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September 23, 2009 > City to collect debts

City to collect debts

By Dustin Findley

Milpitas City Council wishes to increase the City's ability, as a creditor, to collect debts and asked City Attorney Mike Ogaz at its September 1, 2009 meeting to consider three questions.

Can the City put a lien on properties to collect debts? These particular debts appear on the write-off list presented on September 1 by the City's Finance Director.

If the City liens properties will those liens also attach to the land?

How can the City collect debts owed by businesses that have left Milpitas or are no longer ongoing concerns?

As noted in Ogaz's memorandum to Council on September 15, 2009, the City can file debts as liens against properties or place them on the tax roll if they relate to Neighborhood Beautification Ordinance (NBO), or rubbish, violations. Other categories do not apply.

The City can add other categories, such as animal-related violations, false alarms, etc., if the definition of public nuisance changes to include them as NBO-violations.

Liens are not collected immediately. They are realized and collected when the property is sold or refinanced. Unpaid debts placed on the tax roll must be paid with the tax assessment.

The City cannot collect the following as a lien or through the tax roll - penalties such as administration citations; non-property-related charges, such as parks and recreation program fees; and vehicle-related charges, such as DUI.

Similarly, the City cannot collect on project accounts unless the property owner(s) signs the development application. Currently, the City does not require owners to do so.

"We just ask the developer to sign the development application and it's his promise to settle the project accounts" said Ogaz.

The City cannot sign off certificates of occupancy if a development has an outstanding private job (PJ) account balance. Council favors property owners' signatures on PJ accounts so liens can be used. The signature block can include a project's property owner.

A lien attaches to the land and may be "inherited" by a new owner who did not incur the debt. Such a situation arises if the lien was recorded before the transfer of title and the sale/purchase transaction does not involve settlement of the lien. The City can collect from current property owners.

If the business is not in town and no longer owns the property, the City can only use traditional debt-collection methods.

If the business is no longer a going concern, the City can try to collect from the property owner, who is also responsible for nuisances on the property, but he is only liable if he held title when the lien was recorded or the lien remained attached to the real estate when he acquired the property.

Ogaz asked Council to consider how debts owed to the City might be collected, viz. through a property lien or tax roll; amending the NBO to expand the definition of "public nuisance" to enable collection of most of the debts that are not penalties on the write-off list; and requiring property owners' signatures on development applications to allow unpaid private job (PJ) account debt to be recorded as liens against the property.

In reply to Vice-Mayor McHugh, Ogaz stated the City could make utility write-offs recoverable. Currently, the remedy is to turn off the service. If the definition of public nuisance is expanded, utility charges could be filed as liens or collected through the tax roll. Moreover, some utility companies inform property owners of their liability for their tenants' unpaid utility charges.

Motions to lien properties and further consider the issue of project accounts passed unanimously.

Councilmember Giordano wishes to better understand the legal ramifications of recording unpaid utility charges as liens. Her motion to use the lien process for NBO violations, excluding utility charges, and bring back the issue did not pass.

McHugh's motion to proceed and modify the ordinances so non-payments could be considered public nuisances and to include all eligible, proposed write-offs, including the utility accounts receivable, passed with three Aye votes.

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