Kent Tracks Income Tax, Not Worker Status, on Construction Projects
Officials say tracking of income tax payment an imperfect system; no method in place for checking legal or illegal status
How Kent tracks construction workers and their income tax payments is an imperfect system, city officials say, and it depends largely on contractors doing "the right thing."
The issue came to light Thursday after a revelation that 23 undocumented workers from Mexico and Central America were working on a private student housing project in Kent. The Akron Beacon Journal reported the workers were employed at The Province at Kent, a 596-bed student housing construction site on South Lincoln Street owned by Columbus firm Edwards Communities Development Company.
The city keeps tabs on whether a reported worker is paying income tax on their wages, but it does not keep an eye on whether all workers are reported or if there are undocumented migrant workers at construction sites. Under federal law, business owners — in this case, construction contractors — are required to verify whether an employee is legally allowed to work in the U.S. and file the appropriate tax forms.
"We don’t actually perform any role in terms of the individual’s work status, whether or not they’re legal or illegal," Kent Budget and Finance Director Dave Coffee said.
What Coffee's office does try to keep a close eye on is how much income tax is paid either individually by workers or a business entity operating in Kent.
"We do have processes in place certainly to try to, first of all, inform contractors of their tax obligations, and secondly to set up some processes by which we attempt to enforce their adherence and compliance with those things," Coffee said.
That process starts at the Kent Community Development Department, where contractors who obtain building and construction permits must file certain information pertaining to number of employees on a job and the contractor's dollar value of their portion of the construction job.
"Any contractor that comes in and pulls a permit is told they are required to file income tax information," said Bridget Susel, acting head of the community development department.
The development department takes the tax information and passes it on to the finance department, which then forwards it to the Regional Income Tax Agency. Kent contracts with RITA for income tax collection services.
Both Coffee and Susel concede that it's an imperfect system, and some contractors can slip through the cracks. In the Province case, the project has had 62 different sub-contractors working at the site.
"It is by and large predicated on people doing the right thing,” Coffee said. "Sometimes subs have subs. Not all of those certainly are subs that have payrolls as such, depending on their size and amount of the project they’ve got."
Susel said the city conducts spot checks to see if employees are paying income tax on their wages, but the city only does those checks on prevailing wage projects that include state or federal money and are bid by the city. It's a limited number of projects compared to Kent's construction boom, and those checks only cover one or two employees on a job.
"You could not physically interview every worker on a job" because the city lacks the manpower to do so, she said.
Those spot checks exclude private projects, such as the Province construction. The city's downtown construction with development partner Fairmount Properties does not include any state or federal money directly, so it would not be subject to such checks, Susel said.
And the downtown projects managed by Kent State University (new hotel) and PARTA (transit center) also aren't subject to spot checks. It's up to those agencies and their contractors to keep an eye on the employment eligibility of the crews building the new buildings.
Coffee is confident the system works for the vast majority of contractors.
"What can be said with a degree of confidence is that, overall, the construction activity in Kent has had a definite positive impact on our income tax revenue," Coffee said. "During 2011 we experienced an overall growth rate of 2.48 percent, or $258,734, over our 2010 fiscal year income tax collections. During this same period we actually saw a decline in income tax revenue derived from the public education sector, including (Kent State) and Kent City Schools, which traditionally have been the source of a significant portion of our total income tax receipts."
The city hasn't identified any similar problems with other construction projects, he said.
Like Coffee, Susel is confident Kent's system of tracking construction workers' income tax payments works. She believes the situation with the Edwards Communities apartment project was the exception and not the rule for Kent construction.
"It was an anomaly," Susel said.