Despite a bankruptcy filing by the company that owns the Pasadena Sheraton, an assistant city attorney on Thursday told Pasadena Now the city’s lawsuit against the hotel for unpaid taxes will go forward.
Urban Commons, which owns the Pasadena Sheraton, filed for Chapter 11 bankruptcy earlier this week as part of a Delaware filing that contains two dozen hotels with more than $500 million in debt.
The city is suing the Sheraton to collect nearly $850,000 in back taxes. Urban Commons Cordova A, LLC, which oversees the Sheraton Pasadena Hotel is part of Eagles Holding Trust (EHT). EHT is named in the city lawsuit.
“Pasadena’s hotel tax lawsuit against the operators of the Sheraton was not brought against any of the entities that we’re aware of that filed for bankruptcy in Delaware earlier this week,” said Chief Assistant City Attorney Javan Rad. “We will continue to pursue our litigation, in our efforts to collect the approximately $1 million in wrongfully withheld taxes.”
According to Federalpay.org, EHT SPH, LLC received a $1.16 million SBA PPP coronavirus relief loan in May at 303 Cordova St., the address listed for the Pasadena Sheraton.
The Transient Occupancy Tax, or TOT, is paid by everyone who stays at a local hotel. 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 city’s TOT revenues have been decimated by the pandemic, which forced local hotels to close.
According to a September report, TOT revenues came in at $269,900. At that time, TOT funds were expected to end up about $5.2 million below budget.
According to a report included in a City Council’s Finance Committee agenda, the Pasadena Center Operating Co. (PCOC) will not begin to make up for lost TOT revenue 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.
TOT funds are scheduled to be turned over on or before the 20th day of the month. The money goes into 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 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.
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.