Question

Facts: Frustrated by high property tax rates, residents in the Village of Williamsville voted to dissolve their village government, instead of agreeing to receive similar services (formerly provided by the Village government) from their county government, Erie County. No consideration must be paid by (or to) the county to effect this transfer. The effects of this transfer/dissolution will be that all village assets and liabilities (cash balances, buildings, infrastructure, and accounts payable) will become property and responsibility of the county, six employees will transfer to the Erie County district offices, and three employees will be involuntarily terminated and given 3 months of severance pay. The three terminated employees were responsible for Williamsville’s animal control division, which will be discontinued.

Required: You have been asked to write a brief accounting issues memo to the Erie County government files describing the accounting implications of the Williamsville dissolution. In your memo, address the appropriate accounting for the transaction: merger, acquisition, or transfer of operations? Also, address how Erie County should recognize and measure the additional assets and liabilities, and describe—broadly—the accounting implications of the discontinuation of the animal control operations and the principle for recognition of the related employee terminations. In doing so, assume that the Village of Williamsville has prepared financial statements as of the merger date. Feel free to identify other issues that should be considered, as well.

Answer 1

SOLUTION:-

Village Dissolution,

Financial Issues

The overriding 'fiscal issue' in any proposed dissolution is determining the effect of the proposal on local property taxpayers which require in depth analysis of both the village and town's budgets

Therefore

Step One:

Create a "fiscal snapshot" of current town and village activities by highlighting appropriations and revenues based on General Fund, Highway and Special District appropriations and estimated revenues.

Step Two:

Summarized and compare "Current" and "Merger" budget findings.

Step Three:

illustrate the "current" and "merger" tax rate schedules. The purpose of this particular step is to depict the total tax rate responsibilities of property owners regardless of whether their property is located within or outside the village limits.

Step Four:

Compare the property tax impact of the "current" scenario with that of the "merger"

The impact of dissolution and merger of the village will be as follows:

Village books and records. Upon the disslotion of the village, all its records, books and papers shall be deposited with the town clerk of the town in which the principal portion of such village is situated, and they shall thereupon become a part of the records of such town.

Claims and actions. No action for or against the village shall abate, nor shall any claim for or against it be affected by reason of its dissolution.

Village obligations. Unless the plan shall provide otherwise, the outstanding debts and obligations of the village shall be assumed by the town and be a charge upon the taxable property within the limits of the dissolved village, and collected in the same manner as town taxes. The town board shall have all powers with respect to such debts and obligations as the board of trustees would have had if the village had not been dissolved, including the power to issue town bonds to redeem bond anticipation notes issued by the village.

Village property. Unless otherwise provided by the plan, the property of the village shall upon diddolution vest in the town.

Unpaid taxes and assessments.

1. Whenever the plan requires the levy of a tax to pay village indebtedness and such tax is to be levied or collected at a time subsequent to the effective date of such dissolution, such tax shall be levied and collected as town taxes are levied and collected and aoolied to such indebtedness, and shall be levied in the same manner as other town taxes upon the taxable real property in that portion of the village situated within the town and shall be collected in the same manner as other town taxes.

2. Any village assessment or instalment there of which shall become due after the effective date of dissolution shall likewise be treated for all purposes as a town assessment. All provisions of the real property tax law with reference to the return of unpaid town taxes and assessments to the country treasurer shall apply to such taxes, and the country treasurer shall thereafter proceed to collect such taxes and assessments in the manner provided for the collection of town taxes and assessments.

3. If at the effective date of such dissolution there remains any uncollected village taxes theretofore levied, including delinquent assessments which are deemed unpaid taxes for purposes of collection, such taxes shall be reported to the legislative body of the country or counties by the supervisors of the town or towns in which said village was situated, and such taxes shall be re-levied upon the property originally liable.

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