Chelan County PUD to compensate city $30,000 for tax collection mistakes

Utility tax collection errors are compelling the Chelan County PUD to compensate the city of Leavenworth $30,768. Leavenworth is not the only city in Chelan County affected. Also affected was Wenatchee, Cashmere, Chelan and Entiat.

The problem stems from the boundary lines of the all the cities, in terms of which homes fall in the city and which homes do not. It makes a difference in terms how the utility tax implemented. The cities charges a 6 percent utility tax, while the county does not.

A recent audit found some homes in the city were not being charged the tax while some homes outside the city were being charged the tax.

PUD Customer Accounting Manager Kerri Wendell said they initially discovered the problem while reviewing the water tax in Wenatchee.

"That prompted us to look at the city utility tax in the city of Wenatchee," Wendell said. "It prompted us to look at some addresses to see if we did have some problems. We did find some areas that were being taxed and shouldn't be taxed and some areas that were not being taxed but should have been.

"As we went through the process, that prompted us to go forward and take care of every city and make sure everything in our system was correct."

This closer look at homes what something neither the PUD nor the cities had been doing, she said. Nobody had looked at this for a very long time.

At the end of every month, the PUD remits those taxes to each city. So this process has been going on for a long time. However, further review revealed some areas the PUD needed to be look at.

"The process we've been doing for a long time, and we weren't going to the assessor's site and doing that," she said. "We were looking at an address, and if the neighbor was being taxed, then they should be taxed. That was incorrect, and we ran into some issues there."

The problem had been going on for an indeterminate length of time, so the PUD capped it at three years, because that is the Statute of Limitations, she said.

To eliminate this problem moving forward, Wendell said they are reviewing every address they put into the billing system.

"We review that with the county assessor site, verifying if it is within the city limits or not. If there is a discrepancy, we have representatives from each city that we are working closely with to make sure whether a home should be taxed or not," she said. "We have a better relationship now with each of the cities. We are working now to make sure everything is correct."

Any customers that were not being taxed, but should have been, were sent a letter in September they would receive correct bills on Oct. 1. For those that should not have been paying the tax but were paying, they will receive a credit to their account.

Approximately 200 customers fit into this category. In Leavenworth, there were 200 customers who were not billed the tax, but should have been. There were 20 customers outside the city that were paying the tax that should have been.

"We stopped taxing them in October. I don't think people really realized. It's something on their bill they've been paying," she said. "We reviewed every address in the county and worked with each of the cities. We're happy with where we are now, moving forward on a good basis."

Leavenworth city officials have decided to apply the money to the general fund, but it will be accounted for as a reserve.

"We are actually going to apply this to the reserve increase," said Leavenworth Mayor Cheri Kelley Farivar at the Jan. 14 study session. "Our number goal is to build our fund balance and increase our reserves."

This whole process has been an eye opener for the PUD, Wendell said.

"We have some that are really close. You basically just have to go out there and find out if it is taxed or not," Wendell said. "We have to go out and work with each of the cities to verify. It's a lot better because now we have the assessor's site to review that. Before, we never had that. That's why the process was old. We can't assume an old process is the best moving forward."

Ian Dunn can be reached at 548-5286 or editor@leavenworthecho.com.