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Home My WebLink AboutItem 3b: Ordinance 2264 Requiring Operators to Pay Taxes as a Condition of Seeking Judicial Review of Transient Occupancy Tax LiabilityDATE: March 2, 2010 TO: SUMMARY BACKGROUND HONORABLE MAYOR AND CITY COUNCIL STAFF REPORT Office of the City Attorney FROM: STEPHEN P. DEITSCH, CITY ATTORNEY Prepared by: Lisa Mussenden, Chief Deputy City Clerk/Records Manager SUBJECT: ORDINANCE NO. 2264 AMENDING SECTION 2664.5.1 OF THE ARCADIA MUNICIPAL CODE REQUIRING OPERATORS TO PAY ALL TAXES, INTEREST AND PENALTIES AS A CONDITION PRECEDENT TO SEEKING JUDICIAL REVIEW OF A DETERMINATION OF TRANSIENT OCCUPANCY TAX LIABILITY Recommended Action: Introduce The proposed Ordinance amending Section 2664.5.1 of the Arcadia Municipal Code will allow the City to continue collecting all taxes, interest and penalties from hotel operators who wish to appeal Transient Occupancy Tax (TOT) determinations. Arcadia Municipal Code Section 2664.5 empowers the tax administrator, after providing notice of a hearing and, if requested by the applicable operator, conducting a noticed hearing, to issue a determination that the hotel operator owes back TOT, interest and penalties. Any operator who believes he or she is aggrieved by the determination of the tax administrator may appeal to the City Council according to Arcadia Municipal Code Section 2664.5.1. From time to time an operator may choose to seek further review of the City Council's determination in a court of competent jurisdiction. The California Court of Appeal, in the case of City of Anaheim v. Superior Court (Priceline.com) filed November 24, 2009, held that if a hotel operator seeks judicial review of a City's TOT determination, the operator is not required to pay all TOT, interest and penalties prior to pursuing judicial review, unless a city's municipal code explicitly includes a "pay first, litigate later" provision. In order to ensure TOT collection, the City Attorney and staff recommend that the City Council amend the Arcadia Municipal Code to include a "pay first, litigate later" provision that requires hotel operators to remit all amounts of back TOT, interest, and penalties determined to be owing to the City prior to seeking judicial review of the City Council's TOT determination. This will ensure that essential public services dependent on the funds are not unnecessarily interrupted. FISCAL IMPACT The recommended amendment to the Arcadia Municipal Code will have a positive fiscal impact to the City by ensuring that there will be no unnecessary delay in the receipt of TOT. ENVIRONMENTAL ANAYSIS No environmental review is required because the proposed amendment is not a project governed by the California Environmental Quality Act. RECOMMENDATION: It is recommended that the City Council introduce Ordinance No. 2265 amending Section 2664.5.1 of the Arcadia Municipal Code requiring operators to pay all taxes, interest and penalties as a condition precedent to seeking judicial review of a determination of Transient Occupancy Tax Liability. APPROVED: ,_Thyu.,€ Q {?cr -4 Donald Penman City Manager Attachment: Ordinance No. 2264 2 ORDINANCE NO. 2264 and AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF ARCADIA, CALIFORNIA AMENDING SECTION 2664.5.1 OF THE ARCADIA MUNICIPAL CODE REQUIRING OPERATORS TO PAY ALL TAXES, INTEREST AND PENALTIES AS A CONDITION PRECEDENT TO SEEKING JUDICIAL REVIEW OF A DETERMINATION OF TRANSIENT OCCUPANCY TAX LIABILITY WHEREAS, Sections 2661, et seq., of the Arcadia Municipal Code impose a transient occupancy tax ( "TOT ") upon the privilege of hotel occupancy within the City of Arcadia; and WHEREAS, if a hotel operator fails to remit the required amount of TOT to the City, Arcadia Municipal Code Section 2664.5 empowers the tax administrator, after providing notice of hearing and, if requested by the applicable operator, conducting a noticed hearing, to issue a determination that the operator owes back TOT, interest and penalties; WHEREAS, Arcadia Municipal Code Section 2664.5.1 allows an operator to appeal a determination of the tax administrator to the City Council, whose decision, after a noticed hearing, is final and conclusive; and WHEREAS, Arcadia Municipal Code Section 2664.5.1 further requires an operator to immediately pay any amounts determined to be due by the City Council upon service of notice of the City Council's determination; and WHEREAS, from time to time, operators may seek judicial review of the City Council's TOT determination in a court of competent jurisdiction; and WHEREAS, the California Court of Appeal, in the case of City of Anaheim v. Superior court (Priceline.com) (filed Nov. 24, 2009), recently held that if a hotel operator seeks judicial review of a City's TOT determination, the operator is not required to pay all back TOT, interest and penalties prior to pursuing judicial review, unless a city's municipal code explicitly includes a "pay first, litigate later" provision; and WHEREAS, in order to better ensure TOT collection, the City Council_ desires to include a "pay first, litigate later" provision in the Arcadia Municipal Code that requires hotel operators to remit all amounts of back TOT, interest, and penalties determined to be owing to the City prior to seeking judicial review of the City Council's TOT determination. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OFARCADIA, CALIFORNIA, DOES ORDAIN AS FOLLOWS: SECTION 1. Section 2664.5.1 of the Arcadia Municipal Code is hereby amended to read as follows: "2554.5.1. SAME. 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 (15) days of the serving or mailing of the determination of tax due. 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. -2- Any amount found to be due shall be immediately due and payable upon the service of notice. No injunction or writ of mandate or other legal or equitable process shall issue in any suit, action or proceeding in any court against the City or an officer thereof, to prevent or enjoin the collection of taxes sought to be collected pursuant to this Part and payment of all tax, interest and penalties shall be required as a condition precedent to seeking judicial review of any tax liability." SECTION 2. If any section, subsection, subdivision, paragraph, sentence, clause or phrase of this Ordinance or any part thereof is for any reason held to unconstitutional, such decision shall not affect the validity of the remaining portion of this Ordinance or any part thereof. The City Council of the City of Arcadia hereby declares that it would have passed each section, subsection, subdivision, paragraph, sentence, clause or phrase thereof, irrespective of the fact that any one or more section, subsection, subdivision, paragraph, sentence, clause or phrases be declared unconstitutional. SECTION 3. The City Clerk shall certify to the adoption of this Ordinance and shall cause a copy of the same to be published in the official newspaper of said City within fifteen (15) days after its adoption. [SIGNATURES ON NEXT PAGE] -3- ATTEST: City Clerk Passed, approved and adopted this day of , 2010. APPROVED AS TO FORM: r. Stephen P. Deitsch City Attorney Mayor of the City of Arcadia