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CC AG PKT 2004-03-08 #M
AGENDA REPORT DATE: March 8, 2004 TO: Honorable Mayor and City Council THRU: John B. Bahorski, City Manager FROM: Pamela Arends -King, Director of Administrative Services/Treasurer SUBJECT: The Seal Beach Inn and Gardens Appeal of the 10% Late Payment Penalty for the Third Quarter 2003 Transient Occupancy Tax SUMMARY OF REQUEST: Staff requests Council uphold the 10% late payment penalty The Seal Beach Inn and Gardens was assessed for late payment of the third quarter 2003 Transient Occupancy Tax. BACKGROUND: Marjorie Bettenhausen - Schmaehl and Harty Schmaehl the owners /administrators of The Seal Beach Inn and Gardens are currently appealing the 10% late payment penalty of the Transient Occupancy Tax (TOT) of $2,004.60 for the third quarter of 2003. The 10% late payment penalty was assessed because The Seal Beach Inn and Gardens did not submit the third quarter 2003 Transient Occupancy Tax (TOT) in a timely manner. Section 22- 29 of the City Code states each hotel operator shall, on or before the last day of the month following the close of each calendar quarter, or at the close of any shorter reporting period which may be established by the tax administrator, make a return to the tax administrator, on forms provided by him/her, of the total rents charged and received and the amount of tax collected for transient occupancies. At the time the return is filed, the full amount of the tax collected shall be remitted to the tax administrator. The third quarter 2003 TOT was due on or before October 31, 2003. On January 22, 2004 during the six -month review of all general fund revenues staff discovered The Seal Beach Inn and Gardens did not submit the third quarter 2003 TOT plus penalty and interest that were due on or before October 31, 2003. Also, it should be noted that appropriation of taxes for personal use is a felony in California. Further, pursuant to Code section 22 -30, the hotel could have been charged an additional 10% and 25% penalty in addition to the one 10% penalty. However, staff has imposed only a 10% penalty. In response to the City's request, Mr. Schmaehl contacted the City on January 23, 2004 and said the reason the third quarter 2003 TOT was not paid was because the hotel experienced difficult financial times due to legal fees and workers compensation insurance and the TOT for the third quarter was used to pay those expenses. He also requested the City let the TOT be paid back in installments plus interest but wanted any penalties to lie waived. On January 26, 2004, staff Agenda Item /V ■ The Seal Beach Inn and Gardens appeal of the late payment penalty. March 8, 2004 informed Mr. Schmaehl it was willing to work out a payment schedule for the delinquent TOT, interest and a 10% late payment penalty. Staff also informed Mr. Schmaehl that The Seal Beach Inn and Gardens would have to submit the TOT on a monthly basis to the City as of February 2004. This information was confirmed in writing to the Schmaehl's. RESPONSE TO APPELLANTS' ALLEGATIONS: While not relevant to this appeal, the Schmaehls have asserted a number of concerns about city representatives. The singular issue before City Council is whether to waive the penalty. However, staff believes it is important to point out that the City has been very reasonable and professional in its dealings with the hotel. The City Manager requested a TOT audit be conducted on all the hotels located within Seal Beach before the City was even aware of the nonpayment of the TOT by the Schmaehls. The City Attorney, the auditing firm staff and City Staff have treated the Schmaehl's in a respectful and professional manner. It should be noted Mr. and Mrs. Schmaehl did not bother to contact the City regarding the non - payment of the third quarter 2003 TOT, instead the City had to contact them and request immediate payment of the tax. It should also be noted the City has been more than willing to work with The Seal Beach Inn and Gardens in the past. After the "9/11" terrorist attack, Mr. Schmaehl contacted the City and stated the hotel could not make the TOT payment due to the "9/11" terrorist attacks. Apparently their bookings dropped off significantly and the hotel used the TOT to pay business expenses such as payroll. Because "9/11" seriously affected the travel industry it was understandable the hotel could have ran into difficulties. Also, the fact that Mr. Schmaehl contacted the City before the TOT was due indicated they were doing their part in trying to resolve the issue of paying the TOT. The City worked out a payment schedule for the delinquent TOT due for the third quarter 2001 with only 4 1 /2% interest and no penalties were assessed. The delinquent tax plus interest was paid on schedule. This time, however staff had to initiate the request. As explained the City could have charged The Seal Beach Inn and Gardens an additional two penalties making the total amount of penalties due to be 45% of the total TOT due for the third quarter 2003, but only charged one 10% late payment penalty and 6% interest instead of the 0.5% per month or fraction permitted by the code, and agreed to a reasonable payment schedule. Therefore the 10% penalty is reasonable and should not be waived. RECOMMENDATION: Staff recommends the 10% late payment penalty for the third quarter 2003 TOT The Seal Beach Inn and Gardens was assessed not be waived. Attached is a copy of the City Code and other relevant correspondence. ■ The Seal Beach Inn and Gardens appeal of the late payment penalty. March 8, 2004 __ , a g..ezet, j Pamela Arends -King Director of Administrative Services/Treasurer NO ' H D 'PRO . , IP . • Ay if , :. Bahorski 4 / --- - - - Manager • S 22 -23 Taxation S 22 -24 • Article IV. Uniform Transient Occupancy Tax. Section 22 -23. Short Title. •This article shall be known as the "Uniform Transient Occupancy Tax Ordinance of the City of Seal Beach." (Ord. No; 685, S1) Section 22 -24. Definitions. For the purposes of this article, the following words and phrases shall have the meanings respectively ascribed to them by this section: Tiotel. Any structure, or any portion of any structure, which is occupied or intended or designed for occupancy by transients for dwelling, lodging or sleeping purposes, includes any hotel,-inn, tourist home or house, motel, studio hotel, bachelor hotel, lodging house,.- rooming house, apartment house, dormitory, public or private club, mobile . home or house trailer at a fixed location or other similar structure or portion thereof. • Occupancy. The use or possession, or the right to ?the use or possession of any room -or rooms or portion thereof, in any hotel for dwelling, lodging or sleeping purposes. . Operator.' The person who is proprietor of -the hotel, whether in the capacity of owner,- lessee,- sublessee, mortgagee in possession; licensee or any other capacity. Where the operator performs his functions through a managing agent of any type or character other than an employee, the managing agency ,shall also be deemed an for the purposes of this ° article and shall have. the same duties and liabilities as his principal. Compliance with the provisions of this article by either the principal or the managing agent shall, however, be considered to.be compliance by both. - Person. Any individual, firm, partnership, joint venture, association, social club, fraternal organization, joint stock company, corporation, estate, trust, business,. trust, receiver, trustee, syndicate or any other group or combination acting as a unit. gent. The consideration charged, whether or:. not received, for the occupancy of space in a hotel valued in money, whether to be received in money, goods, labor or otherwise; including all receipts, cash, credits and property and services of any kind or nature, without any deduction therefrom whatsoever. Tax Administrator. The City Treasurer. 5216 (Seal Beach 12/94) S 22 -24 Seal Beach City Code S 22 -26 Transient. Any person who exercises occupancy or is entitled to occupancy by reason of•concession, permit, right of access, license or other agreement for a period of thirty consecutive calendar days or less, counting portions of calendar days as full days. Any such person so occupying space in a hotel shall be deemed to be a transient until the period of thirty days has expired unless there is an agreement in writing between'the operator and the occupant providing for a longer period of occupancy.' In determining whether a person is a transient, uninterrupted periods of time extending both prior and subsequent to the effective date of this article may be considered. (Ord. No. 1182, S1) • Section 22 -25. Imposition: Amount. Where Payable. For the--', privilege of occupancy in any hotel, each transient is subject to and shall pay a tax in the amount of nine percent (9 %) of:the- rent charged by the operator.` Such tax constitutes a - debt owned by the transient to the City which is distinguished only by payment to the operator or to the City. The transient shall pay the tax to the operator of the hotel at the time the rent is paid. If the rent is paid in installments, a proportionate share of the tax shall , be paid with each installment. The unpaid tax shall be due upon the transient's ceasing to occupy space in the hotel. If, for any reason the tax due is not=paid to the operator of the hotel, the tax administrator may require that such tax shall be paid directly to the tax administrator. (Ord•. No. 1248, S1) Section 22 -25.1. Liability of Person Subletting Room.. In the . event that an agreement exists between the hotel and any person for occupancy, as hereinbefore defined, for a period in excess of thirty (30) days -and in the event that such person allows occupancy by another as subtenant, guest, or permittee, the person who has made the agreement with the hotel as aforesaid shall be subject to and shall pay the tax provided for herein. (Ord. No. 1182, S3) Section 22 -26. Persons Deemed Exempt From Tax. No tax shall be imposed upon: (a) Any person as to whom, or any occupancy as to which, it is beyond the power of the City to impose the tax herein provided; - (b) Any federal or state officer or employee when on official business; (Seal Beach 12/94) 5217 S 22 -26 Taxation S 22 -28 (c) Any officer or employee of a foreign government who is exempt by reason of express provision of federal law or international treaty. No exemption shall be granted except upon a claim therefor made at the time rent is collected and under penalty of perjury upon a form prescribed by the tax administrator. (Ord. No. -685, S4) Section 22 -27. Collection: Advertising That Payment of Tax Not Required Prohibited. Each operator shall collect the tax imposed by this article to the same extent and at the same time as the rent is collected from every transient. The amount of tax shall be separately stated from the amount of the rent charged, and each transient shall receive a receipt for payment from the operator..: No operator of a hotel shall advertise or state in any manner, whether directly or indirectly, that the tax or any part thereof will be assumed or absorbed by the operator, or that it will not be added to the rent, or that, if added, any part will be refunded except in the manner hereinafter provided. • (Ord. No. 685, S5) Section 22 -28. Transient Occupancy Registration Certificate Within thirty days after the effective date of this article, or within thirty days after commencing business, whichever is later, each operator of any hotel renting occupancy to transients shall register such hotel with the tax administrator and obtain from him a "Transient Occupancy Registration Certificate" to be at all times posted in a conspicuous place on the premises. Such certificate shall, among other things, state the following: (1) The name of the operator; (2) The address of the hotel; (3) The date upon which the certificate was issued; (4) "This. Transient Occupancy Registration Certificate signifies that the person named on the face hereof has fulfilled the requirements of the Uniform Transient Occupancy Tax Ordinance by registering with the Tax Administrator for the purpose of collecting from transients the Transient Occupancy Tax and remitting said tax to the Tax Administrator. This certificate does not authorize any person to conduct any unlawful business or to conduct any lawful business in an unlawful manner, nor to operate a hotel without strictly complying with all local applicable complying with all local applicable laws, including but not limited to those requiring a permit from any board, 5218 (Seal Beach 12/94) S 22 -28 Seal Beach City Code S 22 -30 commission, department or office of this City. This certificate does not constitute a permit." (Ord. No. 685, S6) Section 22 -29. Report and Remittances Each operator shall, on or before the last day of the month following the close of each calendar quarter, or at the close of any shorter reporting period which may be established by the tax administrator, make a return to the tax administrator, on forms provided by him, of the total rents charged and received and the amount of tax collected for transient occupancies. At the time the return is filed, the full amount of the tax collected shall be remitted to the tax - administrator. The tax administrator may establish shorter reporting periods for any certificate holder if he deems it necessary in order to insure 'collection of the tax and he may •- require further information in the return. Returns and payments . are due immediately . upon cessation of business for any reason. All taxes collected by operators pursuant to this article shall be held in trust for the account of the City until payment thereof is made to the tax administrator. (Ord. No. 685, S7) Section 22 -30. Penalties for Failure to Remit Tax When Due. (a) Original Delinauencv. Any operator who fails to remit any tax imposed by this article within the time required shall (- pay a penalty' of ten percent (10 %) of the amount of the tax in addition to the amount of the tax. (b) Continued Delinauencv. Any operator who fails to remit any delinquent remittance on or before a period of thirty days following the date on which the remittance first became delinquent shall pay a second delinquency penalty of ten percent (10 %) of the amount of the tax in addition to the amount of the tax and the ten percent (10 %) penalty first imposed. (c) Fraud. If the tax administrator determines that the 'nonpayment of any remittance due under this article is due to fraud, a penalty of twenty -five percent (25 %)of the amount of the tax shall be added thereto in addition to the penalties stated in paragraphs (a) and (b). (d) Interest. In addition to the penalties imposed, any operator who fails to remit any tax imposed by this article shall pay interest at the rate of one -half of one percent (.5 %) per month or fraction thereof on the amount of the tax, exclusive of penalties, from the date on which the remittance first became delinquent until paid. (Seal Beach 12/94) 5219 S 22 -30 Taxation S 22 -32 (e) penalties Merged With Tax. Every penalty imposed and such interest. as accrues under the provisions of this section shall become a part of the tax herein required to be paid. (Ord. No. 685, S8) §ection 22 -31. Failure of Operator to Collect and Report Tax : Determination of Tax by Tax Administrator: Notice and Hearing. If any operator shall fail or refuse to collect the tax and to make, within the time provided in this article, any report and remittance of such tax or any portion thereof required by . this article, the tax administrator shall proceed in such manner as he may deem best,to obtain facts and information on which to his estimate of the tax due: As soon as the tax administrator shall procure such facts and information as he is able to obtain upon which.to base the assessment of any tax imposed by.this article and payable by any operator who has failed or refused to collect the same and make such report and remittance, he shall proceed to determine and assess against such operator the tax, interest and penalties provided for by this article. In case such determination is made, the tax administrator shall give a notice of the, amount so' assessed by serving it personally or by depositing it in the United States mail, postage prepaid,--. - addressed to the operator so assessed at his last known place of address. Such operator may within ten days after the serving or mailing of such notice make application' in writing °to the tax administrator for a hearing on the amount assessed. If application by the operator for a hearing is not made within the time prescribed, the tax, interest and penalties, if any, determined by the tax administrator shall become final and conclusive and immediately due and payable. If such application is made, the tax, administrator shall give not less than five days written notice in the manner prescribed herein to the operator to "" show cause at a time and place fixed in such notice' why the amount specified therein should not be fixed for such tax, - interest and penalties. At such hearing, the operator may appear and offer evidence why such specified tax, interest and penalties should not be so fixed. After such hearing the tax administrator shall determine the proper tax to be remitted and shall thereafter give written notice to the person in the manner prescribed herein of such determination and the amount of such tax, interest and penalties. The amount determined to be due shall be payable after fifteen days unless an appeal is taken as provided in Section 22 -32. (Ord. No. 685, S9) Section 22 -32. Appeal. Any operator aggrieved by any decision of the tax administrator with respect to the amount of such tax, interest and penalties, if any, may appeal to the City Council by filing a notice of appeal with the City Clerk within fifteen days of the serving or mailing of the determination of the tax due. • 5220 (Seal Bach 12/94) S 22 -32 Seal Beach City Code S 22 -34 The City Council shall fix a time and place for hearing - such appeal, and the City Clerk shall give notice in. writing to such operator at his last known place of address. The findings of the City Council shall be final and conclusive and shall be served upon the appellant in the manner prescribed above for service of notice of hearing. Any amount found to, be due shall be . immediately due and payable upon the service of notice. (Ord. No. 685, S10) . Section 22 -33. -Records to be Kept for a Period of Three Years. It shall be the duty of every operator liable for the collection and payment -to the city of any tax imposed by this_article to keep and preserve for a period of three years, all records as may be- necessary - to determine_the amount of such.tax as he may have been liable for the collection of.and payment to the city, which records the tax administrator shall have..the -right to inspect at all reasonable times. (Ord. No. 685, Sii) - Section 22 -34. Refunds. .. (a) Whenever the amount of any tax, interest or,penalty has been overpaid or.paid.more than once, or has been erroneously or illegally collected or received by the city under -this article it may be refunded as provided in paragraphs (b) and, f" (c); provided, a claim in writing therefor, stating under . penalty of perjury the specific grounds upon.which the claim is founded, is filed with the tax.administrator within three years of the. date of payment. The claim -shall be on forms furnished by the tax administrator. . (b) An operator. may claim a refund or take as credit against - taxes collected and remitted the amount overpaid,'; paid more than once or erroneously or illegally collected - or received when it is established in a manner. prescribed by the tax administrator that the person from whom the'tax has been - collected was not -a transient; provided, however,. that - neither a -refund nor a credit shall be allowed unless the ' amount of -the tax so collected has either been refunded to the transient or credited to rent subsequently payable by the transient to the operator. . (c) A transient may obtain a refund of taxes overpaid or paid more than once or erroneously or illegally collected or received by the city by filing a'claim in the'manner provided in paragraph (a) of this section, but only when the .tax was paid by -the transient directly to the tax administrator, or -when the transient, having paid the tax to the operator, establishes to the satisfaction of - the tax - administrator that the transient has been unable to obtain a. refund from the operator who collected the - tax. ' (Seal Beach 12/94) 5221 S 22 -34 Taxation S 22 -36 (d) No refund shall be paid under the provisions of this section unless the claimant establishes his right thereto by written records showing entitlement thereto. (Ord. No. 685, S12) Section 22 -35. Action by City to Collect. Any tax required to be paid by any transient under the provisions of this article shall be deemed a debt owned by the transient to the City. Any such tax collected by an operator which has not been paid to the City shall be deemed a debt owned by the operator to the city. Any person owing money to the City under the provisions of this article shall be liable to an action brought in the name of the City for the recovery of such amount. (Ord. No. 685, S13) Section 22 -36. Violations of Provisions of Article Deemed Misdemeanor: Penalties. Any person violating any of the provisions of this article shall be guilty of a misdemeanor and shall be punishable thereof by a fine of not more than five hundred dollars or by imprisonment in the county jail for a period of not more than six months or by both such fine and imprisonment. Any operator or other person who fails or refuses to register as required herein, or to furnish any return required to be made, or who fails or refuses to furnish a supplemental return or other data required by the tax administrator, or who renders supplemental return or other data required by the tax administrator, or who renders a false or fraudulent return or claim, is guilty of a misdemeanor, and is punishable as aforesaid. Any person required to make, render, sign or verify any report or claim who makes any false or fraudulent report or claim with intent to defeat or evade the determination of any amount due required by this article to be made is guilty of a misdemeanor and is punishable as aforesaid. (Ord. No. 685, S15; Ord. No. 1182, S4) t • 5222 (Seal Beach 12/94) . . , Seal Beach City Code i . . .. . . • . . . . .. . , . . . .. . . . .. . . . . . . . . . - .. _. . . . . . - .. . . . . . . . . - . . . . . .. . , . . . . . . - . . . ..., . . .: . :..:: . . . , ( . . . . . . . .. . . ., . _ . -... . . ... . . . . . . , . . . . - ... . . . „. . . . .• - . _ - . ,,.. . . . : . . _ . . .. . . - .. -• . . . , . . . ( 5223 . . r t .,; x ri yz M .x 's- ' '3" N 2 b ` 7 tt ? -- -. rya f t ' . : t �.t" € - ,yr - z� � a 1 F -_, � ; t,.r -? �...i' <..z ".4. :A 3� s x Ls. .z,} '--,. _"\ , Od-, w , . 'l r � { c "G f .r y5, 4.-2-..• p q y k 4�� � � L �$ .t 0.�.. �F"'. � v �`SEi'tt Y 5 - , .t T z -,r-- v z 3 li ,r -j r s rra r .+ � �„� z 1 � � � ,t � x � .� r � r�tRf � , i 4 - s ,, - $' F .� y<. � � -c, 5 G T t „v' � '�. a � s ,� © �pHPQi?q ? s "^ � S— '' r?� tom s r � � �� # V fi _ � � � �.; s �.. '�` �. - ,. c s 7, r ,L. -, `.Y' ' -. , t- rt , �T C1Tl F 1 ,- ; `Z) ki, lCzlL -0-4 �E£ :-" r ' w y `y - � ", 1-.- t x � , 4 - -- > t j x .- s (HEA ''' QLIfCQf�RttA - , - '- j .':� - ., -i ..u •`�'3. 2 x? r' s r .Y ,�t-w, r. ti a -, :. «� .... . -_ �.. t. . -. ^ r 'FJ��� �Jrt „„_...L.„:. �� X._�� 4 .s c - 5 � S .:-.." . ..... , - , 1:- - :=.- , --; - '� F ; z i 7 �,s r �”. F 4 -(` r ' ;. , k"'j Y G _, February 25, 2004 Marjorie Bettenhausen Schmaehl • Harty Schmaehl Innkeepers/Owners The Seal Beach Inn and Gardens P.O. Box 1492 Kamiah, Idaho 83536 Dear Mr. and Mrs. Schmaehl, This letter is to inform you per my conversation with the City Manager, John B. Bahorski, the late payment penalty for the third quarter 2003 Transient Occupancy Tax has not been waived. Your appeal to the City Council of the late payment penalty is scheduled for the March 8, 2004 council meeting. The council meetings start at 7:00 p.m. If you have any questions regarding the appeal please do not hesitate to contact me. Sincerely, • �� Pamela Arends -King Director of Administrative Services/Treasurer cc: John B. Bahorski, City Manager FROM : HEARTHSTONE FAX NO. : 2089352422- + Feb. 23 2004 10:04AM P1 e/ ) ■ FP/ .-1111111PFS*)Y- ar.,4 A ° WI 02/23/2004 Sea! I B � h To: City Clerk �dC2 6 IN City of Seal Beach 5 43 ( — L I 7- and Gar Re: Request to Schedule an Appeal to The City Council We hereby request that time be assigied on the city council's agenda, as soon as possible, for our attached letter of appeal to be read and considered. Most councilpersons are expecting this matter to be considered. We ask that the letter be copied for each councilperson and given to them today, and otherwise be held in confidence. We can be reached at (208) 935 2322, !ax (208) 935 2422. Thank you, Maijorie Bettenhausen- Schmaehl Owner /Administrator The Seal Beach Inn & Gardens 212 5th Street, Seal Beach, CA 90740 -6115 (562) 493 -2416 .7 .4mmipir A FEB -23 -2004 10:07 2089352422 + 97/ P.01 FROM : HEARTHSTONE FAX NO. : 2089352422- + Feb. 23 2004 10:05AM P2 • � .�. -ail "Nr=i,"' te. 02/23/2004 ) -1.77L To: The Seal Beach City Council T � Beach City of Seal Beach, CA 90740 INN and camas Re: Appeal for waiver of penalty Dear Men hers of The Seal Beach City Council; The Seal Beach Inn and Gardens is the city's oldest continually operating business, which I have operated as a country inn for the past 27 years. In those years, The Inn has brought fame and acclaim to Seal Beach. We have been featured on Japanese TV daily for one week, featured on The Travel Channel, with extensive coverage given to the downtown shops and pier, were on the back of an Uncle Ben's Rice box for 5 years, have been included in numerous travel guides and major magazines including Glamour, Travel Holiday, as well as many others, including Country Inn, which designated The Inn as one of America's top 12 country inns. The City Council issued a resolution commending our contributions to the city. Even now, a major national magazine is considering an article about The Inn. Such an article would be a boon for Seal Beach businesses. During our years of operation we collected and paid to the city of Seal Beach transient occupancy tax (TOT) in the range of one and a half to two million dollars. All The Inn's taxes are now fully paid. These taxes were paid in full and on time, with the exception of 9/11, which was paid in installments and with interest, and the third quarter 2003, two extraordinarily anguishing periods in The Inn's operation. The 3Q 2003 problem was caused by circumstances beyond our control, one major factor of which was that a dishonorable employee who lived on The Inn's premises refused to leave after he was terminated. To remove him cost over $20,000 and took months of expensive legal effort, major lost revenues, ex-pensive rents and replacement staff, all during a time of year when business is naturally slower. Added to this was the doubling of workmen's comp rates and required deposits of $11,000 for the policy. Ms Arends -King has called for an audit dour personal federal income taxes and private bank records and business records for the past 3 years, because we were late with ow 3Q 2003 payment, which has been made in full, with interest. While there are reportedly some hospitality facilities in Seal Beach which may have held back TOT from the city, The Inn is not among them. Frankly, a 30 minute spot check of several of our TOT submissions would show all our inputs and payments were made in full, were complete and accurate. If it is the Council's pleasure that such an extensive audit be conducted, we are prepared to do so, but we submit that to involve our personal taxes and bank records is not a legitimate demand for scrutiny by Ms Arends -King and we ask that The Council not continue to allow her demands for this personal and private information. Because we were late with the 3Q 2003 TOT, we have been subjected to extraordinary harassment and humiliation by Ms Pamela Arends -King, as well as others on her behalf, 212 5th Street, Seal Beach, CA 90740 -6115 (562) 493 -2416 FEB -23 -2004 10:08 2089352422 + 96% P.02 FROM : HEARTHSTONE FAX NO. : 2089352422- + Feb. 23 2004 10:06AM P3 ti namely Mr. Abbe, a city attorney and Mr. Acocello, the city auditor. The city sends 4 monthly utility bills to our out-of-state address. They also are paid promptly. Yet, even after we furnished our telephone number to Ms Arends -King, by way of the city manager, asking them that only we, not our employees, be contacted about the TOT matters, registered Letters from the city were subequently sent not to us but to our business. letters from the city attorney were openly faxed into our business for our employees to see. The faxed attorney's letter was particularly objectionable and accusatory, claiming we were refusing to cooperate to provide business records to the auditor, which was not true, and instructing us of our obligation to do so. Two separate attorneys who specialize in city tax audits, have given us legal opinions that Ms Arends - King was overreaching her prerogatives by demanding that we provide our personal federal income tax information and personal bank records for the 3 years she wishes to have audited. Based on this legal advice, we had expressed to the auditor's office we will gladly make all business records available for the audit, but would exclude the private information which has no part in the audit, and which serves only to satisfy a curiosity about our personal finances. We faxed actual records and calculations to the auditor's offices and described the daily records we keep, their undcrstandableness, and the clarity of our accounting. Our communications expressed we would provide total cooperation and openness with our business records, which are what the city statutes require to be provided. We needed no heavyhanded attorney's letter to reprimand us for allegedly failing to cooperate. A short telephone call from Ms Arends -King to us would have been much cheaper and could have cleared up this matter, if she had any genuine concerns about any actions on our parts, although we gave her no reasons for concern by either word or deed. We encourage city staff to have a cooperative, business - friendly attitude. We appeal to The Council to waive the 10% penalty ($2004.60) on the 3Q 2003 TOT. We recognize the payment was made late, but it has been paid in full, with interest for each day it was late. The circumstances which created the problem were unique and unforeseen, and we believe they will not be repeated in the future. We ask consideration for the fact that for 27 years we have scrupulously taken care of all our obligations to the city, including the TOT. We ask consideration for the fact that we have paid all taxes due, with interest. Finally, we ask consideration for the fact that Ms Arends - icing and others acting as the city's agents have willfully and harmfully impeded the normal flow of our business, created great turmoil and discouragement among our staff and have needlessly heaped shame and embarrassment upon us as owners. We appeal to you for a favorable decision on the above requests and thank you for your consideration. Sincerely, ,, ,, ww Ns. ry) a 1041 ' - CtatibUAA Marjorie Bettenhausen- Schmaehl Owner /Administrator FEB -23 -2004 10:08 2089352422 + 97% P.03 �E SEA1 9 r °TY - HALL;: + 211 +'EIGHTH: STREET' SEAL BEACH, -CAUFORN1A 9074D 4, r _ l562) 431 February 17, 2004 Marjorie Bettenhausen Schmaehl Owner/Innkeeper , The Seal Beach Inn and Gardens P.O. Box 1492 Kamiah, Idaho 83536 . Dear Ms. Bettenhausen Schmaehl, This letter is to confirm our conversation we had today in regards to appealing the . Transient Occupancy Tax (TOT) penalty for failure to pay the amount due for the third quarter ending September 30, 2003 by the due date of October 31, 2003. a It is my understanding you will appeal the penalty. As we discussed, according to Section 22032 of the City's Municipal Code an appeal may be made to the City council by filing a notice of appeal with the City Clerk within fifteen days of the serving or mailing of the determination of the tax, interest and penalties due. A letter was sent to The Seal Beach Inn and Gardens on January 27, 2004 notifying you of the tax, interest and penalties due for the third quarter of 2003, however, you said you were on vacation therefore you did not receive the letter of notification until February 11, 2004. Because you were on vacation the City will consider February 11, 2004 the notification date of the tax, penalty and interest due for the delinquent Transient Occupancy Tax. Therefore the notice of appeal cannot be submitted to the City Clerk after February 26, 2004, which is within fifteen days of February 11, 2004. If you have any questions please do not hesitate to contact me. S' rely, . • Pame a en s -King , cc: John B. Bahorski, City Manager Joanne Yeo, City Clerk EB -13 -2004 16 14 FROM RIM TO 1562493985? P. 02/03 • • • . 1`p2 RICHARDS j WATSON GERSHON C. ATTORNEYS AT LAW —A PROFESSIONAL CORPORATION 35S South Grand Avenue, 40111 Floor, LosAngeles, California 9007 -9101 Telephone 213.626.0484 Facsimile 213.626.0070 R1eNAR D;�;am February 13, 2004 OLLNN R rrarso iR[r,aml VIA FACSIMILE AND FIRST CLASS MAIL HARRY L *LLANON(1 (NLTIRw) O A= 4:"M Harty Schmaehl and Marjorie Bettenhausen Schmaehl sTNCN a. DORM RAMAN' • L. RTRAVSZ P.O. Box 1492 M'TCNf . L. AIL OTT GRCGOIY svgPAWICCN Kamiah, Idaho 83536 -1492 ROCNLLLC Hama WILLIAM O. WOOL MUM M. 1ARROW CAROL W. LYNCH MCCORTM.=NUT R e f e rence: Transient Occupancy Tax for Seal Beach Inn and Gardens; Audit of THOMAS M. MOO ROOLIIT C. =CON Records S7lVlr 1 1.100MMANII GARY L ONNs IONR I. MAIM 007: Dear Mr, Schmaehl and Ms. Schmaehi: MICMALL IITIAOA • • 1.411A Oct 1. WIOIl1 sTRV1N N. OAR M 11- "Lb" A " This letter is to confirm the phone conversation between Ms. Schmaehl and myself KAKMR 0. SUM! PETER M. CROSSON that took place at 12:00 noon today, regarding the transient occupancy taxes and JAMES L MAPKMAN CRAIG A. STEM audit of business records of the Seal Beach Inn and Gardens. T. RCM PIING[ TLN1ac[ a. mom LIRA RRNO MET C. COLOUR R°N"" "t 14. MAR Th you again for ur prompt February 11, 2004 letter: I am NM 0. GRAYSON 3"O p roP res response to • beso Ah Ir1.aMaMAN encouraged by your willingness to cooperate with the City and I hope that this WILLIA P. WRICY 111 e. CNMe ,OX matter may soon be resolved amicably. RaiPAT r, pITTMAM ROY A. CuRKL MC M. ROAM MICNAn" "N1aA I understand that you have now signed the payment schedule that Pamela Arends- I[01RA N. OANNCn P " "`A G =TE ' ' King provided to you for the overdue transient occupancy taxes and that you have irnsa NO.UNANO P. Gloss SIM Came the signed schedule via facsimile to the City. I will contact Ms, Kin g on llM N. NAN). MCOINLCY ALEMM Ste ARR! Tuesday and I will inform you if there was any problem with the transmission. (The CARRIL N. ANN • lIDARRN A. soWTAN City is closed on Monday for Presidents' Day.) rItNACL P. COYN[ DIANA . eNUANA 1ORCITW. WAT00N PATa1CX C 000K0 DAlun R • GajrIA I also understand that spoke this to Brenda Grubbs at Moreland & amour's. . 'AMIaCK you 9p0 morning 12141. NLINJRIN Associates, who will be conducting the audit of the Seal Beach Inn and Gardens, and MYRLCOX svNAU sA L ow that u have scheduled the audit for March 1, 2004. Given that the March 1 date VIO OAVID M. . SNOW VA KNAW J" , AeCART'" is agreeable to both you and Ms. Grubbs; it will not be necessary to conduct the MA1TNLW 1 Imams yl, 11NL TTA L. O IOVINCO T11gNA 0R4 audit by February 20 as I stated in my previous letter. As we discussed, at the audit eM'D "l" " you will be providing all of the records that Ms. Grubbs requested, including the mown' MARK L IAMKLN bank receipts and tax returns that you have previously objected to providing. SAYU[ W!AVLR W'WIAN K. Mum OROe[w. GALLOWAr saa vullasCO OPNCL TCLCPNONL 01n•12•a464 (MAIM COUNTY MICE TOtPHOMI,r4.99o.o9Dr • !, =B -13 -2004 16:15 FROM RWG TD 15624939857 P.03/83 • RICHARDS I WATSON I GERSHON Harty Schmaehl and Marjorie Bettenhausen Schmaehl February 13, 2004 Page 2 Finally, any future correspondence I send to you will go to your Idaho address. I was previously unaware that you preferred to not receive mail at the Seal Beach Inn and Gardens. Please contact me if this is not your understanding of what we discussed. Thank you again for your cooperation in this matter. Very truly•you , - Alexander Abbe • Assistant City Attorney City of Seal Beach cc: Pamela Arends -King, Director of Administrative Services/Treasurer • S729610001 \763938.2 ' • TOTAL P.03 I;a RICHARDS I WATSON I GERSHON re ATTORNEYS AT LAW —A PROFESSIONAL CORPORATION 355 South Grand Avenue, 4oth Floor, Los Angeles, Califomia 90071 -3101 Telephone 213.626.8484 Facsimile 213.626.0078 RICHARD RICHAR ° February 11, 2004 GLENN R. WATSON (RETIRED) VIA FACSIMILE AND FIRST CLASS MAIL HARRY L. GERSHON (RETIRED) - AROLD ERWIN D. PI E.ADLER EPER Harty Schmaehl and Marjorie Bettenhausen Schmaehl STEVEN L DORSEY WILLIAM L STRAUSZ Owners /Innkeepers MITCHELL E. ABBOTT GREGORY W. STEPANICICH The Seal Beach Inn and Gardens ROCHELLE BROWNE QUINN MB BARROW 212 5th Street CAROL W. LYNCH GREGORY M. KUNERT Seal Beach, CA 90740 THOMAS M. JIMBO ROBERT C. CECCON STEVEN H. KAUFMANN GARY E. GANS Reference: Failure to ' Disclose Business Records and Remit Transient JOHN J. HARRIS KEVIN G. ENNIS ROBIN D. HARRIS Occupancy Tax MICHAEL ESTRADA LAURENCE S. WIENER STEVEN R. ORR B. TILDEN KIM Dear Mr. Schmaehl and Ms. Schmaehl: SASKIA T. ASAMURA KAYSER 0. SUME PETER M. THORSON JAMES L. MARKMAN CRA PETER PIERE IG . STEELS This law office serves as legal counsel to the City of Seal Beach. T. TERENCE R. BOGA USA BOND JANEr IL M E. COLE. DIAZ SON I am informed by Pamela Arends -King, the City Director of Administrative R NET JIM G. GRAYSON DEBORAH R. HAKMAN Services/Treasurer, that City Auditors recently requested access to your business WILLIAMD. CRAIG OX records, and that you notified the Auditors that the records were either unavailable ROBERT ROY A. I CLARKE or were located out of state. ERIC M. ALDERETE MICHAEL F. TOSHIBA REGINA N. DANNER PAULA TE GUTIRESERA HO -UHO- BAEZA One condition of operating a business within the City is that records of business RR OWEN P. GROSS JIM R. KARPIAK transactions are subject to inspection and must be disclosed to City representatives EVAN J. McGINLEY ALECARRIE N XANDER ABBE upon request. City Code §§ 11 -19, 22 -33. Chapter 11, Article I, Section 11 -19 of . AHN ELIZABET AEL A. P. COU LOVAYNN the Code of the City of Seal Beach provides that statements and records MIE DIANA K. CHUANG ROBERT W. WATSON PATRICK K. BOBKO DANIEL R. GARCIA "shall be subject to audit and verification by the Collector, his deputies, or MIGUEL S. RAMIREZ 1 1 EZRA1. REINSTEIN JULIET E. COX authorized employees of the City, who are hereby authorized to examine, SONAU SARKAR JANDIAL DAVID M. SNOW audit and inspect such books and records of any business license holder or G. IN ER KHALSA BRUCE G. McCARTHY applicant for said license as may be necessary in their judgment to verify or MATTHEW B. FINNIGAN GINETT TRISHA ORTIZ ascertain the amount of business tax due. All persons subject to the CANDICE K. LEE provisions of this chapter shall keep complete records of business OF COUNSEL MARK L LAMKEN transactions, including sales, receipts, purchases, and other expenditures, SAYRE WEAVER 7 BRUCE E W. GALLOWAY and shall retain all such records for examination by the Collector. Such SAN FRANCISCO OFFICE records shall be maintained fora eriod of at least three person years. No TELEPHONE 415.421.8484 p Y l� ORANGE COUNTY OFFICE required to keep records under this section shall refuse to allow authorized TELEPHONE 714.990.0901 RICHARDS 1WATSON ' GERSHON • Harty Schmaehl and Marjorie Bettenhausen Schmaehl ; February 11, 2004 Page 2 representatives of the Collector to examine said records at reasonable times and places." It is pursuant to this authority that the City Auditors have requested inspection of your business records. Note that the Code expressly states that businesses must keep all records necessary to determine the amount of taxes such that "the tax administrator shall have the right to inspect at all reasonable times." City Code § 22 -33 (emphasis added). Storage of these records in another state does not comply with this requirement, because the administrator would not be able to inspect those records at all times. Please be advised that failure to comply with these or any other provisions of the City Code is grounds for revocation or suspension of a business license and a misdemeanor. City Code §§ 11 -28, 11 -36, 22 -36. Please contact the City Auditor, Brenda Grubbs, to arrange a time for inspection of your business records. Please contact Ms. Grubbs as soon as possible, but no later than 12:00 noon this Friday, February 13, 2004. The Auditor may be reached at Moreland and Associates at (949) 221 -0025. In order to comply with the Code's requirement that the records be inspected within a reasonable time, the inspection must take place no later than Friday, February 20, 2004. In addition, as you are aware, the Seal Beach Inn and Gardens has not submitted its Third Quarter 2003 transient occupancy taxes as required by the City Code. In a letter dated January 27, 2004, Ms. King advised you that the Inn owes $22,050.60 in taxes and penalties to the City. Ordinarily, this amount would be due immediately, but in her January 27 letter, Ms. King you the courtesy of allowing you to pay this amount in installments, plus interest and subject to your agreement to a payment schedule. However, as of February 11, 2004, you have not yet sent your signed acknowledgment of the terms of this payment schedule. Please sign the payment schedule that Ms. King sent with her January 27, 2004 letter and return it to the City immediately. If Ms. King has not received the signed acknowledgment by this Friday, February 13, 2004, at 5:00 p.m., the amount in arrears will become due immediately and the City will pursue any legal action necessary to recover this amount. RICHARDS I WATSON I GERSHON Harty Schmaehl and Marjorie Bettenhausen Schmaehl February 11, 2004 Page 3 Thank you in advance for your cooperation. Very truly yours, RICHARDS, WATSON & GERSHON At Alexander Abbe Assistant City Attorney City of Seal Beach cc: Pamela Arends -King, Director of Administrative Services /Treasurer Quinn M. Barrow, City Attorney S7296\0001\763492.2 FROM : HEARTHSTONE FAX NO. : 2089352422- + Mar. 14 2004 02:32PM P4 ' 4 02/11/2004 * -fit'. THE To: Alexander Abbe 9 Seal Beach Richards/Watson/Gershon Re: Failure to Disclose Business Records and Remit Transient Occupancy Tax Dear Mr. Abbe, We have received your letter of February 11, 2004, faxed to our employees, subject as above, and dispute the assertions made by Ms. Arends -King regarding our refusal to disclose business records. The facts are exactly the opposite of those assertions. We have been and continue to be most cooperative. • 1 spoke with Joanna, the auditor scheduled to come to The Inn, on several occasions on February 6, 2004, and assured her all needed business records would be made available for the audit. In fact, l am attaching all pages of brief fax which I sent to her regarding some of the types of records available, to allow her to see the clarity of them. 1 also explained we have daily packets which i nclude all that day's registration cards, credit card slips, batch reports, manual cash sheets, computer printouts and other information which will be useful. We must ask, how does this offer of help and cooperation lead Ms Arends -King to conclude we are failing to be willing to disclose business records? Quite the contrary, we have been very cooperative. In correspondence to the city manager, of which Ms Arends -King has a copy, we asked early on that calls not be made to our employees, but that only we were to be contacted about this matter. We expected a basic professional courtesy to be extended to us in doing so, since our staff is unable to resolve any issues extant, and to call us is most expedient. Our request has been disregarded, as pointed out by your above fax being sent to The inn, the auditor's calling there, your February 5 letter (received here February 11) and the City's letters continuing to be sent there. The City's letters, like yours, were - -- - -- - - - delayed -by over -one week due -to that.--- W-e -Fe -state the - request please_contact us_not _ staff Never call them. To continue to ignore this request is a serious disregard of our • position as owners of this business, and indicates a blatant, malicious desire to shame and humiliate us in front of our employees. We are puzzled by such an unprofessional disregard of our request by both the City staff and your office, and find your combined actions greatly disappointing. You have: even persisted to involve our night clerk with your fax this evening. Harty /Marjorie Schmaehl Tel: (208) 935 2322; Fax -2422. PO Box 1492 Email: barjie @camasnet.com Kamiah, ID 83536 -1492 212 5th Street, Seal Beach, CR G 90740 -6115 (562) 493 -2416 • _ op , mi . sow Airr, lit „AL - k m a.410111 FEB -12 -2004 14:34 2089352422 + 97% P.04 ,ARTHSTONE FAX NO. : 2089352422- + Mar. 14 2004 02:33PM P6 - There are some issues we disagreed with, but wished to obtain legal advice on prior to expressing them. Even as your February 5 letter outlines the city code regarding transient occupancy tax (TOT) and today's faxed letter repeats, we are obligated to provide business records to substantiate: the correctness of our submissions. We have been gathering those records and staging them in preparation for the audit. There are about 6 filing cabinets of records, some of which were in storage. None of those records are out of state. We have obtained legal advice regarding our being forced to make available to the City or its auditors our personal financial details, such as our income tax returns and bank records. The City is overreaching its prerogatives by demanding access to all our private financial information, much of which is frotn business conducted out of state. We will not be furnishing our private financial information. Again, we say, as we have said heretofore, all appropriate business records have been being prepared and will be opened freely. Marjorie, who grew up with aborigines in China, is a professional businesswoman, trained as a nurse, is a certified hotel administrator, a speaker at state and national innkceping conferences, previously married for 27 years to a medical doctor in Seal Beach, having moved there 40 years ago. She has greatly influenced the city to become what it is today. I am a WW11 death camp survivor, a decorated US Army Viet Nam veteran, a licensed real estate broker, have an MBA, a diploma from the Defense Department's Program Management College and numerous other business and professional training certifications. 1 had an integral part in developing the Global Positioning System (GPS), so widely used nowadays. We are not stupid, nor irresponsible businesspeople. However, sometimes life happens. In it all, we sent 3 of our children to law schools. We moved to Idaho at Marjorie's doctor's orders, following her cancer surgery. We spent the day yesterday in Boise with the governor and all state department heads and marry legislators and business persons as part of a state economic development commission. We both were appointed for a four year term, after we came to the governor's attention and he came to know us personally. We are not stupid, nor irresponsible businesspeople. However. sometimes life happens, like 3Q 2003. We have Seal Beach's oldest continually operating business. Country Inns magazine designated our Inn as one of America's top 12 country inns. We have been featured on - - - - - - - - - - - - - - - - Japanese - and - Chinese TV, The Channel; written - up in -magazines such - - - • - as Clamour, Travel and Leisure, the LA Times, guidebooks galore, featured on the back of an Uncle Ben's Rice box for 5 years, and on and on. We have brought fame and acclaim to our city over the 27 years during which we have owned and operated The Inn. In those years we actually initiated a systematic TOT payment system, having even brought to the City the form still in use to collect such tax. Except the quarter of 9/11, we never failed to pay the tax on time and in full, until we ran into exceptional problems during the 3Q, 2003, as we discussed with Ms Arends -King, Mr Bahorski and our city councilman It is therefore so disheartening to us to be unsupported by the city manager, hut even more so to have our integrity impugned, to be threatened, derided and disrespected by its director of administrative services, none of whom have probably ever needed to meet payrolls out of their own pockets, nor had to struggle as entrepreneurs with setbacks or problems as we expressed we had had to during the quarter in question. • FEB -12 -2004 14:35 2089352422 + 97% P.06 . ;HRTHSTONE FAX NO. : 2089352422- + Mar. 14 2004 02:33PM P5 • ' • We are faxing back to the City the reply they requested by February 6, which was the date we received their letter forwarded to us. We .had informed Ms Arends -King of the TOT amount in question. We explained we were tying to obtain a loan to pay off the amount more quickly, and proposed a payoff plan should that loan not be possible. We only asked of the city manager to not exacerbate our financial problems by insisting we also pay the $2,000 penalty. While we knew the penalty is due, we explained we did not need that punitive sum as motivation, and it should be waived. Clearly, Ms Arends- King was insistently desirous that we pay it. The city manager allowed her to have her way. We will appeal to the city council. if it is not waived, we will need to review whether we have a willingness to continue to do business in the city to which we have paid some $70,000 in TOT annually for years. Residences built on our lots would not pay anything close to those amounts to the city annually. Again, having said all that, our bottom Iine is that we had expressed a willingness to cooperate fully and have been preparing all needed business records for the audit. On February 6, Joanna, the auditor, assured us she would call us with the dates of the audit after she had staffed it with her supervisor. The auditor has to date failed to call us with such a date for the audit., which we proposed be around February 19, 2004. The auditor had initially called on Friday noon, February 6, to tell us the audit would take place the following Monday morning, February 9, for 3 days. Since we had an appointment with the governor on Tuesday, February 10, and also need to make some personal preparations • and flight arrangements, we asked for the later date. We urge you to interject some reason into this situation, which strikes us as having spun out of control inside City hall, as evidenced by your involvement and the auditors'. • As city businesspeople, we feel our money would have been better applied to one short call to us from Ms Anders -King, which would have saved the city hours of legal fees. The issues are not so great but that two reasonable parties could have discussed them rationally and come to a reasoned resolution, to which we believed we had come, with the exception of the 10% penalty, without the needless acrimony which has been generated. We will appreciate your understanding of the issues, and once again assure you of our commitment to fully cooperate in examining our business records. Sincerely, . . (. 1fime. 0 rty Schmae 1 L I j vvv\ U 1 d r y62 4drojuz... 1 ifi , Managing innkeeper • FEB -12 -2004 14:35 2089352422 + 98% P.05 OR4 � t=) crlit 9 V -6 A lac ) ,,(A � O 4 � � , BF R 2I 1 P � : `�a � -- n \ CITY HALL 211 EIGHTH STREET SEAL BEACH, CALIFORNIA 90740 (562) 431 -2527 • dsea] beach.ca.us January 27, 2004 Harty Schmaehl Marjorie Bettenhausen Schmaehl Owners/Innkeepers The Seal Beach Inn and Gardens 212 5 Street Seal Beach, CA 90740 • Dear Mr. Schmaehl and Ms. Schmaehl, This letter is to confirm the payment schedule for the 3:d quarter 2003 transient occupancy taxes in arrears I discussed with Mr. Schmaehl January 26, 2004. Total transient occupancy taxes due to the City of Seal Beach for the .3 quarter 2003 . according to the remittance advice prepared by your general manager is $20,046.00. Due to the non - payment of the tax in a timely manner a 10% 'penalty will be charged of $2,004.60. Total amount due is $22,050,60. The $22,050.60 will be paid to the City of Seal Beach at $2,000 monthly increments starting February 15, 2004 with an interest rate of 6% annum from the delinquent date of October 31, 2003 until the total debt is paid off Also transient occupancy taxes will be remitted to the City of Seal Beach on a monthly basis instead of a quarterly basis as of February 2004. Therefore the January and i uary transient occupancy tax would be payable to the City of Seal Beach no later t`tan March 30, 2004 and the March 2004 transient occupancy tax would be due April 30, 2004. Each month's transient occupancy tax would be due within thirty days following the end of the month. The same penalty and interest amounts would be applicable. Please sign on the second page of this letter as indicated that you have read this letter and have acknowledged the payment terms for the 3` quarter 2003 transient occupancy taxes due to the City of Seal Beach and the new remittance schedule of the transient occupancy taxes and return to the City no later than February 6, 2004. • If you have any questions please do not hesitate to call me. Sincerelly, tC-A ante Ar d Kin g ``' ame a en s- • g �` U Director of Administrative Services We have read this letter and have acknowledged the payment terms for the 3 quarter 2003 transient occupancy taxes due to the City of Seal and the new remittance schedule of the transient occupancy taxes. Harty Schmaehl Marjorie Bettenhausen Schmaehl cc: John B. Bahorski, City Manager a • FROM : HEARTHSTONE FAX ND. : 2089351873 Jan. 23 2004 10:03PM P1 .■., _Ac .... --..--.. --Y- ., --__ 41 ,-- p, ---w; e "—ro pif , — opiri vy ,v '446.- .. .„-111 .. ,..... _ _ 4 _10 111 ■\*Zor -.la -4. - -_.rom■r ) ........... 4.. zi ii,„ ......,=_„„,--- ..._ - 0i.,...„ ■ 01/23/2004 t THE To: Mr. John Bahorski, City Manager soot Beach Pam, Teresa, Finance Department o - Re: Payment of Transient Occupancy Tax Due the City e Dear Mr. Bahorski; This letter is to summarize our conversation with you this morning, with our appeal and proposal regarding The Seal Beach Inn transient occupancy tax payment timing. The Seal Beach Inn is the oldest continuously operating business in Seal Beach and we have been the owners/operators for the past 27 years. During these years, The Inn brought great financial benefit to Seal Beach from our hard earned money through international attention and acclaim to the City. tt is our recollection that we have always paid the bed tax and other obligations in full • • according to city prescribed set times, except for one time following 9/11, during the ensuing occupancy crisis. At that time, we arranged with the City to pay the outstanding bed tax in regular payments over a period of time_ In the current situation we are committed to bringing our tax obligation current in the shortest time feasible. In our conversation with you, we explained that in the past few months we had extraordinary expenses which drained ail the Inn's funds. Our workman's comp carrier . assessed The Seal Beach Inn and Gardens a supplemental $9,000.00 to cover alleged shortfalls in last year's premiums. Our former resident manager would not leave when we. terminated him and an unlawful detainer action took over four months to execute and cost us some $17,000 in expenses and lost business. This had not happened previously in 27 years of business. We had expected Inn revenues to catch us up, so that we would be able to pay all moneys due the city when we pay the 4 Qtr Occupancy Tax on January 31_ But, with a drop in revenue and the above significant, unexpected expenses, this did not happen. So, for some weeks we have been in the process of seeking Loans and/or grants available to assist small businesses. Unfortunately, to do so takes time. We were not able to personally financially help the Inn, because we recently used our private funds to create jobs for the very poor on the Nez Perce Indian Reservation To help improve our finances at The Inn, v►e are working to improve our web site to revive our national and international market. We have also recently hired a new business development person to help market and promote The Inn, to increase our occupancy and • improve our revenue. 212 5th Street, Seal Beoch, CA 90740 -6115 (562) 493 -2416 du X--AL-k,-mia --Amigni ip■ - -7 •--------- , F /;_ditF FROM : HEARTHSTONE FAX ND. : 2089351873 Jan. 23 2004 10:03PM P2 We propose to pay the current 4 Qtr 2003 bed tax of 514,827.76 due Jan 31, 2004 on time and in full. Since the due date is Saturday, we will have the check at the finance department the first workday morning, Feb 2, 2004. For the other bed tax due, we ask to snake $2,000 monthly payments beginning in Feb 2004 until paid off. Pam, in the City finance office, had said we would be assessed 6% per annum interest on the 3Q 2003 bed tax due and this we accept with understanding. We appeal that we not be assessed any additional penalty for the 3Q 2003 bed tax of $20,046. The financial pressure on us is too great as it is. The Seal Beach Inn is good for the City, has been recognized as one of America's top country inns and we hope to continue using our own funds and capital to continue to create tax revenue for the City both at The hm and the spin -off spending our guests do in shops and restaurants in town.. As we had mentioned, when we began The Inn in 1976, no one in the City even had the form or protocol to report and collect the bed tax. So, Marjorie went to Long Beach and brought to Seal Beach City Hall a form to help the City collect this tax, with which we always voluntarily complied, as we do now. We believe that the Inn is a positive financial benefit for Seal Beach, as we wrote in our business plan in 1976 that it would be. We are committed to taking care of the subject obligations and no penalty is needed in order to increase our incentive. We do not believe this situation will happen again for many reasons to which we are now alert. We ask for your understanding and help in resolving this situation. Our telephone number is (208) 935 2322. Regarding this matter, please call only us, not our employees_ Thank you. Sincerely, • j �A i ! �'r' aavt /�- • orie Bettenhausen Schmaehl Harty Schmaehl Owners/innkeepers 2 Attachments •