IRS files tax lien against city of Jellico, TBI investigating

IRS files tax lien against city of Jellico, TBI investigating

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The IRS could seize Jellico's assets if the city fails to come up with a payment plan and its appeal is rejected. The IRS could seize Jellico's assets if the city fails to come up with a payment plan and its appeal is rejected.

JELLICO (WATE) – The city of Jellico has stopped making payments on a $161,740 Internal Revenue Service tax lien, according to Jellico Mayor Les Stiers.

Jellico's tax issues are only the latest for a city that has battled financial problems since last fall.  At one point, city employees did not get paychecks on time because, according to city officials, there was no money to pay them.

However, in December, Stiers says he learned from the state comptroller's office that the city had also failed to pay $125,000 in payroll taxes to the IRS from the fourth quarter of 2011 through all of 2012.

Former city recorder Linda Douglas resigned around the same time, just as the Tennessee Bureau of Investigation, comptroller's office, and attorney general began investigating, according to Stiers. 

The Tennessee Bureau of Investigation confirms to 6 News that it's investigating Jellico.  

Jellico's mayor says those agencies are investigating because the $125,000 for payroll taxes is missing, along with money from a drug raid.    

Since Douglas resigned in December, penalties and interest have ballooned the back taxes to about $161,740, according to the mayor. 

To pay off the IRS tax lien, the city first proposed selling a building for $350,000 to a company, with payments of $85,000 per year over four years to the city.  But the comptroller's office rejected the proposal, according to Stiers, because the city cannot operate as a creditor. 

The city tried to hold on to a deal with the company by leasing with an option to buy, but its investors pulled out of the deal. 

Now, Stiers wants the city to sell 50 acres of the 66-acre Jellico Hospital site, leaving between 15 and 16 acres for the hospital.   

Stiers says the comptroller's office likes the idea, which could bring in about $200,000 in revenue. 

The positive interaction comes after a year of audits and threats from the comptroller's office. In a letter sent in June to the Jellico Board of Mayor and Aldermen, Tennessee Comptroller Justin Wilson threatened to pass a budget and levy a tax if Jellico's leaders didn't by July 1.

The city's aldermen and mayor passed a budget, skirting a deadline to keep control of the city from the state comptroller's office. 

The state also asked city leaders to considering reducing some of Jellico's $160,000 annual deficit by raising property taxes above its current $1.15 per $100 of assessed value. 

Jellico's leaders not only failed to increase taxes, but also accidentally erased the entire $1.15 tax levy. 

Mayor Les Stiers missed a meeting on Tuesday that he called to fix the mistake, according to city alderman Alvin Evans. 

Another meeting on Friday night also couldn't reach a quorum, leaving the city without  a property tax.

Stiers says he will present the IRS issue along with the accidental property tax deletion to the board of aldermen at its next meeting on July 18 at 6:30 p.m.

The IRS has given Jellico 60 days to find a solution after the city stopped making payments of $2,000 per week after just a few months.  Stiers tells 6 News that the city can't afford to make the weekly payments.

Stiers says he appealed the 60-day decision on Thursday to the IRS.

The IRS could seize Jellico's assets if the city fails to come up with a payment plan and its appeal is rejected. 

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