Pasadena Settles Claim Against Former Sheraton Pasadena Hotel Operator – San Gabriel Valley Tribune
Pasadena has received $497,000 as part of a settlement agreement stemming from unpaid hotel taxes with a former operator of the Sheraton Pasadena hotel – Urban Commons Cordova A, LLC – city officials announced on Monday, 22 august.
The settlement, signed by both parties last week, relates to a claim filed in the Delaware bankruptcy involving Urban Commons Cordova A, LLC.
The city’s claim was for approximately $885,000, consisting of nearly $277,000 in principal, $93,000 in interest and approximately $515,000 in penalties, according to a proof of claim filed in Delaware on July 23, 2021.
In a Monday, Aug. 22, statement, city leaders explained that Urban Commons had taken hundreds of thousands of dollars in transitional occupancy taxes and an assessment fund from the Tourism Business Improvement District, without remitting funds to the city on a monthly basis, as required by law.
Hotel guests pay both taxes when they book a room in Pasadena, and the tax money goes to the city’s general fund to be used for several purposes.
The $497,000 settlement allows the city to collect “a large multiple of what certain other creditors have received from Urban Commons,” according to Monday’s statement. But Pasadena’s lawsuit in a California court continues against other Sheraton Pasadena hotel operators, where the city is seeking the remainder of the unpaid hotel tax, interest and penalties.
“I am proud of Pasadena for standing up to collect the money owed to its ratepayers, which was wrongfully withheld,” Mayor Victor Gordo said in a statement accompanying the settlement announcement.
The financial troubles began, according to a December 2020 legal filing, shortly before Urban Commons made a payment under a nearly $840,000 tax refund plan agreed to in September.
The company was sued by the city earlier that year after allegedly failing to pay more than $690,800 in taxes and penalties owed to the city in 2019 and early 2020.
The amount owed has since increased due to late fees and other penalties that resulted once the debt became delinquent, according to a lawsuit filed by the city of Pasadena against the hoteliers in May 2021.
However, CFO Matt Hawkesworth began sending letters to hoteliers long before in November 2019, lawsuits allege, estimating the hotel owed the city $690,806 in taxes, penalties and interest.
Urban Commons founder Taylor Woods responded four days later after “confirming with the property that they made a very large and significant payment last week,” he wrote in an email. , asking if the city had received it.
The payment covered “basic tax payments for August and September”, Hawkesworth replied, but “July has still not been paid, nor have penalties and interest for the three late payments”.
Four months later, in February 2020, Hawkesworth followed suit, telling hoteliers they could seek a hearing on the transit occupancy tax portion of their debt. He also said they could seek a hearing on the transitional occupancy tax portion of their debt.
Woods offered a deal in an email to the city on March 2: 50% of what’s owed would be paid next week and the remaining 50% would be paid over the next three weeks, according to a lawsuit filed in May 2021. Four days later, a “split payment” of approximately “10-20%” of their total liabilities dating back to May 2019, which was applied to the outstanding TOT amount due for October, November and December 2019.
Chief Assistant City Attorney Javan Rad wrote in an email to this focus group in 2020 that every hotel in Pasadena is required to collect taxes and hold the money in a trust until let him pay the city.
It’s a process that goes like clockwork every month, Rad said in a follow-up interview.
“I’ve been with the city for 15 years and I’ve never been involved in anything like this,” he said. “When you look around in the state, I don’t see it very often either.”
There were some hiccups, of course, but Rad added at the time that he had never seen such delinquency from a major operator.
Lawyers for the defendants did not return a request for comment.
Pasadena isn’t the only city that’s had trouble with Urban Commons or its many affiliates; Long Beach also considered legal action against them. Meanwhile, a subsidiary appears to be suing a subsidiary affiliate in Sacramento.
In Long Beach, Urban Commons took over management of the Queen Mary in 2016 and has since struggled to make up for years of deferred maintenance and repairs.
The allegations were made this week in a city audit report and in court filings related to a corporate bankruptcy case involving the parent company of the Queen Mary lessee.
The City of Anaheim found during a missing hotel tax audit that two Urban Commons-associated properties paid no more than $700,000 in August 2020, but the window to file a claim in bankruptcy court s was closed, said city spokesman Mike Lyster.
The bankruptcy court asked the city to remove the lien it had placed for the taxes because it was too late to file a claim, he said.
The properties have been sending the city the tax owed since then, and the city is exploring other options to recoup the revenue, Lyster said.
The tenant, Urban Commons Queensway LLC, did not respond to a request for comment. Taylor Woods, who was among the owners charged with fraud in court filings this week, denied any wrongdoing in a Wednesday May 26 statement and said her company remains committed to the vessel.
In Sacramento, the Westin Sacramento hotel is owned by Urban Commons Riverside Blvd. LLC, which is suing EHT WSac LLC – both appear to be owned by Urban Commons or its director, Taylor Woods, and both are registered at the same Los Angeles address.
In this lawsuit, Urban Commons is suing EHT for more than $2 million in rent, fees, taxes and other payments that EHT was supposed to pay Urban Commons.