Paging The Tax Man, Should IRS Review City Council Stipends For Personal Use?

Black Rock resident Jennifer Buchanan, host of the Bridgeport Now cable access show, has asked the Internal Revenue Service to examine taxpayer-financed stipend expenditures of City Council members that “show payment to cell phone providers, Cable TV, grocery stores, drug stores, hardware stores and many restaurants.” If council members leverage stipends for personal use, must taxes be paid?

Council stipends, $9000 a year in lieu of compensation, have been debated on OIB. Theoretically, the stipends exist to cover costs associated with council responsibilities, but some members of the 20-person budget and legislative body, according to Buchanan, have taken latitude with how the taxpayer money is spent.

In a letter to the IRS requesting a review Buchanan asserts “I, like most citizens want to see my tax dollars allocated in compliance with IRS rules, just as I file my tax returns in compliance with IRS rules. It is never a good day when citizens find reason to ask for a higher governing body to investigate their local elected officials, however, sadly that day has arrived.” More from Buchanan’s letter to the IRS:

There appear to be 2 issues concerning the voting on and and disbursement of local, state and federal tax funds and the use of tax free Stipends funds by the Bridgeport CT City Council. I have enclosed official Ethics investigation request as well as documents regarding the disbursements in question. I would very much appreciate your help in investigating this matter. I have enclosed disbursement statements, Stipend disbursement statements and Bridgeport City Monthly financial analysis reports. Please note I have filed form 13909 with supporting documents. Please let me know if you wish a copy of the supporting documents.

The 20 member elected city council is the governing body to vote on and approve the city budget. The Mayor submits the budget, the most recent was 530,000,000 consisting of local tax and fees with revenue of about 300,000,000 and state and federal funds combined to make up the budget shortfall …

Many city council members are also full time city employees … The city employees all vote on the final combined funds budget.

$180,000 fund called City Council Stipends (item 51402 under Legislative Department on the general ledger), is approved to reimburse members for expenses specific to their duties. The city council members have approved and disbursed excess funds in their name from year end using the excess of the $180,000 to various charitable and religious organizations as Supportive Contributions. City Council members also have a debit card to access, which was set up so the council people would not have to pay income taxes on the stipends.

City Council members have a suite of offices, complete with computers, cable TV, Wi-Fi, copy machines, fax machines and telephones with 24 hour access at the City of Bridgeport Office building, 999 Broad Street, Bridgeport CT. The enclosed stipend statements show payment to cell phone providers, Cable TV, grocery stores, drug stores, hardware stores and many restaurants.



  1. Has anyone noticed if you read JML’s letter (when you click the link above), all the contributions add up to $2,000 (with the exception of maybe one person)? Due to the consistent contribution level, it appears the Council is specifically being told to contribute a specific amount to organizations. Does anyone have any thoughts?

  2. Lennie, the IRS needs documentation like what I provided them regarding the Andres Ayala 2012 Committee payment totaling $2,800 for wages to Pivot Ministries on Jane Street–a clear violation under IRS rules. The Pivot Ministries Van was not seen bringing voters to the pols during the last Democratic Primary.

    Andmar, what the council members did was the reverse of what Andres Ayala did–yet sort of similar. It appears the council members gave city money to the non-profits to help them behind the scenes in the election. In 2008 and 2010 Andres Ayala’s committee had surplus money left over. He could have given the surplus funds to the State of Connecticut’s CEP fund or any other non-profits in the State of Connecticut. The non-profit he chose to donate the surplus funds to was Alpha Home Inc.–his fiancée’s non-profit organization. Say it ain’t so, Godiva2011.

    Paging Lennie Grimaldi. You have commentary via e-mail. Please confirm receipt.

  3. Jennifer Buchanan, what is Form 13909? I never heard of that form. I wonder if they took a tax write-off for donations made with taxpayer money. Keep in mind the City Attorney’s Office had ruled under IRS rules, the stipends are considered income. What say Bob ‘The Troll’ Walshhh?

  4. The IRS is so funny!
    When I called them about the City Council stipends, they pulled the Joe Pesci scene were he asks the question “Funny how? I mean, funny like I’m a clown? I amuse you? I make you laugh? I’m here to fuckin’ amuse you? How da fuck am I funny? What da fuck is so funny about me? Tell me. Tell me what’s funny.”

  5. This is a group effort. Documents were gathered and reviewed and it was determined there are two questions to be asked, covered by two different departments. It is a very sad day when a governing body with complete voting control of our budget are, over a period of years, questioned in public at city council meetings and ethics complaints are filed on the ethics of voting on their own department budget and the disbursement of funds allocated for the execution of their official duties. The city council has not ever answered these accusations. I do not know if abuse has occurred within the rules of the IRS. I do not know if ethics have been violated within the rules of the IRS. I am aware of the contradictory statements by this administration, drivewaygate, the mayor did not know, then the FOI documents the CT Post reported showed he did know more than the letter to the editor from the city attorney originally started, the Parks Commission was an opinion, then it was official. I do know what these types of issues do to voters and their confidence in this city. Our state reps had an opportunity to stop part of this last year when Jack Hennessy brought forth the conflict of interest bill. Auden Grogins had the courage to add her name in support of this bill. The lack of support from our two senators and other reps was the only reason this bill did not pass. Ethic rules and the laws we all live by is the floor of acceptable behavior. It is the absolute minimum required of acceptable behavior. I expect more from my elected officials. If they will not step up and be more ethical than required, and God knows it is almost impossible to vote them out of office, we must use every tool at our disposal.

  6. Andrew C Fardy // May 6, 2014 at 6:11 pm

    This kind of larceny would not have happened if Tom White still worked for the council but as you all know he was ambushed by Brannelly and McCarthy and subsequently let go. Funny how Tom McCarthy went over the $9,000 maximum allowed on his stipend. Why are they getting away with these crimes? And make no mistake, they are crimes. Tom Sherwood and the financial people are part of the problem as this happens when they are in charge of finances. Should people be arrested for what has happened and my answer is yes. We were supposed to be able to trust these people, but we can’t.
    The people of Bridgeport started cleaning up this cesspool we call the city council during the last election. We must continue the movement and get rid of the rest of these dishonest leeches. I am tired of them wasting my tax dollars.

  7. It has been noted by wise persons the real meaning of personal integrity is indicated by what you do when there is no one looking. What values do you uphold? Integrity around money issues is obviously critical for those who handle public funds. When records of public funds are difficult to access or practically secret, the potential for corrupt behavior has an advantage as integrity will be in the dark.

    Well, we have learned in Bridgeport official watchdog positions and responsibilities have been eliminated or ignored in recent years, enough so to hear citizens ask when things look questionable, “Where is the sheriff?” At bottom, this is about taxpayer money and the City Council’s use of same in two direct instances:
    1) Following (and/or revising) an existing Ordinance regarding the use of generous stipends to assist City Council persons in receiving REIMBURSEMENT of direct business related expenses that has been kept at a level of $9,000 per year by Council vote for over a decade.
    The administration changed the REIMBURSEMENT system (without the Council completing work on the authorizing Ordinance) two years ago to a quarterly ADVANCE system with a DEBIT CARD that has allowed in some circumstances expenses that are not DIRECTLY RELATED to Council matters (or at least there is no explanation required and/or no one monitoring) as well as overruns such that funds in excess of $9,000 have been expended in a year. Carry forwards have been allowed and that would be impossible in a reimbursement system.

    By signing for a DEBIT CARD, the Council member acknowledges their understanding these funds are not to be used for charitable or political purposes. Where is the oversight? Where in the records do you see the business purpose of the amount paid through the debit card system? Often the purpose seems worthy of question.

    2) At the end of June 2013, Council members were instructed by Council President Tom McCarthy they had a special opportunity to allocate $2,000 each to non-profit organizations of their choosing. The potential $40,000 was to come from a Legislative line item called Other Services that for years has been unused by the Council year in and year out, leaving 90% or more of this money as a surplus variance that has been spent elsewhere by the City but unknown to the taxpayer because a final June 12-month statement that is audited has been unavailable until January 2014.

    Thus the purchasing department received the elections of 15 of the then-sitting Council members, and distributions were made to the listed charitable organizations in a year where primaries were being held and elections were following in November. And no one stood up to explain the behavior. And neither the City in general nor the Council specifically received any OTHER SERVICES as the line item suggests. Who is served? Not the taxpayer certainly. And to whom is the gratitude of the respective non-profit recipients due? To the specific Council members making the request without a public meeting, agenda, minutes or vote? Or did letters come to the City? Or to individual taxpayers? I have seen nothing, personally.

    3) Does money talk in Bridgeport? To whom does it talk remains to be seen. But City Council members have heard this information raised on multiple occasions as I address them at most semi-monthly public speaking sessions. Only one Council member has chosen to talk about this, but that person has not done anything to move the TABLED stipend Ordinance into action to address the stipend issues. And no one wants to talk about the $2,000 NON-STIPEND gifts. Several Council members who elected to make charitable gifts of taxpayer funds lost their positions on the Council.

    I have asked on more than one occasion, where is the Sheriff who will call a halt to bad behavior? Is that person Local, State or now perhaps Federal? Some Council members have been unhappy Stipends were not fully tax free. They had a legal opinion researched several years ago that may have been ignored in the creation of the DEBIT CARD system. In any case, if the taxing authorities get interested we may find an answer to questions that have gone ignored for too long. Time will tell.

  8. A little history on the stipend.
    First you have to realize if this or any administration were to pass judgement on what is an appropriate use of the funds and what is not, then that administration would immediately have an upper hand in getting the council to do what the administration wants them to do. Pretty much the same as being a city employee sitting on the council. Not necessarily a good situation.
    The council could adopt rules, but who should enforce them? The council president? Again, you are increasing the power of one individual in the legislative process. Not necessarily a good situation.
    Or you institute a policy of self policing. And that is what you have today. Not the best, but not the worst.

  9. Ethically speaking, the city should establish some guidelines and some level of documentation. The city should also have this documentation readily available for review. However, since the city has required a signed acknowledgement from the council members prior to getting their debit card or requesting funds, they have absolved themselves from any wrongdoing. They have shifted any tax liability onto the council members and the council members have gleefully accepted this.

  10. To add some specificity, there is an ordinance regarding city council stipends that has not been amended to reflect the changes McCarthy has made. There were also guidelines used based on input from a tax attorney in 2003. I used to share these with council members frequently. It appears McCarthy and the Finch administration have established new uncodified rules that provide them another way to control the city council. Any city council members asking for clarification? Are you kidding?

  11. Thank you, Tom.
    If memory serves correctly, I think the attorney you are referring to was originally retained by Joe Ganim for his personal issues with unreported income. And then to avoid more taxing issues (or to get the city to cover part of the fees), the tax attorney was asked to look at the stipend account. But whatever the reason, you can be sure Joe was not looking out for the well-being of the council members.

  12. Bob,
    Yes, there was resentment of Ganim’s administration adopting guidelines that deemed some expenses as taxable. Certain council members resented that and wanted it changed. It appears McCarthy and the Finch administration have devised a way to relieve the city from collecting and reporting taxes on earned income, having issued 1099s in the past.
    Using funds from a city department budget, rather than their stipends to make ‘donations’ in council members’ names, completely avoiding the reporting of what should have been from their stipends and taxable.
    Hopefully, the IRS will respond to Jennifer and look into this issue.

  13. But the bigger question is why is the IRS going to get involved???
    Firstly, the city giving money to non-profits is not a concern of the IRS. Federal, state and local money flows to non-profits on a regular basis whether it is part of Bush’s Thousand Points of Light, Block Grants Funds, education funding going to charter schools, etc. The money did not go to a council member and in turn they wrote checks to the non-profit.
    Secondly, let’s look at the big picture instead of thinking small. Even if all council members spent $9,000 for a total of $180,000, is anyone accusing all of them for using all the money for personal use? NO.
    Some of them may be using some of the money for personal enrichment. Is anyone making a documentable estimate as to what this might be? I haven’t seen it.
    If 25% of the members are misusing 25% of the funds, that works out to $12,500 based on $200,000 total. Now if we assume the average council member’s tax bracket is 20%, that means maybe the Feds are short $2,500 in tax revenue. How much do you think the IRS should spend trying to recover it?
    And the evidence is someone decided a cable bill is not reimburseable. Even if that council member is going to say they need it to watch local cable news, for Internet access and for cell phone use. And you think the IRS is going to want to get in the middle of that pissing contest?
    I think not.
    I believe the IRS will say clean up your own backyard before you ask us to help.

  14. Bob, I guess you are saying it’s alright to steal a little bit rather than a lot. People spending money for cable bills and at least 50-plus times at Stop&Shop are stealing taxpayer money. BTW you are wrong about the IRS, they are sending a friend of mine dunning letters for $1500 he owes in taxes and they promise legal action if the money isn’t paid. Donating taxpayer money to the PAL and to the old-age marching band is illegal no matter how people try to BS the issue.

  15. Bob, the point of Jennifer’s request to the IRS is to review examples of individuals not paying taxes on taxable income and the city (McCarthy and Finch administration) being complicit. One would hope the IRS would be willing to review the guidelines the city is using and determine if they are compliant with tax code. The examples and spending patterns Jennifer refers to are all documented. We have become accustomed to the arrogance of some city council members’ use of their stipends. Agreed, the IRS will not get involved in what you call a “pissing contest,” but if they did not pay taxes on taxable income, and the city is involved in the process, it is reasonable to expect the IRS will review. The amount does not matter.

  16. Also remember Tom, if the city did not cut a 1099 it does not mean a councilor did not record some of the stipend as taxable income on their own forms. It is just like you are better off claiming $100 in Internet purchases on the state form and paying $6. This way you may have underrecorded your liability than to claim $0 in which case you are avoiding taxes completely.


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