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Miami must repay Globe in tax kerfuffle

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Tough times in the Town of Miami look to get tougher for the foreseeable future, as the town has to pay the City of Globe a tax debt of nearly one quarter of a million dollars.

Miami Town Manager Joe Heatherly recently discovered Miami received tax revenues for the past four years that should have gone to the City of Globe and must now pay the funds back, to the tune of $230,000-$260,000.

Not only does the town have to repay its larger neighbor to the east, but also faces the prospect of the loss of about $6,000 a month in revenues from businesses that will be added to Globe’s tax rolls.

“Two steps forward and three steps back it seems,” Councilmember Rosemary Castaneda responded upon hearing the news at the March 12 Town Council meeting.

The situation first came to Heatherly’s attention in September 2017 when he received a report from the Arizona Department of Revenue as he looked into another matter, attempting to find businesses in arrears of payment.

What he found was that a handful of businesses with Globe addresses were paying taxes to the Town of Miami.

“This has been going on for awhile,” Heatherly reported to Miami council. “If you look at it, it’s nothing that jumps out at you.”

Since November, Heatherly has been in almost constant contact with the Arizona Department of Revenue, which offered the town “alternatives that weren’t too good.”

What the state offered was to abruptly end payments to Miami for as long as it took in order to immediately retire the debt.

“I told them that would impossible,” Heatherly said. “They gave me two weeks to get it straightened out.”

He then reached out to Globe city manager Paul Jepson to see if they could work out a more equitable solution. Both managers decided it would be better to work together to settle the issue than to create friction between two tightly knit communities.

What they came up with was what Jepson calls “basically, a short-term loan,” with the Town of Miami paying $2,000 per month for five months beginning in April, with the payment ballooning to $10,000 per month for about two years until it is paid in full, according to a draft agreement presented at the Globe city council meeting on March 13.

In addition to the funds in question, Globe will receive 4 percent interest on the amount, a rate Jepson calls “fiscally responsible.”

“Repaying it will be a hardship on Miami,” Jepson explained to Globe council on March 13. “And we don’t need it at this time.”

Both councils have agreed in principal on the reimbursement and placed it on the agenda for a joint council meeting on Monday, March 19 (after press time). Barring any unforeseen problems, the agreement should be finalized at the Globe city council meeting on March 27.

According to Heatherly, the same circumstance took place about nine years ago.

“I asked around and found out it happened before in 2009, where money paid to Miami should have gone to Globe,” he reported to Globe’s council. “It was difficult to pinpoint, because merchants pay on different schedules and there wasn’t anything big enough to stick out.”

Part of the problem is that some of the businesses have addresses in Globe, but use a Miami P.O. box and others have corporate offices located out of state that are not familiar with the geography of the area.

“Someone in the corporate offices in Iowa will look at the business permit and say, ‘oh, this is in Miami,’ when the address is actually in Globe,” Heatherly said.

Another factor that adds confusion to the situation is the jurisdictional mishmash existing in the Highway 60 corridor between Globe and Miami that includes unincorporated properties in the county’s sphere of influence.

“Globe city limits are a lot bigger than people think,” Heatherly said in a subsequent interview. “Miami High School isn’t in Miami [unincorporated], Fry’s is in Globe and Central Heights is unincorporated. Most municipalities are not like Miami: It’s unique.”

Jepson said the problem involves about 20 businesses. In order to keep it from happening again, the city will have an auditor double-check Globe business addresses with Miami’s. The city will also update its business license process, so that new business addresses will be more clearly defined.

The Town of Miami’s annual budget is about $5 million, while Globe’s is slightly more than $10 million, with less than half its operating budget coming from local sales tax.

The next Miami Town Council meeting is set for Monday, March 26 at 6 p.m. at Miami Town Hall, 500 W. Sullivan St., Miami. The Globe City Council meeting is scheduled for Tuesday, March 27 at 5:30 p.m. at the Globe City Council chamber at 150 N. Pine St., Globe.