1 2 3 4 5 6 KERR COUNTY COMMISSIONERS COURT 7 Emergency Session 8 Thursday, July 14, 2005 9 10:00 a.m. 10 Commissioners' Courtroom 11 Kerr County Courthouse 12 Kerrville, Texas 13 14 15 16 17 Internal Revenue Service Levy on Kerr County funds 18 19 20 21 22 23 PRESENT: PAT TINLEY, Kerr County Judge H. A. "BUSTER" BALDWIN, Commissioner Pct. 1 24 WILLIAM "BILL" WILLIAMS, Commissioner Pct. 2 JONATHAN LETZ, Commissioner Pct. 3 25 DAVE NICHOLSON, Commissioner Pct. 4 2 1 On Thursday, July 14, 2005, at 10:00 a.m., an emergency 2 meeting of the Kerr County Commissioners Court was held in the 3 Commissioners' Courtroom, Kerr County Courthouse, Kerrville, 4 Texas, and the following proceedings were had in open court: 5 P R O C E E D I N G S 6 JUDGE TINLEY: Good morning, ladies and 7 gentlemen. Let me call to order the emergency meeting of 8 Kerr County Commissioners Court posted and scheduled for 9 this time and date, Tuesday, (sic) July 14th, 2005, at 10 10 a.m. I felt it necessary to call an emergency meeting 11 because of the serious nature of the subject matter of the 12 agenda item, that being an I.R.S. tax levy which was 13 effected on Kerr County funds. Yesterday morning, the 14 Sheriff brought to me a notice that some funds which was due 15 his office by the Social Security Administration, and which 16 belonged to Kerr County by virtue of the efforts of his 17 office, that those funds had been levied upon in part by the 18 federal government because of some outstanding obligations 19 that were owed by Kerr County to the federal government. 20 And I will turn it over to the Sheriff now and let him 21 explain how this thing developed, and we'll go from there. 22 COMMISSIONER LETZ: Judge, I have a question. 23 JUDGE TINLEY: Let me call the agenda item 24 first, if I might. Consider and discuss appropriate action 25 or response to Internal Revenue Service levy on Kerr County 7-14-05 emg 3 1 funds. 2 COMMISSIONER LETZ: Judge, I have a question. 3 I mean, I looked at this yesterday, and I understand -- I 4 mean, it's obviously an important issue. I also looked at 5 the response that we had from the Treasurer which explained 6 the issue, and that is being resolved, and based on the 7 facts today it has been resolved. How does this qualify as 8 an emergency? I ask the County Attorney. I just don't see 9 this as an emergency. I mean, I see it as a, I mean, issue 10 that needs to be dealt with. It's being dealt with. I 11 think it's a -- you know, a bad situation, the fact that it 12 happened, but the fact that it's being corrected, I don't -- 13 it seems to me that we're spending a lot of taxpayers' 14 money -- wasting a lot of taxpayers' money having an 15 emergency meeting and having all the Commissioners come back 16 in today for something that's been resolved. 17 JUDGE TINLEY: Well -- 18 COMMISSIONER LETZ: And so I'm deferring to 19 the County Attorney. Is this an emergency? Does this 20 qualify? 21 JUDGE TINLEY: Let me respond to that, if I 22 might. 23 COMMISSIONER LETZ: I asked the County 24 Attorney a question, please. 25 JUDGE TINLEY: Number one -- 7-14-05 emg 4 1 COMMISSIONER LETZ: No, I asked the -- Judge, 2 I asked the County Attorney a question. 3 JUDGE TINLEY: Mr. Letz, I'm the presiding 4 officer of this Court. Let me respond to that, if I might. 5 Your question was to me. 6 COMMISSIONER LETZ: No, it was to the County 7 Attorney. 8 JUDGE TINLEY: I'll respond. 9 COMMISSIONER LETZ: Okay, Mister County 10 Attorney -- 11 JUDGE TINLEY: I have not seen anything to 12 indicate this matter was resolved, and I would submit to the 13 Court that any time any taxpayer receives a levy from the 14 Internal Revenue Service, that it's a very serious matter 15 and ought to be considered an emergency, and I think we need 16 to know what the circumstances are. 17 COMMISSIONER LETZ: Okay, I don't think 18 you're who I asked the question to. County Attorney, is 19 this an emergency? 20 MR. EMERSON: I think, given the initial 21 information -- all I had was the tax lien, and if they're 22 seizing county funds immediately, it probably would qualify 23 as such. Now, I haven't -- I just received the new 24 information. 25 COMMISSIONER LETZ: All right. 7-14-05 emg 5 1 JUDGE TINLEY: Sheriff, would you like to 2 tell us how this originated? 3 SHERIFF HIERHOLZER: First, I'd like to start 4 out -- I was getting up this morning and read the article in 5 the paper where it says there was a tax lien filed against 6 the Kerr County Jail. That's the biggest bunch of malarkey 7 I've ever heard in my life. Kerr County Jail's the one that 8 is correcting the situation, and I don't appreciate them 9 getting zinged by the newspaper for an erroneous statement 10 in the newspaper. Kerr County Jail's the only one that 11 makes the county funds off of Social Security 12 Administration, and because we are the only department -- 13 the jail is -- that makes funds, that's where I.R.S. went to 14 seize part of those funds that we get. Since it's coming 15 from Social Security and it's government funds, they started 16 taking some of those funds. 17 What this is, several months ago I got a 18 notice from I.R.S. about some kind of taxes or something 19 else. It didn't pertain to me, I didn't feel; it's the 20 County, you know, Treasurer that takes care of that. That 21 notice was forwarded on over to the Treasurer, and I really 22 didn't even keep a copy. Normally I do; I have the 23 secretary do it, but I didn't. On the 12th, day before 24 yesterday, I got another notice from I.R.S. about a -- them 25 taking county funds out of revenues that the jail is 7-14-05 emg 6 1 earning. At that time, I was dealing with media on other 2 issues, so I had the chief deputy call I.R.S. and try and 3 find out what this was about, what is going on, you know, 4 what's happening here, and that's when we got into this. To 5 explain, the Kerr County Jail and all our inmates we house, 6 if those inmates are collecting Social Security money -- 7 funds, when they are incarcerated, they're not entitled to 8 collect those Social Security funds. 9 Back in 2000, right when I took office -- and 10 it actually started before I took office; it just wasn't any 11 funds received from the county -- we entered into an 12 initiative agreement with Social Security Administration 13 that we would report those people that are going to jail 14 that should be cut off their Social Security benefits, and 15 we have done that ever since. And because of that, the 16 initiative is Social Security pays the Sheriff's Office, 17 okay? And that's why everything is naming the Kerr County 18 Sheriff in this. They pay us so much money, depending on 19 how many of these people we report to them, and our payments 20 go -- they're always in hundred dollars. They'll either go 21 from 400 a month to 800 a month to 1,200 a month, just 22 depending on how many people we report that they verify out. 23 So, it's a revenue-making deal that the County's made since 24 I took office, and I think it does help the county. Over 25 five years, it's added up to a pretty good chunk of money 7-14-05 emg 7 1 that we try and get back for the County. 2 What -- being that the jail is the only one 3 that makes money from Social Security, and Social -- and 4 I.R.S. saying that the County owes them money due to some 5 late payments on Social Security benefits from employees, 6 there's been a levy, as that statement shows. And that's 7 all I can -- it says purpose on it, tax levy against the 8 Kerr County Sheriff. And what they're doing is they're 9 taking a portion of that revenue money -- before we get it, 10 they are taking a portion of that to help satisfy this debt 11 that Kerr County owes. 12 COMMISSIONER LETZ: Sheriff, are you aware of 13 what the amount of the levy is? 14 SHERIFF HIERHOLZER: I have no idea, okay? 15 At the bottom of that page you got yesterday from I.R.S., it 16 says payment before reduction, $600. What that would have 17 been is, the check that we would have gotten from Social 18 Security in the amount of $600 for this incentive program. 19 That would have been proceeds to Kerr County. Well, they 20 took $90 out of that, and this isn't the first time. 21 They've done it one other time that I can pinpoint, because 22 it's always in hundred-dollar increments we get, and the May 23 deposit into the County's fund, where all that money goes -- 24 it goes into the Out-of-County Prisoner Housing Fund, 25 anything that's derived in the jail. The one in May should 7-14-05 emg 8 1 have been $300; it was $210. So, the first -- 2 COMMISSIONER LETZ: $90. 3 SHERIFF HIERHOLZER: They would have taken 4 $90 out of that one, too. And that first notice would have 5 been -- was forwarded on by my secretary to the Treasurer's 6 office at that time, 'cause we had no idea what it was, 7 okay? Clay, my chief deputy, can probably explain a little 8 bit more, because you got to -- you got a henscratch 9 attachment with your backup, probably. What that henscratch 10 attachment is, is when I told Clay to call I.R.S. and try 11 and find out what was going on on the 12th, Clay gets on the 12 phone with I.R.S. They can't talk to Clay, even though it's 13 naming the Kerr County Sheriff and everything else, but that 14 the County Treasurer -- I guess there's certain people that 15 I.R.S. could talk to. They could not talk to Clay about 16 this issue without the Treasurer's office being on the 17 phone. So, they set up a conference call with the Treasurer 18 and I.R.S., and they had to get the Treasurer's permission 19 to talk about it with Clay still being on the phone. 20 COMMISSIONER BALDWIN: Rusty? 21 SHERIFF HIERHOLZER: So I'm going to -- yes, 22 sir? 23 COMMISSIONER BALDWIN: I recognize 24 henscratching. I know what that is. 25 SHERIFF HIERHOLZER: Well, mine my be a 7-14-05 emg 9 1 little -- 2 COMMISSIONER BALDWIN: But I don't see any 3 henscratching here in my pile. Was it henscratching, like a 4 conversation between -- 5 SHERIFF HIERHOLZER: It' notes taken during 6 this conversation. 7 COMMISSIONER BALDWIN: I don't have that. Is 8 that -- is that notes taken from -- between Clay and the 9 I.R.S.? 10 SHERIFF HIERHOLZER: Between Clay -- during 11 that conference call with Clay, the I.R.S., and Barbara 12 Nemec. 13 COMMISSIONER BALDWIN: Okay. 14 SHERIFF HIERHOLZER: Okay? And so, at this 15 point, I think the best thing for me to do is let Clay 16 explain what was talked about on that phone conversation. 17 COMMISSIONER WILLIAMS: Let's see if we can 18 get the terminology straight here, Sheriff. The document 19 from I.R.S. talks about a levy. 20 SHERIFF HIERHOLZER: Yes. 21 COMMISSIONER WILLIAMS: Not a lien. 22 SHERIFF HIERHOLZER: Right. 23 COMMISSIONER WILLIAMS: There seems to be 24 some misinterpretation of what the letter says. It is a 25 levy, as you will note, taking a certain amount of money for 7-14-05 emg 10 1 purposes that they think they are entitled to. 2 SHERIFF HIERHOLZER: Right. 3 COMMISSIONER WILLIAMS: As opposed to a lien. 4 SHERIFF HIERHOLZER: Right. 5 COMMISSIONER WILLIAMS: There is no lien that 6 I can find in any of this. 7 SHERIFF HIERHOLZER: That's why I said I 8 didn't like -- 9 COMMISSIONER WILLIAMS: Of this facility or 10 its funds. Is that correct? 11 SHERIFF HIERHOLZER: That's why I said what I 12 said in the beginning. The newspaper even reported this 13 morning, tax lien against the jail. This is no lien. 14 COMMISSIONER WILLIAMS: It is a levy. 15 SHERIFF HIERHOLZER: It is a levy where they 16 are recouping a certain percentage of revenue that we're due 17 because of some sort of debt they think we owe. 18 COMMISSIONER WILLIAMS: So, the question then 19 is, why do they think they are entitled to these funds? 20 SHERIFF HIERHOLZER: That's right. 21 COMMISSIONER WILLIAMS: Do you have that 22 answer? 23 SHERIFF HIERHOLZER: That will come from the 24 chief deputy during that phone conversation. I don't want 25 to talk third-party about that from Barbara Nemec herself. 7-14-05 emg 11 1 COMMISSIONER WILLIAMS: I just wanted to get 2 the terminology straight. 3 COMMISSIONER LETZ: Commissioner, what you 4 said I think is an important point, 'cause I talked to -- I 5 don't know what paper Rusty is referring to, but I talked to 6 the Express News, and based on talking with Zeke MacCormack, 7 somebody called him and told him it was a lien. 8 COMMISSIONER WILLIAMS: Right. 9 COMMISSIONER LETZ: And so someone in the 10 county -- someone who was aware of this intentionally 11 created that impression. I have -- Zeke, being the good 12 reporter he is, will not reveal sources, of course. 13 SHERIFF HIERHOLZER: That's all I can tell 14 you immediately, because all my letters, every bit of mail 15 we get is date-stamped on when it's received. It was 16 received on the 12th. The next morning, immediately -- 17 'cause we were dealing with -- Clay was dealing with this 18 until 5 o'clock that afternoon of the 12th. Then I even 19 called the Judge at home -- or at his other office, really; 20 I tried to get him at home after 5 o'clock on the 12th to 21 let him know about this and demand a meeting first thing 22 yesterday morning. I met with the Judge first thing 23 yesterday morning, turned the original of the letter from 24 I.R.S. over to him, and it went from there. There is not a 25 lien. I did not appreciate what I read in the paper this 7-14-05 emg 12 1 morning that there's a tax lien against Kerr County Jail. 2 COMMISSIONER WILLIAMS: Well, I want to make 3 a comment, following up on Commissioner Letz. I, too, 4 received a call from the Express News, Zeke MacCormack, at 5 5:28 yesterday afternoon at home, in which he told me he had 6 received an e-mail saying that Kerr County's -- that there 7 was a lien placed on Kerr County's funds and facilities by 8 the Internal Revenue Service. The individual that sent him 9 that e-mail is in this room today, and it's not you, 10 Sheriff. 11 SHERIFF HIERHOLZER: I know it's not me, 12 'cause I haven't talked to the media about any of this. But 13 I just was really upset when it looks like to the public the 14 jail was doing something wrong, okay? That's totally wrong. 15 The jail was doing things right. They were creating revenue 16 for this county. But this is a problem that evidently has 17 gone on and has not been resolved for almost two years, and 18 it's a problem that should have been resolved. The gist of 19 the conversation is they have already now, that I know of, 20 taken $180 out of revenues -- I.R.S. has -- that the jail 21 has earned, and through that conference call with Clay and 22 them, they are going to continue to do it until this thing 23 is resolved. And I don't like losing revenue that the 24 jail's trying to make for this county over somebody else's 25 mistake -- over I.R.S.' mistake, 'cause I seriously doubt 7-14-05 emg 13 1 that we're going to get that $180 back from I.R.S. Dealing 2 with I.R.S., I think it's going to be hard to get it to come 3 back. 4 COMMISSIONER WILLIAMS: Well, it's a levy 5 against revenue to your operation based on things you do, as 6 opposed to a levy on tax money; is that correct? 7 SHERIFF HIERHOLZER: That is correct. 8 COMMISSIONER WILLIAMS: Is that your 9 understanding? 10 SHERIFF HIERHOLZER: We keep records. These 11 are the records that we send in and what we get back, okay, 12 from I.R.S. -- or from Social Security Administration, and 13 what we do at the jail, all right? And what it is -- like, 14 May 5th, it was $800 that they sent us. And it goes all the 15 way back to the year 2000, varying from 1,200, 800, 400, but 16 it falls in hundred-dollar increments, is what we do by the 17 work that -- the hard work that the jail staff does and my 18 secretary does keeping those records and forwarding it on to 19 Social Security. 20 COMMISSIONER LETZ: Sheriff, I guess -- you 21 know, I mean, I agree totally with you that this is a very 22 serious matter. It shouldn't be done, and the fact that it 23 got to this point is a bad reflection on the county. But 24 you said it's been done twice. Now, I was always under the 25 impression, whenever this happened, that the I.R.S. sent a 7-14-05 emg 14 1 letter. Didn't you get a letter the first time for the $90? 2 SHERIFF HIERHOLZER: I got a letter the first 3 time that, evidently, they took $90. When I opened that 4 letter, okay -- 'cause it's all date-stamped. When I read 5 it -- and it's been several months ago, all right? -- I 6 looked at it, and I said, "This isn't anything we do." And 7 I didn't realize where it -- so I immediately had Nancy, my 8 secretary, send that letter over to the Treasurer's office. 9 COMMISSIONER LETZ: Okay. 10 SHERIFF HIERHOLZER: That's where it went 11 then. And my mistake, I should have kept me a copy of it. 12 We normally keep copies of everything we send. But it was 13 just one of those, "This doesn't deal with us. It's for the 14 Treasurer. It's going to deal with the County." Sent it 15 over, and we let it go. 16 COMMISSIONER LETZ: Okay. 17 SHERIFF HIERHOLZER: But then, when I got the 18 second one the other day, I paid a little bit more attention 19 to it, you know. And especially when it names the Kerr 20 County Sheriff; kind of got on my wrong side real quick. 21 COMMISSIONER LETZ: Okay. 22 SHERIFF HIERHOLZER: But I will let Clay 23 explain to y'all what the conversation was, 'cause evidently 24 they're saying the deposits for the fourth quarter of 2003, 25 the second, third, and fourth quarter of 2004, and the first 7-14-05 emg 15 1 quarter of 2005 were late deposits. But there's a lot of 2 mixup in there, and I know Barbara should talk about this 3 too, about, you know, biweekly -- that the County actually 4 pays two times a month, not every two weeks, and it makes a 5 difference on dates and amounts of deposits. And somehow 6 the I.R.S. got that mixed up, so that may totally be an 7 I.R.S. problem. I haven't seen what y'all got this morning, 8 okay? 9 COMMISSIONER LETZ: They said it's an 10 administrative error. 11 SHERIFF HIERHOLZER: All I know is I've lost 12 some money out of revenues back to I.R.S., and I don't like 13 giving I.R.S. anything we don't have to give them. Clay? 14 MR. BARTON: And, for the record, I am not 15 the one that contacted the newspaper either. 16 COMMISSIONER WILLIAMS: I know you're not. 17 MR. BARTON: Now, my conversation is going to 18 be -- like I say, most of this was just a conversation 19 between Ms. Nemec, a lady named Escobel with I.R.S. 20 Collection -- I called the number on that -- let's see that 21 page, Rusty. At the top, under the I.R.S. -- it's an 800 22 number right there, right above the tax -- purpose, tax levy 23 statement. That's the number I called. I talked to a lady 24 named Escobel after being on hold forever. When I told her 25 initially that we finally got the -- I'm the one that 7-14-05 emg 16 1 hand-wrote the EIN number on there, 'cause she kept trying 2 to run the TIN number, and which is generally someone's 3 Social Security number, but she couldn't get it to ever come 4 up. When she finally figured out who I was with, or that 5 it's an entity, she asked what our employer ID number was, 6 and she ran that back through. Then she finally could find 7 us. So, I'm the one that hand-wrote the EIN number in when 8 I got that from the Sheriff's secretary. 9 She found out what it was in reference to, 10 and what I told her was that we really didn't pay the bills; 11 all that came through the County Treasurer's office. That's 12 when she -- I was able to do a conference call and get -- 13 ultimately get Ms. Nemec on the phone about this. And from 14 what I can just understand through what Ms. Nemec was 15 explaining to this lady -- and I don't know what Ms. Nemec 16 has prepared for y'all; it may just be the exact same thing 17 I'm fixing to let you know, but she had -- apparently there 18 had been some -- I'm assuming that maybe the Schedule B's -- 19 and I didn't even know what a Schedule B is -- had not been 20 received by I.R.S., or had been -- all Ms. Nemec advised me 21 -- or advised this lady, she'd had to resend photocopies of 22 the Schedule B's because this lady did ask, do they have the 23 original signatures? And she said no, I've already sent the 24 originals, but I've had to resend photocopies to a lady 25 named Mrs. Cruz in San Antonio with I.R.S. That's who she 7-14-05 emg 17 1 said she was supposed to be sending these Schedule B's to. 2 She sent them on June 30th. They're supposed to remove a 3 penalty that's apparently a penalty for a late deposit, and 4 they were supposed to remove that once they received the 5 forms. 6 The computer did reflect that this account's 7 supposed to be on hold until October, if I remember right 8 what this lady was saying, and that we should call back 9 after October 15th if nothing's been heard back from I.R.S. 10 She did say they'll continue to do the levy until this is 11 disposed of properly. She did -- I know Ms. Nemec -- she 12 did advise Ms. Nemec that the copies of the Schedule B's 13 need to have original signatures, and Ms. Nemec did advise 14 her, well, I'll make copies again and put original 15 signatures and forward those again. They talked about some 16 941's that were due, and I don't know anything about what a 17 941 was. I made a notation of 941 after the 2004 fourth 18 quarter, 2005 first quarter, and I'm not sure what form a 19 941 is. Like I say, I was writing as they were talking. 20 That's kind of the extent of what my notes show, except my 21 notes did show Schedule B's have been sent on June 30th. 22 I've got Judy Carr's name listed at the top of that list, 23 'cause the conversation on the conference call originated 24 with -- with Judy, and then Judy transferred to it Barbara 25 when Barbara got off another line. So, that's why Judy 7-14-05 emg 18 1 Carr's name is listed on this form. I don't know if y'all 2 have any more questions of me, but I was just kind of 3 hearsaying this conversation. 4 COMMISSIONER WILLIAMS: I don't have any 5 questions, but I'd like to find out what this is all about. 6 JUDGE TINLEY: The -- did the I.R.S. 7 representative indicate what periods were in dispute or a 8 concern or in question? 9 MR. BARTON: Well, as the Sheriff said 10 earlier, at the very tail end of the conversation, she'd 11 already said earlier the second quarter of 2004, the third 12 quarter of 2004, the fourth quarter of 2004, and the first 13 quarter of 2005, and at the end of the conversation, she 14 threw in that the fourth quarter of 2003 may have had some 15 errors in it. And Ms. Nemec just assured her that they'd 16 gotten all the paperwork sent in on the 30th to San Antonio. 17 And I -- at that time, I didn't even know why we received 18 Social Security -- in fact, I talked to Ms. Nemec about it. 19 I was kind of concerned as to why we had money coming to the 20 Sheriff's Office from Social Security. I wasn't aware that 21 we did that. She wasn't aware of it either, or she didn't 22 know why we had it. She said she would try to look into why 23 we're supposed to be receiving Social Security funds. And 24 after the conversation, I was talking with the Sheriff and 25 he advised me why we got Social Security funds in. So, 7-14-05 emg 19 1 that's really all. 2 JUDGE TINLEY: Anything else? 3 MR. BARTON: That's all I've got. 4 JUDGE TINLEY: Any questions for Deputy 5 Barton? Thank you, sir. 6 COMMISSIONER BALDWIN: Thank you. 7 JUDGE TINLEY: Ms. Nemec do you have any 8 input you'd like to offer? 9 MS. NEMEC: Sure. A couple of months ago, 10 when we received the letter that the Sheriff is referring 11 to, I called I.R.S. and talked to them. Unfortunately, 12 there were several times that I called, and the person on 13 the other line -- I was not able to understand a word they 14 were saying. And this happened on several occasions. The 15 accent or whatever it may be, I just was not able to 16 understand them. And every time I called, they would tell 17 me something different. So I talked to Mindy Williams, the 18 Assistant Auditor, and I showed her all my paperwork and 19 explained that I really didn't know what the problem was. 20 Because the way our accounting system is, is everything is 21 supposed to zero out at the end of the pay period, and so 22 that -- that is the amount that should be sent to I.R.S., 23 and those are the amounts that had been sent. And so I 24 asked Ms. Williams if she -- if I made an appointment with 25 the I.R.S., if she would go with me to Austin and discuss 7-14-05 emg 20 1 this so that we could find out exactly what it is that they 2 were needing from us, because I had attempted to do that on 3 several occasions over the phone and was unable to. She 4 then suggested that we go to the San Antonio office. 5 So, I called Ms. Cruz last month, in June, 6 and asked her if -- if I could set up a meeting, and 7 explained to her the situation; that we had received this 8 letter, and that I -- you know, that all my books balanced 9 and that I did not know what this was about, and would like 10 to go in person to discuss it. She looked it up right away 11 and was able to tell me clearly what the problem was. She 12 said that in December 2003, they'd had -- we are a 13 semimonthly payroll, which means we pay twice a month. Our 14 tax deposits then are received on the 15th, if that's the 15 day that we pay, and at the end of the month. On the 16 December 2003 -- the 941 and the Schedule B are mailed in 17 together at the same time. She said that on the -- the 18 Schedule B, for some reason, they were showing that we had a 19 pay period on December the 8th. In fact, it was December 20 the 15th, and December the 15th is when our tax deposit was 21 made. Well, they were showing that we had our payroll on 22 December the 8th; therefore, showing that our tax deposit 23 was late. I explained to her that we've never paid on the 24 8th, and explained to her the date that that was paid. 25 She told me how to correct it; to send a 7-14-05 emg 21 1 letter by June 30th and to go ahead and attach another 2 Schedule B showing the dates that we paid, and that there 3 would -- that there was nothing owed for that pay period. 4 She also then said that on the -- on the 941 that they 5 received for -- let's see -- June 30th, 2004, and 6 September 30th, 2004, that they received the 941's, but 7 could not locate the Schedule B's, and said that all I 8 needed to do was send them a copy of those Schedule B's, and 9 -- and explained to me at that time that we may get letters 10 like the one that the Sheriff got, but that as soon as they 11 got their letters and they gave it to an adjuster, he would 12 input all this information and our account would show 13 cleared and up to date on everything. 14 When Clay called me and we had this three-way 15 conversation with the I.R.S., they started telling me again 16 what it was that I needed, and I explained to them at that 17 time that I had been in contact with Ms. Cruz and that all 18 had been taken care of. They went into the computer on -- 19 into another screen and pulled it up and saw, in fact, where 20 all that had been notated by Ms. Cruz. So that is when, on 21 the 12th, Tuesday, I went ahead and wrote a letter to this 22 Court explaining what the situation was. I was at a 23 conference yesterday. I called the I.R.S. and asked them to 24 please update the address that they have for us, because 25 they just have 700 Main, and I explained to them that these 7-14-05 emg 22 1 I.R.S. notices were going to different departments and then 2 I was getting them at a later date, and it would be better 3 if they just came to me, so they went ahead and updated 4 that. 5 Then he, at that time, told me he had gotten 6 a call from our Auditor and that they had explained to him 7 everything, and I said, "Well, okay. If you go into another 8 screen, you'll see where I've had conversations with 9 Ms. Cruz and what needed to be sent in, and that has been 10 done." At that point, I told him that I had made copies of 11 my Schedule B's that I had sent in previously, and that I 12 had sent them to them on June the 30th. He at that point 13 asked me if I had sent -- if, on the copy, my signature was 14 on there. I said, "Well, it's a copy of my signature, 15 because I don't have the original. The original was sent in 16 when it was due." So he suggested that when I get back to 17 the -- got back to the office, that I send -- resend it 18 again with my original signature and the date that I'm 19 sending it. 20 Well, this morning, as a result of this 21 meeting being called, I tried to get ahold of Ms. Cruz to 22 get a letter from her so that I could provide to this Court 23 to explain what the situation was, and the lady that I 24 talked to was a Ms. Moore. She told me that she could help 25 me with it, that it would be hard to contact -- to get ahold 7-14-05 emg 23 1 of Ms. Cruz; that the calls just come in, and whoever gets 2 them. And I explained the situation to her. She looked it 3 up on her computer, and as a result, she faxed me this 4 letter, which she said they normally don't stop receiving 5 phone calls from other clients to stop and do this, but I 6 told her the emergency of it, and so she agreed to do it for 7 me this morning. And, again, on this letter, it explains 8 about the 2003 -- what I explained to y'all, and that was 9 where they had us listed as paying on the 8th for whatever 10 reason, I don't know. And then the notice -- notice stating 11 that they needed me to resubmit the copy of the Schedule B 12 for the other two tax periods. So, that's the explanation. 13 COMMISSIONER WILLIAMS: Why don't you read 14 the letter of the 14th into the record so everybody knows 15 what it says? 16 MS. NEMEC: Okay, be glad to. It says -- 17 it's from the I.R.S., and it says, "Dear Ms. Nemec: Per our 18 conversation of July 14th, we discussed the FTD penalties 19 that were assessed on your 941's for quarters ending 20 December 31st, 2003; June 30th, 2004; and September 30th, 21 2004. The June 30th, 2004 was assessed FTD penalty because 22 of an administrative error, because the first liability was 23 not listed on the 15th, which should have -- which would 24 have been correct. This penalty can be corrected by 25 submitting me the corrected 941 and Schedule B. The other 7-14-05 emg 24 1 two tax periods were missing their Schedule B's. The 2 computer averaged the liability to incorrect dates. These 3 two other tax periods can be corrected by submitting the 4 Schedule B for each so that it can be correctly input in our 5 system. Barbara has promised to fax all three of these 6 Schedule B's to me post the court hearing today." 7 She suggested -- I explained to her that I 8 had already mailed this information and that I was getting 9 ready to certified mail the -- the -- another copy of the 10 information with my original signature. She said because of 11 the urgency that I was telling her that was taking place 12 today, that if I would just fax this to her today, which 13 they -- that is -- that is not something that they normally 14 do, but that they would make an exception; that if I would 15 fax this information to her today, they would get right on 16 it. Because if I mail it, they're going to assign it to an 17 adjuster. By the time the adjuster gets to it and corrects 18 all the information on their computer, it could be months 19 down the line. And so she assured me that if I fax this 20 over to her today, that she would get right on it and get it 21 corrected for us. 22 JUDGE TINLEY: Anything further? 23 MS. NEMEC: Not unless someone has any 24 questions. 25 JUDGE TINLEY: Any member of the Court have 7-14-05 emg 25 1 anything? Any questions from anybody? 2 SHERIFF HIERHOLZER: Judge, I have one 3 question. 4 JUDGE TINLEY: Yes, sir? 5 SHERIFF HIERHOLZER: In your conversations 6 with her -- and my department will tell everybody I'm a 7 penny pincher. My other main concern is, are we going to 8 get back the revenue money that I.R.S. took in either a 9 credit against the -- the Social Security payments or 10 whatever? Because they took money, you know, because of 11 this, and if it's their administrative error or whatever, I 12 think we need to at least attempt to get that money back to 13 Kerr County. 14 MR. BARTON: It was my understanding on our 15 phone conversation with Ms. Escobel that they would refund 16 the money. Is that your understanding? 17 MS. NEMEC: Yes, absolutely. They said we 18 don't owe any money. We -- we will be refunded all the 19 money once they update their records. And first -- what 20 happened was, because for some reason they were missing the 21 Schedule B's, they averaged out, as the letter says, and 22 threw us into a biweekly employer to whereas they were 23 figuring they should have been receiving tax payments every 24 two weeks versus twice a month. 25 JUDGE TINLEY: Okay. Any questions by any 7-14-05 emg 26 1 member of the Court? 2 MR. BARTON: Ill say this. I didn't go in 3 verbatim on the -- my presentation, but everything that she 4 has said that happened during that phone conversation, I 5 concur with. 6 JUDGE TINLEY: Okay. 7 MR. BARTON: There was nothing disputed on 8 that. 9 JUDGE TINLEY: What was the approximate date 10 that you first became aware of this difficulty with regard 11 to this particular problem? 12 MS. NEMEC: I believe the letter was sent 13 over in May? Does that sound right? 14 SHERIFF HIERHOLZER: That was the first time 15 they took $90, apparently. I have -- I went back and pulled 16 the deposits, 'cause they are automatic deposits going into 17 the County's fund on our accounts. And the first deposit 18 that would have been short $90 was deposited on May the 19 12th. 20 JUDGE TINLEY: Okay. Prior to that date, you 21 didn't receive any letters or notices or communications of 22 any kind from I.R.S. -- 23 MS. NEMEC: No, sir. 24 JUDGE TINLEY: -- indicating this sort of a 25 problem? 7-14-05 emg 27 1 MS. NEMEC: No, sir. 2 JUDGE TINLEY: Okay. 3 COMMISSIONER WILLIAMS: Just a comment, 4 Judge. I just want to be sure I understand. Ms. Nemec, 5 this letter from the Internal Revenue Service dated the 6 14th, today -- 7 MS. NEMEC: Mm-hmm. 8 COMMISSIONER WILLIAMS: -- indicates that 9 there was an administrative error, and it's on their 10 stationary, and I guess they're acknowledging they made the 11 error; is that correct? 12 MS. NEMEC: I asked them to please 13 acknowledge that, because that was the conversation I had 14 with Ms. Cruz, yes. 15 COMMISSIONER WILLIAMS: And that the penalty 16 can be corrected by submitting whatever it is you're going 17 to submit, and that the levy occurred because the computer 18 -- their computer's sophisticated computer programming did 19 whatever it did based on an erroneous date, classifying us 20 as a -- 21 MS. NEMEC: Biweekly. 22 COMMISSIONER WILLIAMS: -- biweekly payroll 23 as opposed to a semimonthly payroll; is that correct? 24 MS. NEMEC: That's correct. 25 COMMISSIONER WILLIAMS: Is that your 7-14-05 emg 28 1 understanding? 2 MS. NEMEC: Yes, sir. 3 COMMISSIONER WILLIAMS: I just wanted to be 4 sure I understand it. 5 COMMISSIONER LETZ: I think it's to be noted 6 also that that was informed to this Court on the 12th of 7 this month, two days ago. 8 COMMISSIONER WILLIAMS: It was. 9 COMMISSIONER LETZ: Exact same situation. 10 JUDGE TINLEY: The -- 11 MS. NEMEC: And also, we have several 12 situations -- throughout the year, we get tax levies on our 13 employees, and our -- when we levy the -- their payroll 14 funds, they'll come to our office and say, "This has been 15 taken care of now. This is not -- you're not supposed to 16 levy this." And I explain to them that I have to levy -- I 17 have to take the money out of their payroll. Well, you 18 know, we'll get on the phone, and sure enough, the I.R.S. 19 ends up sending me a notice lifting the levy because they've 20 made an error. So this has even happened with our 21 employees' paychecks. 22 JUDGE TINLEY: Anything further? Mr. Bullock 23 had -- had filed a participation form. Do you wish to have 24 any input on this, Mr. Bullock? 25 MR. BULLOCK: Later on in the court meeting 7-14-05 emg 29 1 is fine. 2 COMMISSIONER LETZ: I think we're about done. 3 JUDGE TINLEY: Yeah. This is the only agenda 4 item that we've got, Mr. Bullock. 5 MR. BULLOCK: This is it? 6 JUDGE TINLEY: Yes, sir. Does it relate to 7 the subject we've been discussing? 8 MR. BULLOCK: Not really. It relates to the 9 newspaper articles. 10 JUDGE TINLEY: I'm not sure we can take your 11 comments, then, if it doesn't relate to this particular 12 agenda item. I apologize. 13 MR. BULLOCK: I'll send them to the 14 newspaper, then. 15 JUDGE TINLEY: Okay, thank you. Is there 16 anything further? Any member of the Court wish to offer any 17 motion or any response, course of action in connection with 18 the agenda item? 19 COMMISSIONER LETZ: I'll go back -- I'll make 20 a comment back to my original comment when we started. I 21 think it's been a waste of time. There's 17 County 22 employees in here; we've wasted the better part of an hour 23 on something that we knew the same information on two days 24 ago. 25 COMMISSIONER WILLIAMS: Based on the letter 7-14-05 emg 30 1 that Ms. Nemec provided the Court today, it seems to me it's 2 much ado about nothing. 3 JUDGE TINLEY: The letter came this morning, 4 and I appreciate her providing that. Sir, you had -- does 5 it relate to the agenda item? 6 MR. SCOTT: Yes. 7 JUDGE TINLEY: Come forward, please. Give 8 your name and address to the reporter. 9 MR. SCOTT: I'm Harrison Scott from 10 Kerrville, and I think that it's kind of mandatory that we 11 get something like this out in a timely fashion, rather than 12 waiting and getting the appearance that we're putting 13 something over. So, I appreciate y'all having this meeting 14 today. 15 JUDGE TINLEY: Thank you, sir. Anyone else? 16 Any other thing to be offered by any member of the Court? 17 We'll stand adjourned. Thank you. 18 (Commissioners Court adjourned at 10:37 a.m.) 19 - - - - - - - - - - - 20 21 22 23 24 25 7-14-05 emg 31 1 STATE OF TEXAS | 2 COUNTY OF KERR | 3 The above and foregoing is a true and complete 4 transcription of my stenotype notes taken in my capacity as 5 County Clerk of the Commissioners Court of Kerr County, 6 Texas, at the time and place heretofore set forth. 7 DATED at Kerrville, Texas, this 15th day of July, 2005. 8 9 10 JANNETT PIEPER, Kerr County Clerk 11 BY: _________________________________ Kathy Banik, Deputy County Clerk 12 Certified Shorthand Reporter 13 14 15 16 17 18 19 20 21 22 23 24 25 7-14-05 emg