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Archive for May, 2009|Monthly archive page


Justices Send Occupational Tax Stay Back to Judge Rains

In Legal News on May 27, 2009 at 1:45 pm

On Tuesday, the Alabama Supreme Court denied Jefferson County’s request for an additional stay of an Order requiring the County Commission to escrow funds collected from the occupational tax.  The County Commission had been allowed to temporarily spend money collected under the tax, which was declared illegal in January, while the Alabama Legislature was in session.  That Order expired with the close of the legislative session when no new occupational tax was approved for Jefferson County.  Three justices who pay the occupational tax recused themselves from hearing the matter.  The remaining justices voted 4 to 2 to require Jefferson County to go back before the trial court before seeking a stay in the Alabama Supreme Court. 

Sam Hill and Jim McFerrin, the lawyers who represent the taxpayers in this case, have filed a motion to hold the Jefferson County Commission in contempt of court for failing to escrow funds which have been and are being collected from this illegal tax. Commission president, Bettye Fine Collins, has stated in memorandum to County employees and in the press that the Commission does not intend to escrow the funds.  In January, when Judge Rains declared the tax to be illegal, the County Commission began escrowing its collections immediately, and continued to do so until Judge Rains allowed them access to the funds pending action by the Alabama Legislature.  The County now takes the position that though the Order allowing them to spend these collections clearly expired at midnight on May 18, 2009, they do not have to start escrowing the funds until sometime later in the summer.  

In a separate filing before the Alabama Supreme Court, counsel for the Jefferson County Commission sought and received a 37 day extension for filing their initial appeal brief.  The County’s brief is not due to be filed now until June 29, 2009 – 28 days after the Jefferson County Commission has said that drastic measures will have to be taken because the tax has been declared illegal.  Taken in context with the findings by Gregory T. Reagan, CPA, regarding the fiscal picture facing the County, it begs the question of how necessary these drastic cuts really are.


Is the Sky Really Falling?

In Uncategorized on May 19, 2009 at 5:51 pm

As the Jefferson County Commission publicly decries the failure of the Alabama Legislature to pass a new occupational tax and suggests that chaos will unfurl in light of the occupational tax revenues being escrowed during the appeal of the case which held the tax to be invalid, a review of the public financial records compiled annually by the County suggests things may not be as bad as the County Commission would have us believe.

Gregory T. Reagan – a certified public accountant, certified fraud examiner, certified business valuation analyst and forensic accountant – has reviewed audited financial records kept by the Jefferson County Commission as required by State law for the fiscal years of 2000 through 2007, along with the operating budgets for fiscal years 2008 – 2009.  The review demonstrates several interesting points, as summarized by Mr. Reagan in an affidavit filed in the occupational tax lawsuit (emphasis added by this author)

The financial statements of the Jefferson County Commission for the year ended September 30, 2007 were audited by an independent certified public accounting firm under auditing standards generally accepted in the United States of America and whose report was dated January 12, 2009, meaning that the disclosures within the audit report convey relevant information about events existing at September 30, 2008 and subsequently through January 12, 2009.  As a result, this is presently the most current and reliable information about the Jefferson County Commission’s financial status.  I have, therefore, relied heavily on that information in formulating my opinions expressed in this affidavit. These audited financial statements disclose that:

    a. all of Jefferson County’s debt obligations, other than the Series 2001-B bonds, are non-recourse as to the General Fund.
    b. Jefferson County will have reduced expenditures of $10 million annually starting in 2009 to fund General Fund needs because its final payment from the General Fund to the Birmingham-Jefferson Civic Center Authority was made in December 2008.

    c. Jefferson County’s General Fund for the fiscal year October 1, 2006 to September 30, 2007 reported total audited revenues of $263,190,000 and total audited expenditures of $277,818,000 and, therefore, spending exceeded revenues by $14,628,000. The 2007 fiscal year operating results are aberrant to previous years.

The audits performed by the Alabama Department of Examiners of Public Accounts for the period covering the fiscal year ending September 30, 2000 through the fiscal year ending September 30, 2006 (seven years) determined that the Jefferson County Commission’s General Fund produced excess revenues over expenses before other financing uses and sources, which were primarily comprised of inter-fund transfers, in an aggregate surplus of $180,854,000, or an average annual surplus of $25,836,286.

The document entitled Financial Statements All Counties (For the 2007-2008 Fiscal Year), as published by the Alabama Department of Examiners Public Accounts, reported that Jefferson County’s 2007-2008 Fiscal Year General Fund had total revenues of $269,391,000 and had total expenditures of $274,402,000 (including capital outlays that vary annually), and, therefore, expenditures exceeded revenues by $5,011,000.

The Jefferson County Commission’s adopted budget for Fiscal Year 2008-2009, estimates that the General Fund will have total revenue of $289,252,998. The Commission estimates it will spend $303,674,498 for actual services resulting in a deficiency of $14,421,500, which will be fully funded by net transfers from other governmental funds of $14,421,500 resulting in break-even operations for fiscal 2009. 

***

From fiscal year 1999–2000 to fiscal year 2005–2006, the Jefferson County Commission operated the County, and provided for County governmental services while producing a General Fund aggregate excess of $180,854,000.  General Fund expenditures averaged $163,611,000 for the fiscal years 2000 through 2006.  These increased to $277,818,000 in fiscal year 2007, with general government expenditures alone increasing to $152,777,000 from $85,949,000. Further, capital outlays increased exponentially from average expenditures of $2,211,000 during the seven years of 2000 – 2006 to a total of $10,083,000 in 2007.  This increase alone represents more than 10% of annual occupational taxes.  The budget for fiscal year 2008 (the only information available for the 2008 fiscal year) reflected plans to spend $297,220,201 and the budget for fiscal year 2009 reflects plans to spend $303,674,498.  Since the County’s current primary financial problems are related to debt obligations that are non-recourse to the General Fund, it is unclear why General Fund expenditures have escalated so significantly in recent years.  It seems to me that more stringent spending controls are in order and such should have the capacity to return the Commission to profitable operations without the need for the escrowed occupational and business license taxes and fees.  Based on the information provided me to review, it is my opinion that the current Jefferson County Commission should be able to largely replicate the budgetary constraints utilized by the previous Commissions to allow the General Fund to return to a reasonable degree of fiscal discipline necessary to provide basic governmental services without the receipt of the escrowed occupational and business license taxes and fees. Jefferson County’s General Fund has a fund balance of over $40,000,000 at September 30, 2007.

The review by Mr. Reagan begs the question, “What happened in 2007 and thereafter that has lead to expenditures exceeding revenues?” This is the question the County Commission must be held to answer if Jefferson County is to return to fiscally sound operation. If the sky is falling, it is because the Jefferson County Commission has been knocking the foundation out from below with excessive spending. The County Commission clearly should be able to operate the County without the illegal occupational tax. It is time the Commission exercised some restraint and acknowledge the true problem is with its spending – not the revocation of an illegal tax.


Jefferson County Occupational Tax Bill Fails to Pass Legislature

In Legal News on May 15, 2009 at 8:53 pm

The law firms of Hill|Turner LLC and the McFerrin Law Firm announce that the Alabama Legislature today failed to pass House Bill 811 – the Jefferson County occupational tax bill.  The original occupational tax was ruled invalid by Judge David Rains on January 12, 2009.  Judge Rains’ Order requires the Jefferson County Commission to deposit any money collected under the old occupational tax into an escrow account while the case is being appealed.  Judge Rains had stayed operation of his Order to give the Alabama Legislature the opportunity to pass a new occupational tax bill.  With no action taken today by the Legislature, the fate of the occupational tax returns to the Courts. 

“The Legislature returned to the debate that lead to the original repeal – who should pay this tax?” stated Sam Hill, counsel for the class of tax payers in the case before Judge Rains.  “When all is said and done, there has been no progress on this issue since 1999,” said Hill.

Jim McFerrin, who also represents the class of tax payers, adds, “So many versions of this bill were bandied about both houses of the Legislature this session that it was dizzying.  There were earmarks added and removed, language about professionals, attempts to kill our lawsuit – it was a different bill every time you looked at it.  In the end, the Legislature reached an impasse that could not be broached.”

“Judge Rains made clear that his Order staying the escrow ends with the legislative session.  If the County wants to have access to any collected funds during the rest of this appeal process, they need to come to the table in good faith and we’ll see if there is a compromise that protects our class members that we can agree to,” added Hill.

The case is on appeal to the Alabama Supreme Court.


Representative Canfield Weighs In on the Occupational Tax

In Uncategorized on May 15, 2009 at 8:19 pm

The Problem With the Occupation Tax

Posted by Rep.Greg Canfield on 15-May-2009

To best understand how Jefferson County got to this place with the occupation tax requires a quick review of the history of this tax. First, it’s important to know that under the Alabama Constitution of 1901 counties do not have authority to levy taxes unless authorized by the Legislature. Consequently, the Legislature enacted Act 1967-406 to authorize counties with a population above 500,000 (this specifically applied only to Jefferson County)to levy a license or privilege tax upon any person engaged in business as long as that person was not already paying a license tax to the State of Alabama. Subsequently, Jefferson County passed Ordinance 1120 to impose an occupation tax only to those persons not required to purchase a license from the state. Historically, four different legislative acts have been enacted on this issue and a total of six lawsuits adjudicated since 1987 on this tax.

The problem today stems from the passage of a 1999 legislative act passed to repeal the original Act 1967-406. The repealing Act 1999-669 was litigated and has ultimately been upheld as law in the recent order of January 12, 2009 by Circuit Judge David A. Rains. The bottom line on the Jefferson County Occupation Tax is that it no longer is a legally valid tax and the approximate $75 million per year collected from this tax is to be lost without action by the Legislature to pass a new occupation tax.

The controversy in the Legislature today relates to the fact that of the several bills introduced this session, only HB 811, sponsored by Rep. John Rogers, is in position for passage prior to the end of this Regular Session. Originally, HB 811 passed the House with numerous earmarks and removed the exemptions in the original Act 1967-406. When HB 811 was referred to the Senate the bill was amended by stripping out all previous earmarks and restoring the exemptions of the original Act 1967-406. As sponsor of HB 811, Rep. Rogers controls his bill and its movement to the floor of the House to concur or non-concur with the amended Senate version of his bill. In numerous discussions with Rep. Rogers he notes reservations about the amended version from the Senate and has remained steadfast in his decision to withhold HB 811 from action. This version remains controversial to some and is considered to have possible constitutional problems.

I have personal reservations about the constitutionality of any occupation tax. The Alabama Constitution generally limits authority to county governing bodies to those expressly granted by the Legislature (the wisdom of this Constitutional limitation can be debated in another forum). The 25th Amendment to the Alabama Constitution provides for a State income tax, but does not expressly grant such authority to a county. In my opinion, Act 1967-406 and all legislation following it, only provides for the county to levy a business license tax or privilege tax and since not expressly granted by the Constitution, any tax on gross receipts is an income tax and therefore may be unconstitutional. With a history of six lawsuits following the occupation tax, it is apparent that this tax has always been on shaky legal ground.

Even with the above being stated, it is a fact that Jefferson County has operated in a manner that built a dependency on the revenue generated by the occupation tax. It is now a matter of public policy that should qualify for legislative deliberation, debate and action. Even though I have personal reservations regarding the constitutionality of this tax I welcome movement of HB 811 for consideration and an up or down vote in the Alabama House of Representatives. Absent any action on HB 811, the only remaining action to be taken will reside with the current appeal by Jefferson County to the Alabama Supreme Court.


Consumer Update May 14, 2009

In Legal News on May 14, 2009 at 3:26 pm

Two important recalls were announced by the U.S. Consumer Protection Safety Commission yesterday:

First, the CPSC in conjunction with Louisiana-Pacifica Corp., announced the immediate recall of 48 million linear feet of composite deck material used in building residential decks.  The material can prematurely deteriorate and break.  There have been 37 reports of this deck material breaking, and there have been several fall related injuries as a result.  The deck material was sold through Home Depot under the Veranda brand and other building products dealers under the brand names LP WeatherBest and ABTCo. Between January 2005 and August 2008.  Consumers should contact Louisiana-Pacific for a free inspection.  Their toll free number is (888) 325-1184.  More information is available at www.deckingnotice.com

The second recall involves Eddie Bauer Soothe & Sway Play Yards.  Over 71,000 of these play yards were sold in the U.S.  The bassinet portion of the play yard can tilt when in the non-rocking mode, and the tilted sleeping surface can lead to an infant rolling to the side or corner of the bassinet, risking suffocation.  A mobile with three teddy bears was also sold with the play yard. Models included in the recall are 05046 (all units) and 05044 units manufactured before December 1, 2008. Model numbers and manufacture dates are printed on a sticker on one of the support legs underneath the play yard. These play yards were sold at Target, Sears, and Burlington Coat Factory stores nationwide, as well as through various internet retailers from January 2008 through May 2009 for about $150.  Consumers should immediately stop using the bassinet attachment of the play yard and contact Dorel Juvenile Group for a $40 voucher toward the purchase of a new Dorel product. Consumers can continue using the play yard.  Their toll-free number is  (888) 233-4903. 

If you, a family member or friend have been injured by a defective product, please visit our About Us page and contact HILL | TURNER LLC with any questions you may have about protecting your rights as a consumer.


Senate Action on the Jeff Co Occupational Tax

In Legal News on May 6, 2009 at 8:27 pm

Today the Alabama Senate passed the version of HB811 as amended by Senator Coleman and the members of Local Legislative Committee #2, with one amendment.  That amendment caps the rate at which the County Commission may levy the tax at 0.45%.  This is a 10% reduction from the 0.50% at which the invalid tax was being collected.  The amendment was offered by Senator Steve French.  The bill still carries the modified legislative history that attempts to reaffirm the old tax as if the repeal and subsequent lawsuit never happened. 

The bill will now go back to the Alabama House of Representatives, with the likely outcome being a conference committee between the houses to attempt to reach a compromise between the pending bills.  With three legislative days left, there is pressure on both houses to make something happen.


Under Armour Cup Recall

In Legal News on May 1, 2009 at 7:56 pm

The Consumer Product Safety Commission issued the following recall notice today.  This recall affects all age males who use athletic cups:

FOR IMMEDIATE RELEASE

April 29, 2009

Release #09-202

Firm’s Recall Hotline: (888) 823-0343

CPSC Recall Hotline: (800) 638-2772

CPSC Media Contact: (301) 504-7908

Firm’s Media Contact: Diane Pelkey, (410) 246-5927

 

Under Armour Recalls Athletic Cups Due To Injury Hazard

WASHINGTON, D.C. – The U.S. Consumer Product Safety Commission, in cooperation with the firm named below, today announced a voluntary recall of the following consumer product. Consumers should stop using recalled products immediately unless otherwise instructed.

Name of Product: Under Armour Athletic Cups

Units: About 211,000

Importer: Under Armour Inc, of Baltimore, Maryland

Hazard: The cups can break if hit, posing a risk of serious injury hazard to athletes.

Incidents/Injuries: Under Armour has received five reports of cups breaking, including an injury involving cuts and bruising.

Description: This recall involves all athletic cups that have the Under Armour logo, including adult, teen, and youth sizes. The cups were sold individually and as part of a set with compression, slider, or jock shorts.

Sold at: Sporting good stores and Under Armour outlets nationwide and at www.underarmour.com from January 2006 through March 2009 for about $15.

Manufactured in: China

Remedy: Consumers should immediately stop using the athletic cup and contact Under Armour for a $20 voucher for use online or at any Under Armour specialty or outlet store.

Consumer Contact: For additional information, contact Under Armour toll-free at (888) 823-0343 between 9 a.m. and 5 p.m. ET Monday through Friday, or visit the firm’s Web site at www.underarmour.com/productsafety

To see this recall on CPSC’s web site, including a picture of the recalled product, please go to:

http://www.cpsc.gov/cpscpub/prerel/prhtml09/09202.html


Consumer Update May 1, 2009

In Legal News on May 1, 2009 at 6:55 pm

Several important recalls and announcement effecting consumers have happened this week. 

The FDA announced today that Hydroxycut dietary supplements have been linked to serious injuries including liver failure, rhabdomyolysis, seizures and cardiovascular disorders.  These products have been marketed for weight loss, energy enhancement, low carb diet aids and water loss.  The products are manufactured by Iovate Health Services, Inc., under the Iovate and MuscleTech brands.  FDA warns consumers to immediately stop using these products.  More information is available at http://www.fda.gov/medwatch/safety/2009/safety09.htm#Hydroxycut

 On April 29, FDA announced the nationwide recall of Personal Care Non-Acetone Nail Polish Remover.  This product was marketed as a nail polish remover and conditioner enriched with gelatin.  The nail polish remover, UPC 4815592076, has the potential to cause chemical burns to the fingers of users.  More information can be found at http://www.fda.gov/medwatch/safety/2009/safety09.htm#Nail

The Wall Street Journal (Dooren, B14) reported on April 29, 2009, that stronger labeling for over-the-counter pain killers such as Tylenol (acetaminophen), and NSAID pain relievers such as aspirin, ibuprofen, naproxen and ketoprofen, is now being required by the FDA.  The new labeling warns consumers of risks for stomach bleeding and liver injury.  The risks for stomach bleeding increase in persons who also use blood thinning medications or who take multiple NSAID pain relievers or individual NSAIDs for long periods of time.  The liver risk for acetaminophen increases with long term use or the use of multiple products containing acetaminophen.

Positive news for consumers – the U.S. Senate passed an anti-predatory lending bill this week targeting mortgage fraud.  The bill allows the Justice Department to hire more prosecutors and civil enforcement attorneys to go after lenders who engage in mortgage fraud.  The bill also boosts the Securities and Exchange Commission’s enforcement capabilities.  The bill passed with significant bi-partisan support (92-4). 

If you, a family member or friend have been injured by a defective product or a victim of consumer fraud, please visit our About Us page and contact HILL | TURNER LLC with any questions you may have about protecting your rights as a consumer.


The Occupational Tax Debate Continues

In Legal News on May 1, 2009 at 3:06 pm

David White’s report in the Friday Birmingham News sets out part of the debate that continues to rage on about which version of the occupational tax bill will be passed.  His article focuses on the distinction between the House and Senate bills regarding whether or not professionals should pay the tax. One other very important distinction was left out – each bill treats the taxpayer refunds ordered by Judge David Rains very differently.

The House bill (HB811), as approved by the House of Representatives, provides protection for the refunds ordered by the Court.  The Senate bill (SB488), which has now been substituted for the HB811 in the version that will go before the full Senate, tries to re-write the history of the occupational tax to take away the finding by the Court that the occupational tax was validly repealed in 1999.  By doing so, the Senate bill tries to take the taxpayers’ refunds away.

Senator Steve French is on point when he says, as quoted by Mr. White in his article, “I don’t think, given the track record, that anybody really wants to give more money to the County Commission and that anybody is going to stand for an additional tax.”  The Senate bill gives the County Commission the windfall Senator French warns about.  Under the old tax, $10,000,000.00 per year was pledged to the BJCC.  That obligation has ended.  Taking away the refunds ordered by Judge Rains, in conjunction with the extra money from the BJCC contract that came out of the old tax, puts more tax money in the hands of the Commission.  We need to commend Senator French for standing up for the taxpayers and hold the rest of the Jefferson County delegation to his standard.  We need to keep the County Commission’s feet to the fire.  The taxpayers are due their refunds from the old illegal tax.  Let’s hope our legislators remember the taxpayers when it comes time to vote.

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