City of Oak Creek

Common Council Report

Meeting Date:  11/20/07

Item No.:        

Recommendation:   That the Common Council consider a request for a refund of a portion of late charges for a zero-interest home improvement loan for property at 331 E. Evandale Dr.

Background:   For many years, the City administered home repair loans, both low-interest and zero-interest, for Milwaukee County, with loan proceeds paid to the County, but some late fees due to the City.  In 1997, a no-interest loan was given to the property owner at 331 E. Evandale.   The homeowner made 8 of the 60 monthly payments from 7/97 -2/98 before defaulting on the loan.  When the homeowner passed away recently, the heir, Mr. Anthony Cimermancic, decided to sell the property.  He then became aware of the lien on the property for the delinquent loan and late fees. Although there was no interest due on the balance of the outstanding loan itself, the loan contract specified that late fees were to accrue by a specific formula for non-payment. 

Mr. Cimermancic paid the amount in full, but has asked for a refund of a portion of the late charges. The outstanding loan balance was $2,639.00 and late fees amounted to $11,529.06, for a total payment of $14,168.06.  After reviewing the issue with the City Attorney, staff has determined that the City had calculated the late fees correctly based on the loan documents. 

In his request letter (attached), Mr. Cimermancic suggested his own calculations that would result in his paying $3,269.52 in late fees, with a refund to him of $8,259.54. 

Following are three possible options for the Council to consider:

1.         Accept Mr. Cimermancic’s calculations and approve a refund of $8,259.54.

2.         Deny Mr. Cimermancic’s request and retain the late fees amount of $11,529.06, which was based upon the calculations made by the City in accordance with the loan             contract.

3.         Offer a compromise by reducing the late fee amount by 50%, or another percentage figure.

Due to the unusual circumstances in this case, staff would support reducing the amount by 50% or another percentage.

Fiscal Impact:  The City will turn over the loan balance amount of $2,639.00 to Milwaukee County.  If the City approves Mr. Cimermancic’s request, the City’s revenue from the late fees will be reduced by $8,259.54.  If a compromise is offered, the City’s revenues will be reduced by the amount of the refund; e.g. a 50% reduction would result in a refund to Mr. Cimermancic in the amount of $4,129.77.

The City has one other outstanding low interest loan in default; it is possible that the Council’s decision in this case could affect a future settlement on that loan.

                                                Respectfully submitted,

                                                Patrick DeGrave, City Administrator

Prepared by & fiscal review by;

Beverly A. Buretta, CMC

City Clerk/Comptroller