City Asks Court to Enforce Settlement With Pasadena Sheraton Hotel Owner Over Back Taxes

[UPDATED] As the city continues to struggle with the decline of Transient Occupancy Taxes (TOT) following the closure of local hotels due to the pandemic, one local hotel, the Sheraton, is being sued in an effort to collect nearly $850,000 in back taxes.

According to court papers, EHT SPH, LLC and the city entered into a Sept. 21 agreement calling for a payment plan to reimburse the city, but EHT has breached that agreement, the city claims. According to court papers, the Sheraton Hotel still has not paid nearly $850,000 in transient occupancy taxes.

According to a motion filed with the court, EHT was served with the lawsuit on July 30 and has not yet responded. On Sept. 9, the city filed a request for entry of default against EHT, which remains pending.

The settlement was approved by Scott Ostrander, Urban Commons LLC vice president. Urban Commons, which is part of EHT, is listed as a cross-defendant in the lawsuit.

“As our company, like many others in our industry and beyond, fights to resolve the unprecedented challenges facing us in this devastating pandemic, we ask our partners to grant us with patience rather than additional strains on our resources,” read a statement from Urban Commons.

“While we do not administer payables at a property level, once brought to our attention we do everything in our power to ensure they are settled in a timely manner,” according to the statement.

The TOT is paid by everyone who stays at a local hotel. According to an article appearing in Pasadena Now in August, hotel operators are compelled by city law to collect a TOT and Tourism Business Improvement District (TBID) assessments from guests, and those funds “shall be held in trust for the account of the city until payment is made to the tax administrator.”

The funds are supposed to be turned over on or before the 20th day of the month after guests made their stays. The lawsuit alleges that Urban Commons failed to do so.

The money goes to the city’s general fund.

But according to the lawsuit “all or some of the monies owed under the TOT and TBID ordinances were used in the purchase, improvement and repair of the Hotel and other properties and assets owned and/or operated by one or more (defendant).”

TOT revenue has nosedived as occupancy has plummeted to between 10 and 15 percent since the pandemic began.

According to a September report, TOT revenues came in at $269,900, in line with estimates. At that time, TOT funds were expected to end up about $5.2 million below budget.

According to a report included in the City Council’s Finance Committee agenda, the Pasadena Center Operating Co. (PCOC) will not begin to make up for lost Transient Occupancy Tax caused by the pandemic until fiscal year 2024.

The PCOC manages the Pasadena Convention Center, the Pasadena Civic Auditorium, the Pasadena Convention & Visitors Bureau, and the Pasadena Ice Skating Center.