March deadline for filing taxes.

Wilkins said that after meeting with Moss, he was granted the same payment plan that McDonald had granted him.

The Virginian-Pilot requested names of the businesses on payment plans under the Freedom of Information Act. McDonald had not responded as of Friday afternoon, saying she's not sure whether state code forbids her from doing so.

In response to an identical request, Assistant Treasurer Cathi Mullins said Harbor Group International, Nancy Chandler Associates and J.W. Thomas Co. are on payment plans. She said McDonald's office has refused the share the names of the other businesses.

Bay Chevrolet has contributed $750 to a PAC run by McDonald and Councilwoman Daun S. Hester. Harbor Group contributed $200 to the PAC in 2004. Nancy Chandler has contributed $1,000 in the past six years.

McDonald said the fact that three of four businesses known to be on payment plans that have contributed to her PAC doesn't indicate favoritism. "I don't operate like that," she said.

Wilkins said the payment plan helped his businesses survive the recession.

"My family has been in the automobile business in Norfolk since 1938," he said. "We've paid a lot of taxes to the city. The end result of this payment plan has been helping a business that's been around for a long time."

Pilot writers Mike Saewitz and Dave Forster contributed to this story.

Harry Minium, (757) 446-2371, harry.minium@pilotonline.com