When is a City Officer not a City Employee?

[XLFD]

According to the IRS section 3401(c) this never should happen: "For purposes of this chapter(Chapter 24: withholding, etc.), the term “employee” includes an officer, employee, or elected official of the United States, a State, or any political subdivision thereof, or the District of Columbia, or any agency or instrumentality of any one or more of the foregoing."
As you may know from painful experience, the IRS withholds a fair portion of your paycheck if you are an employee, and around this time of year you get a W-2 Form that gives you a record to use for when you file taxes.
That's why I was surprised when I perused the compiled 2008 W-2 Forms for Ludington employees and could find nary a one for the  Ludington City Attorney Roger Anderson. Was he not an officer, and hence an employee of the City of Ludington? Or did he have some special exception allowed by law, or perhaps he had the status of an independent contractor? I researched the law and got the following results.

1) According to state law, because of its population, Ludington is what is termed a "fourth class city". In the Act that pertains to such cities, section 38 "The City Attorney shall receive an annual salary as the council determines by ordinance." Ludington has no such ordinance dictating a salary for the CA, a violation of this state law. They have a City Attorney Agreement like this  recent one.

2009 City Attorney Agmt. p. 1

2009 City Attorney Agmt. p. 2

 
2) This document states the "City Attorney position is an annual appointment made by the mayor with City Council approval.", which echoes the City Code (section 3.5). It then describes an extensive list of duties and work to be performed by them, as per City Code (sec. 10.5). Which also states it's "Mandatory that Charter provide for duties of officers" by the State's Home Rule Cities Act. In section 2-71 the Code explains "Officer means any elected or appointed official of the city, whether full time, part time, paid or unpaid and shall include members of the various boards appointed by the city". This would seem to indicate that the City Charter classifies the CA as a City Officer, and thus an employee.

3) In section 2-80 it more clearly defines it thus: The following classes of officers and employees of the city and city agencies shall file an annual statement of financial interests with the board of ethics: (3) City attorney

4) In a 2005 decision in the Michigan Court of Appeals regarding a suit that originated from seemingly unreasonable FOIA charges placed by Manistee's ISD they found "...Although the plaintiff contended that the City was not entitled to recover these fees as the city attorney was an independent contractor, this Court found that the attorney was an “employee” as required for recovery under MCL 15.234(1). The city attorney was an employee because he was “‘hired to work for another.’”  See the top of p. 5 for this quote:

Manistee%20CA%20is%20an%20employee%202005.pdf

 

The City Attorney for Manistee at that time was a Richard Wilson, our current City Attorney, and a man who may be a bit behind in his taxes. While he writes up the next ordinance to take more of yours. 

NOTE:  We recently requested the 2009 and 2010 W-2s for the City of Ludington, and was denied the records at a price that was according to law, and local policy.  These likely continued the tax classification of the City Attorney as a non-employee, just like Roger Anderson's status was.

Don't worry, Dick and Roger, chances are none of us will alert the IRS to this oversight of yours. 

[XLFD]

New data is in.  It just so happens that the City of Ludington did consider City Attorney Roger Anderson an independent contractor/vendor as his wages and co-City Attorney Jack Bulger's wages are reported on the 2008 1099 Forms gotten through an FOIA request:

 

This confirms the fact that the City did not consider CA Roger Anderson an employee, even though the City Code confirms he is a city officer, and hence an employee by the IRS Codes.  Furthermore when we compare the numbers that are in the record for the year 2008, as is put on the current budget, there is a difference in the numbers posted on the 1099 and their City-reported numbers:

 

This difference in Anderson's reported earnings between $48,596 and $44,413 is significant and amounts to just under 10%.  Almost the same percentage exists for the $14,400 and $13,200 figures for Mr. Bulger. 

Yet there are no other lawyers in the 1099 compilation forms.  Is this extra 9% some hidden benefit they receive? 

Once again, the numbers do not match, and once again, the City Officers are getting paid more than they officially report.  Perhaps worse, the City and the City Attorney are bilking the Federal Government by not reporting this money as it should.

[Lisa O'Brien]

Is the 9% for a deferred 401K - where his actual pay is 48,596 (budgeted for), but his taxable earnings are 44,413.74 ?

[Guidothesemipsuedocaptitalistpig]

That was my thought too Lisa.

[XLFD]

Possibly, but almost all other categories in the Ludington budget lists the amount of fringe benefits and other errata received by the personnel in that section, and none is displayed in the City Attorney section.  Something you might expect for an independent contractor...

But if a 401k plan was issued by the City to the CA this would be one more certification of an employer-employee relationship to exist. 

Furthermore, I must add, whereas the IRS Code does not explicitly define "public official", section 1.1402(c)-2(b) of the Income Tax Regulations have "City Attorney" as one of their examples of such.

[XLFD]

Well, it is now official, Ludington does not have a City Attorney.  The law firm Gockerman, Wilson Saylor & Hesslin just happens to be a non-employee independent contractor for the City of Ludington.  Any member of that firm who works for Ludington, according to this filing sent to the IRS whose data is provided under the knowledge that inaccurate reporting would be subject to fraud or perjury charges, does not serve as the official with the powers of the City Attorney.  Nor does anyone else, including Susan Kasley Sniegowski who has a similar 1099 form with less cash on it for last year.

What a quandary.  Here these non-employee contractors are writing laws and policies that affect the lives of everyday Ludington citizens, including all the ones raising your fees and taxes (including the newly popular adjustments for inflation), restricting your water and sewage rights beyond the state mandates, and restricting citizens' abilities to peacefully attend meetings held at public buildings.  While they themselves avoid payroll withholding and other taxes as well as wielding the powers that come with being a City Attorney.