LUCERNE – A purchase agreement between the county and the Lucerne Alpine Senior Center has stalled due to the Internal Revenue Service's attempts to collect tens of thousands of dollars in fines and penalties it says the center owes.
As Lake County News previously reported, the county offered to buy the senior center's thrift shop building for $150,000 in order to help the center resolve several outstanding debts and have enough left over for center improvements, including a new roof.
County Administrative Officer Kelly Cox and his staff have been working to finalize a purchasing agreement with the center, which the Board of Supervisors approved in April.
But Cox said this week that the county and Jim Swatts, the president of the center's board, were signing an agreement to extend the purchase contract for another 60 days because of issues that surfaced as the county worked to finalize the deal.
“We thought we would have this purchase completed by June 30,” Cox said. “We opened escrow right away.”
But when a title search was conducted on the property, the county found liens totaling $153,442.58, which includes the $80,000 the center originally paid for the building in October 2004. That's more than the purchase price, Cox pointed out, and would leave the center with nothing extra for repairs and other bills.
In order to give the center time to resolve the liens, Cox extended the purchase agreement and carried the funds for the purchase into the next budget year. He said the county hopes to close escrow on the building Sept. 4.
IRS goes after senior center funds
The senior center's title report includes liens in the following amounts: $18,160.11 to Sysco Food Services of San Francisco; $12,903.43 to L.A. Commercial Group; $3,000 to the state Department of Industrial Relations, Division of Labor Standards Enforcement, a fine assessed to the center in connection with a case four former center employees brought claiming the center had failed to pay $9,000 in back wages; and two separate liens to the U.S. Government in the amounts of $17,007.82 and $17,423.23 for failure to pay taxes.
Those liens don't include thousands more in penalties that Swatts said the IRS has been trying to collect.
Swatts told Lake County News that the liens and government fines arise from the period before he came on board with the center in 2005.
For the last two years, Swatts said he's been working with the IRS to settle the unpaid taxes.
Originally, the IRS wanted $72,000 in unpaid taxes, penalties and interest, Swatts said. They negotiated to reduce the total amount, which most recently was lowered to $33,679.
Congressman Mike Thompson's office has intervened with the IRS on the center's behalf in order to get the tax bill lowered.
Brad Onorato, Thompson's district representative for Lake County, confirmed that Thompson's office contacted the IRS, with Onorato talking to the agency as recently as Wednesday. IRS told Onorato that they expected to give the center a final payoff amount in the coming days.
A May 15 letter from Thompson to the IRS' Sacramento office states that the center's former executive director failed to pay payroll taxes.
The former executive director, who Thompson did not name, is Rowland Mosser, who Swatts removed from that position in the summer of 2005. In January of 2006 J.J. Jackson came on as executive director.
“Once this financial situation surfaced last year, the Center's Board of Directors took steps to right the wrongs that the former Executive Director caused by contacting the IRS in Santa Rosa to work out a repayment plan,” Thompson's letter states.
Jackson said the center has been paying the IRS $500 per month since March of 2006 as part of that repayment plan.
Thompson's letter said the center's total tax liability is $39,000. Of that, $16,000 is penalties. Emphasizing the center's services to low-income seniors, Thompson asked the IRS to dismiss the penalties, bringing the total IRS bill to just over $22,000.
Onorato explained that the penalties can be removed from the tax bill, while interest, by law, cannot.
The IRS had clamped down on the center in recent months, said Onorato, because they heard of the potential building sale and wanted to try to collect the original $72,000, which included additional penalties.
“Hopefully we'll be able to help them get that reduced substantially,” said Onorato.
Swatts said he's going to continue negotiating with the IRS until they agree to the $22,000 figure. That, he said, would allow the center to pay off all its liens and debts, and put on a new roof.
“I'm not going to close the doors on our seniors” because the IRS is greedy, Swatts said.
Investigation continues into missing center funds
Both Swatts and Jackson say they've been unable to account for between $150,000 and $175,000 in funds from the center prior to Swatts staking over leadership of the center in the summer of 2005, as Lake County News previously reported.
Some of the money that is unaccounted for included payments to the IRS. Swatts said he has records of checks the center wrote to the IRS in 2004 totaling more than $15,104.75. The IRS said they never received those funds.
Swatts said he's informed the IRS of the investigation into the missing funds but they've pressed forward with their collection efforts anyway.
Just what happened to the thousands of dollars the center can't account for is at the heart of an ongoing District Attorney's Office investigation, which Lake County News reported on in February.
The Grand Jury took an interest in the center and opened an investigation, which Sheriff Rod Mitchell credited earlier this year for reviving the case, which had stalled in his office due to personnel shortages and other major crime investigations that jumped to the head of the line.
District Attorney Jon Hopkins also confirmed for Lake County News that his office was actively investigating the case, which included networking with Mitchell's office.
Center on more stable ground
Swatts said he's entering his third year as board president, after he had only intended to serve one year. He continues to work 30 to 40 hours a week to keep the center on course. “I said I'd get 'em out of debt and that's what I'm trying to do,” he said.
Along with Jackson, Swatts has put the center back on its feet, making sure it keeps its doors open. Jackson said the center serves as many as 36,000 meals a year, most of those to Meals on Wheels seniors. The center delivers 80 meals to homebound seniors each day.
“We're No. 2 in service to the county,” said Jackson, with the Highlands Senior Center in Clearlake in first place.
The center also has been able to open a bank account and write checks once again, said Swatts. Over the last few years, creditors would hit their accounts with liens as soon as the accounts were opened, but the center now pays for all services with a check on delivery.
In addition, Swatts said Jackson has reestablished relationships with some service providers which previously had claims against the center.
There are still other challenges, such as people dumping old refrigerators, freezers, sofas and appliances outside of the thrift shop. “They don't want to go to the dump so they drop it here as a gesture to us,” said Jackson.
On Thursday the center was doing a $50 dump run, one of three a month that Swatts estimates they have to do to get rid of the trash. Swatts said the sheriff's office has promised to do extra patrol in the area and the center is putting up security cameras.
Late last year the center also was hit in a rash of graffiti perpetrated by a local teen. Jackson said they recently received a $30 check from the teen, who has been required to pay restitution. The center, Jackson added, put in for a total of $90 in damages.
As for the tax issue and the building purchase, Swatts said, “I'm hoping to wrap this up with the county in the next two weeks.”
Swatts said he's grateful to the county for its assistance and patience. “I think the county has bent over backwards to help us.”
Cox said he'll take the amended purchase agreement to the Board of Supervisors for approval at its June 26 meeting.
E-mail Elizabeth Larson at
{mos_sb_discuss:2}
How to resolve AdBlock issue? 
