Allegheny County Controller Chelsa Wagner today announced an additional $1.8 million in transit funds owed to the County by the Hertz Corporation, in addition to the three-quarters-of-a-million dollars identified by her auditors last December. In total, Wagner estimates a $2.5 million total recovery, as a result of her recent audit that discovered Hertz’ underpayment of rental car taxes at the Pittsburgh International Airport from January 2008 through April 2013.
“Finding a total of $2.5 million in unpaid taxes, penalties and interest is a significant potentialrecovery for the County,” Wagner said. “Last December, we informed taxpayers about the initial discovery and vowed to dig further to determine if this problem had deeper roots. We found that it did. Our audit sends a message that the rules will be enforced across the board so everyone pays their fair share. The results are especially meaningful since rental car tax revenues are earmarked to provide funding for public transit. Given the current fiscal challenges in government, the impact of this large figure is amplified when such an infusion of cash can help restore service cuts and benefit those in our County who depend upon transit.”
After identifying $743,107 in unpaid taxes, including applicable penalties and interest, during an initial audit completed in December 2014, Wagner’s auditors investigated further, broadening their inquiry to the inception of the Rental Vehicle Tax in 2008, to determine that Hertz owes an additional $1.8 million – $840,790 in unpaid taxes and an estimated $930,099 in penalties and interest. The Controller previously disclosed the amount due to the Treasurer’s Office in April 2015, requesting the Treasurer to calculate the penalties and interest to be included in the audit findings. Since the Treasurer’s Office has not yet provided the calculation, so as to not delay its audit report, the Controller’s auditors estimated the penalties and interest amount based upon their understanding of the rules and regulations of the rental car tax.
According to County and State law, a two-dollar tax is to be collected per day, per each rented vehicle, by all rental car companies in Allegheny County, including locations at the Airport. The tax is then remitted to the County Treasurer on a monthly basis. Funds acquired through the car rental tax are required, by law, to support public transit. Wagner’s initial audit, looking at the period of May 2010 through April 2013, found that Hertz collected the fee but failed to remit $435,577 to the County. As a result, Hertz is responsible for $307,530 in penalties and interest, for a total of $743,107. Hertz paid that full amount owed for this three-year period in January, but is appealing the assessment of penalties.
Wagner’s office has informed Hertz of the final total assessment for 2008 through 2013 and expects Hertz to pay all amounts owed to Allegheny County. The following is a calculation of the total amount owed, as determined by the Controller’s audit team:
        Initial Audit Period                                                     Additional Audit Period
     May 2010 – April 2013                                                January 2008 – April 2010
Amount unpaid:             $435,577                               Amount unpaid:               $     840,790            
Penalties and interest:   $307,530                       Estimated penalties & interest: $     930,099            
     Total amount owed:  $743,107                        Total estimated amount owed: $ 1,770,889             
         Total estimated amount owed:  $2,513,996
“This sizeable recovery will give the Port Authority an unbudgeted infusion of $2.5 million that can, and should, be used to make meaningful improvements,” Wagner said. “I stand by my previous recommendation that these funds should be used to fully restore bus service in Baldwin and in other underserved areas, to meet the needs of the residents who have been suffering since service cuts occurred in 2011.”
Wagner noted that had Hertz been regularly paying the taxes it owed at the Airport beginning in January 2008, the Port Authority would have had more than $2.5 million more dollars in its coffers when it faced the decision to cut route service throughout our region.
“While we cannot turn back the clock, it is my hope that this money can inject a measure of equity in the system and accomplish what the Rental Vehicle Tax was meant to accomplish: ensure necessary, reliable service for our residents.”
Hertz has regularly been kept apprised of the audit process. Consistent with auditing standards, Hertz’ management received an advance draft of the completed audit report and was invited to submit a written response to all recommendations and findings made therein. Despite deadline extensions, Hertz elected to not respond to the audit other than to contend that the Controller’s Office should not make its findings public, pursuant to Section 5-808B.05 of the County Administrative Code. Wagner, however, believes strongly that the amount of Hertz’ potential total tax liability cannot be considered a “confidential matter” under the Administrative Code. The amount owed by Hertz is a matter of public interest and its disclosure advances continued transparency to the taxpayers. Wagner observed that public knowledge of Hertz’ delinquent payment of rental car monies is no different than the Treasurer’s regular posting of overdue drink tax accounts, which is governed by identical “confidentiality language” in the Administrative Code as that pointed to by Hertz, or in numerous other instances where the identity of tax delinquencies are disclosed publicly.
Wagner also submitted a letter to County Council today, along with the report, bringing the audit’s results to their attention.
The Controller’s Office regularly audits concession contracts with the Pittsburgh International Airport. In 2012, since the Office was already onsite at the Airport, Wagner suggested that the Office expand concession contract audits with the car rental companies to include the car rental tax, becoming the first controller to perform such audits. The car rental tax was enacted, along with the “drink tax,” in 2008. The Treasurer’s office audits all other car rental companies in Allegheny County.