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ORIGINAL
CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
From: Rachel Clark, City Clerk
Subject:
Appeal hearing regarding the results of
a transient lodging tax audit for the
Foothill Motel.
Dept: City Clerk
Date: January 25, 2005
MICC Meeting Date:February 22, 2005
Synopsis of Previous Council Action:
April 19, 2004 - The Mayor and Common Council upheld the findings of the City Clerk
relating to TL T audits of the Sahara Motel and EI Patio Motel.
July 21,2003 - Resolution No. 2003-204 authorizing Progressive Solutions to perform
Transient Lodging Tax audits.
Recommended Motion:
That the hearing be closed; and that the Mayor and Common Council uphold the decision of the
City Clerk and adopt her letter of December 7, 2004, as its findings and conclusions, based upon
the back-up Information submitted and any additional evidence presented at the hearing; or
That the hearing be closed; and that the Mayor and Common Council uphold the appeal of the
applicant and reverse the decision of the City Clerk; or
That the hearing be closed; and that the Mayor and Common Council uphold the appeal of the
applicant In part and direct the City Attorney's OffIce to prepare findings and conclusions
con.'.tent with its doclslon. ~_,
h.~_
Signature
Contact person: r.lntly RIIAl!htAr
Business Reg. Supervisor
Supporting data attached: Yes
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3'00
Ward:
FUNDING REQUIREMENTS: Amount:
Source: (Acct. No.)
(ACN Desf'!ription)
Finance:
Council Notes: ~ P:J/:1:2J5 '#~
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CITY OF SAN BERNARDINO - REOUEST FOR COUNCIL ACTION
~ STAFF REPORT
SUBJECT:
Appeal hearing regarding the results of a transient lodging tax audit for the Foothill Motel
located at 2512 Foothill Blvd.
BACKGROUND:
A transient lodging tax audit for the Foothill Motel was conducted by Progressive
Solutions on November 25, 2003. The audit was perfonned in accordance with GAAP
(Generally Accepted Accounting Principles) which utilize a statistical sampling to arrive
at an Audit Opinion. The review of the hotel's records covered the time period of January
1,2000 to December 31, 2002. A detailed review was perfonned of the transactions
recorded for the month of June 2002. The review included the following:
· Testing, by random selection, the daily summaries which include the date, room
number, registration number, and the name of each guest in-house, for completeness
and accuracy.
· Testing, by random selection, the monthly summary, which includes daily room
revenue, tax and exempt revenue, for completeness and accuracy.
· Review of the operating records for the purpose of detennining the existence of the
practice of allowing complimentary rooms to be occupied without TLT being
collected and remitted.
· Testing the exemptions claimed in the compilation of the taxable room revenues
reported to determine that the exemptions were allowable under the City of San
Bernardino Municipal Code Section 3.55.035 A and B.
The review found discrepancies in the motel's operating procedures that resulted in errors
in assessment, collection, and payment of the transient lodging taxes in accordance with
the requirements set forth in the San Bernardino Municipal Code Chapter 3.55 and 3.54.
Review notes specifically identifying the errors are included in the audit narrative
provided as backup to this appeal. Specificallv. the hotel was assessed additional taxable
room revenue for the following:
"... Our review of the June transactions concerning the existing policy of assessing
occupants for transient tax did not find any evidence that the motel assesses or collects
transient tax from the occupants. The motel admitted that the tax is not collected from
the occupant. We have concluded that the burden of the tax is assumed by the
motel... "
1
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The hotel's operating procedures that were found to be in violation of the San Bernardino
Municipal Code resulted in the assessment of additional Transient Lodging Tax as
follows:
Additional Transient Lodging Tax
Penalty
Interest
TOTAL AMOUNT DUE
$ 480.48
480.48
159.57
$1,120.53
March 29. 2004
A hearing was held before the City Clerk regarding the Foothill Motel's request to
postpone payment until completion of an appeal of additional transient lodging taxes
assessed as a result of an audit of the motel's transient lodging tax.
July 2.2004. August 5. 2004 & November 19. 2004
Letters sent to Mr. Frank A. Weiser, Esq., representing the Foothill Motel, requesting
communication from Mr. Weiser concerning the Transient Lodging Tax Appeal Hearing
and evidence presented.
December 7. 2004
Notice of Final Determination of Transient Lodging Tax and Penalty sent via certified
mail to the Foothill Motel.
December 21. 2004
Appeal received from the Foothill Motel regarding the decision of the City Clerk to
assess $1,120.53 in additional transient lodging tax, penalty, and interest.
FINANCIAL IMPACT:
The hearing found an additional $1,120.53 was owed to the City for transient lodging
taxes. Other motels that have been audited and found to owe additional transient lodging
tax have paid accordingly, including the assessed penalties and interest.
RECOMMENDATION:
That the hearing be closed; and that the Mayor and Common Council uphold the decision
of the City Clerk and adopt her letter of December 7,2004, as its findings and
conclusions, based upon the back-up information submitted and any additional evidence
presented at the hearing; or
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That the hearing be closed; and that the Mayor and Common Council uphold the appeal
of the applicant and reverse the decision of the City Clerk; or
That the hearing be closed; and that the Mayor and Common Council uphold the appeal
of the applicant in part and direct the City Attorney's Office to prepare findings and
conclusions consistent with its decision.
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CITY OF SAN BERNARDINO
APPEAL FORM
Office Use Onlv
Copies Distributed To:
o City Attorney 0 City Administrator
Date:
Dateffime Stamp:
KECEIV~ r:cn '( u'"
IMPORTANT INFORMATION: All appeals to the Mayor and Common Councilt Board of
Building Commissioners (BBC) and Animal Control Commission must be filed in the City
Clerk's Office.
Appellant
Name:
Address:
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Contact Person
Name: ~%~~ ~. ~tt..\.St (L. ~~oq ,\(l."" ~~ \..~
Address: ~\U;~ ~..\.$.,,^-\ ru ~ \.. \I C. I S~ C\.~ 1 \ "- . ~. I c:.~ 0....00 \ Q
Day-Phone: C..,...\'~\ ~~\.\.~o....6'U Fax: G ,~\ S~~ ''''1h~
Evening Phone: ( <-\. ~ \ S f..,,-1~ t:. E-mail:
Affected Property Address:
Assessor's Parcel Number (APN #):
Whose Decision Are You Appealing:
Date of that Decision:
s.~., cfl...
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DBoard of Building Commissioners - $75.00
6IMayor and Common Council - $75.00*
DPlanning Commission - Fee Adjusted Annually
DAnimal Control Commission - $75.00
DPolice Commission - No Charge
DOther: - No Charge
*Note: Appeals to the Mayor and Common Council can only be from the Planning Commission and Police Commission.
City of San Bernardino - City Clerk's Office - 300 N. "D" Street - San Bernardino, CA 92418 - (909) 384-5002
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1. The action appealed:
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2. The grounds for appeal:
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3. The action(s) sought:
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4. Any additional information:
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LAW OFFICES
FRANK A. WEISER
LEONARD NASATIR
OF COUNSEL
3460 WILSHIRE BOULEVARD,SUITE 903
LOS ANGELES, CALIFORNIA 90010
TELEPIIONE, (213) 384-6964
FACSIMILE, (Z13) 383.7368
REFER TO FILE NO.
December 20, 2004
BY EXPRESS MAIL AND FACSIMILE
Rachel C. Clark
City Clerk
Office of the City Clerk
City of San Bernardino
300 North "0" Street
San Bernardino, CA 92418-0001
Facsimile: (909) 384-5158
Re: Appeal Notice/Transient Lodging Tax
Audit/Desert Inn Motel at 607 W. 5th
Street/Terrace Motel at 2606 W. Foothill
Blvd./Sunshine Motel at 570 N. "H" Street/
Knights Inn at 1150 S. "E" Street/
Foothill Motel at 2512 Foothill Blvd./
Econo Lodge at 606 N. "H" Street/Astro
Motel at 111 S. "E" Street/Budget Lodge
c/o Larry Hall
Dear Ms. Clark:
As you know, I represent the above referenced
motels located in the City of San Bernardino. I received your
letter dated December 7, 2004, notifying my clients of the
final determination of transient lodging tax and penalties
for eacj motel. Pursuant to your letter and Chapter 2.64 of
the San Bernardino Municipal Code, each motel wishes to
appeal your individual decision to the Common Council.
The grounds for the appeal are as follows:
None of the motels owe any monies to the City as
they have reported and collected all monies due. Any
technical reporting deficiencies noted in your reports are
not subject to a tax assessment, as they are just that;
technical deficiencies at the most and do not impact the
amount of monies collected. Nevertheless, each motel owner
denies any such reporting deficiencies.
Nothwithstanding this, the City repealed Chapter
3.54 of the muncipal code in November 2002. It is a violation
of due process to collect a tax repealed and declared
unconstitutionally suspect by the voters. Morevover, both
Chapters 3.54 and newly amended Chapter 3.55 violate
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Rachel C. Clark
City Clerk
Office of the City Clerk
City of San Bernardino
Re: Appeal Notice/Transient Lodging Tax
Audit/Desert Inn Motel at 607 W. 5th
Street/Terrace Motel at 2606 W. Foothill
Blvd./Sunshine Motel at 570 N. "H" Street/
Knights Inn at 1150 S. "E" Streetl
Foothill Motel at 2512 Foothill Blvd./
Econo Lodge at 606 N. "H" Street/Astro
Motel at 111 S. "E" Street/Budget Lodge
c/o Larry Hall
fundamental due process as they attempt to collect a
transient tax in violation of the residency requirement of
the Fourteenth Amendment of the United States Constitution.
This classification also violates the Equal
Protection Clause of the Fourteenth Amendment of the United
States Constitution.
Notwithstanding this, Chapters 3.54 and 3.55
violate due process as they are "void for vagueness."
We seek to completely overturn your determination
decisions on each motel before the Common Council and
respectfully request a hearing at the Council's earliest
convenience.
Please advise me accordingly. Your courtesy and
cooperation in the matter is appreciated.
Sincerely,
-.- f"'.
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Frank A. Weiser
Attorney at Law
cc: City Attorney's Office
(Facsimile: (909) 384-5238)
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OFFICE OF THE CITY CLERK
RAcHEL G. CLARK, C.M.C. . CITY CLERK
300 North "0" Street. San Bernardino. CA 92418-0001
909.384.5002' Fax: 909.384.5158
www.cLsan-bernardino.ca.us
VIA CERTIFIED MAIL
December 7, 2004
Ramilaben D. Patel
Foothill Motel
2512 Foothill Blvd.
San Bernardino, CA 92410
RE: NOTICE OF FINAL DETERMINATION OF TRANSIENT
LODGING TAX AND PI~NAL TY
Dear Mr. Patel:
After due consideration of the testimony and evidence presented at your appeal hearing on March
29, 2004, it is the decision of the City Clerk that your appeal on behalf of the Foothill Motel is
denied and the total amount of$I,120.53 is now due and owing to the City of Sun Bernardino. The
audit period which is the subject of this appeal was January 1,2000 through December 31, 2002.
The substance of the San Bernardino Municipal Code Sections which were not complied with are
the same for the ordinance which was in effect from Janur.ry 1,2000 through November 5, 2002
(Chapter 3.54), and for the ordinance which has been in effect since November 5, 2002 (Chapter
3.55).
It is the decision of the City Clerk, based upon the testimony and evidence so presented,that the
Foothill Motel was not in compliance with the following San Bernardino Municipal Code
requirements:
Collection of Tax - Failure to assess and collect the transient lodging tax. Failure to provide a receipt
to each transient at the time the rental payments are made. Failure to report the amount of transient
lodging tax to the transient. Failure to not represent that the transient lodging ta.x will be added to
the room rental charge and the operator absorbing the payment of the tax.
Registration Cards - Failure to use preprinted registration cards. Failure to reflect expected date of
termination.
I
CITY OF SAN BERNARDINO
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Daily Summary Sheets - Failure to maintain a daily summary sheet.
The afore-mentioned violations set forth in this decision were detailed and sent to you as part of the
audit performed by Progressive Solutions, Inc., via letter dated December 15, 2003. This audit was
made part of the appeal hearing record at the March 29, 2004 hearing.
As indicated previously herein, the violations set forth in this decision result in a total assessment
due to the City of San Bernardino in the amount of $1,120.53. This amount contains three
components:
Additional Transient Lodging Tax
Penalty
Interest
$480.48
$480.48
$159.57
$1,120.53
The amount of$1,120.53 is now due within fifteen (15) days of the date of this decision unless this
decision is appealed to the Common Council in accordance with the provisions of Chapter 2.64 of
the San Bernardino Municipal Code (a copy of said Chapter 2.64 is enclosed with this letter for your
information). However, the City Clerk determines that this amount of $1,120.53 may be paid over
a four month period in four equal one-quarter payments of the lump sum in order to avoid any undue
hardship. If you choose this method of payment instead of one lump sum payment, you must contact
Ms. Cindy Buechter, Business Registration Supervisor, immediately at (909) 385-5035 in order to
make payment arrangements.
Sincerely,
~ hUvJe-
Rachel G. Clark, CMC
City Clerk
encl.
cc: Mr. Frank Weiser
2
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PROGRESSIVE SOLUTIONS'
December 9,2003
R[CEIV~": CIl'( ClHK
V(t{ e-t'Ylri//
"OJ (Ie 10 A 7 :59
Rachel G. Clark, City Clerk
City of San Bernardino
300 North D Street
San Bernardino, CA 92418
Dear Ms. Clark,
Progressive Solutions, Inc. has applied the procedures enumerated below to the accounting
records of the Foothill Motel with respect to the transient lodging taxes owed to the City of San
Bernardino for the three year period beginning January 1, 2000 and ending December 31, 2002. The
procedures performed are summarized as follows:
1. We reviewed the City ordinance relating to the levy of transient Lodging tax.
2. We reviewed the operating records for the purpose of determining the existence of the
practice of allowing complimentary rooms to be occupied without TL T being collected
and remitted.
3. We tested, by random selection, the daily summaries which include the date, room
number, registration number, and name of each guest in-house, for completeness and
accuracy.
4. We tested by random selection, the monthly summary, which includes daily room
revenue, tax and exempt revenue, for completeness and accuracy.
5. We tested the exemptions claimed in the compilation of the taxable room revenues
reported to determine that the exemptions were allowable under the City of San
Bernardino code section 3.55.035, under the exemption sub-sections (A) and (B).
6. We performed additional procedures, as we deemed necessary.
Our review determined that the motel's operating procedures were found to be in violation of the
San Bernardino code, which resulted in the assessment of additional transient lodging taxes in the amount
of $480.48, penalties in the amount of$480.48, interest in the amount of $159.57, for a total amount of
$1,120.53 due to the City of San Bernardino. Review notes specifically identifying the errors have been
included in the contents of the Audit Narrative.
This report is intended for the information of City management and the taxpayer. This restriction
is not intended to limit the distribution of this report, which is a matter of public record.
Sincerely,
jLlI.tJ.;/J
Glenn R. Vodhanel, Audit Review Manager
Audit Division-Ocunside; P.O. Box 4489: Oceanside. CA 92052-4489
Tel: (760) 533-7808 FAX: (760) 722-2123 Email: ACAPUCHINO@aoI.com
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CITY OF SAN BERNARDINO
TRANSIENT LODGING TAX
FOOTHILL MOTEL
AUDIT REPORT
NOVEMBER 25, 2003
Performed by
PROGRESSIVE SOLUTIONS
Al Capuchino-Principal Auditor
Audit Division-Oceflns/de; [] liIl [ill] [ill![JUIJill [l]][][]ll]]J]] [][TIL![][JO[UTJe][]
Oe[OOJ[]OUiIlnJIIJO[ill] [] [] [][]OOIJl!IJ!JIIIIIl][J 0 rnmo 0 ODD [] 0 [[J [] [] []DDiiIDJ
PROGRESSIVE SOLUTIONs*
FOOTHILL MOTEL
TRANSIENT LODGING TAX
AUDIT NARRATIVE
Progressive Solutions, Inc. completed the assigned review of the motel's records for the period
beginning January 1, 2000 and ending December 31, 2002 in the presence of the motel's
proprietor, Ramilaben Patel.
A detailed review, as previously described, was performed of the transactions recorded for the
month of June 2002. Our review included the examination of the motel's registration cards, and
the manually prepared revenue summary, which is only a listing of the totals of the amounts
recorded on the registration cards that are dated for that particular day. Our review noted that the
hotel records revenue on a "cash basis" as monies are received. This practice does not properly
reflect daily revenue for rooms occupied, which is required by the city ordinance. Registration
cards are not pre-numbered, and cards were missing from the June batch. This resulted in the
audit compilation of the cards to be less than the amount reported to the City. The cards we
examined did display the occupant's name, room number, day of arrival, with rent charges
distinguished as either daily or weekly rentals. Pre-numbered receipts are only prepared when
requested by the occupant at the time of payment. The receipts that we examined only reflected
the amount paid with no reference to the transient tax. Accordingly, we are not able to verify
that the motel has properly informed the occupants of the transient taxes that were assessed and
paid. We have informed the motel that these procedures are in violation of the city ordinance.
Our review of the June transactions conceming the existing policy of assessing occupants for
transient taxes did not find any evidence that the motel assesses or collects transient tax from the
occupants. The motel admitted that the tax is not collected from the occupant. We have
concluded that the burden of the tax is assumed by the motel. Our review also examined the
inclusion of the rental revenue of the weekly occupants was included in the total reported to the
city. Our review resulted in an error of 7.8527% of the taxable revenue. This error percentage
has been extrapolated to the entire audit period. The motel has been informed of the poor
condition of the motel records as it relates to the clerical accuracy of reporting revenue to the
city.
We tested the completeness of the records presented for our examination by comparing our
revenue compilation with amounts reported on the Federal tax return. However our review has
noted the lack of internal control over the accounting for each transaction. By not having a
numerical and sequential "folio" number assigned to the records of each occupant, there exists a
potential risk of not recording every rental charge, and the related assessment and collection of
the transient tax, as well as, the reporting and remitting the tax to the City. Consequently, we are
not able to express an opinion as to the completeness of the records.
Audit Division-Oceanside; OIJIJ IlIIJOrJIDJOOOlD UIJlII[][lIJI]OIJIHJCOUJD(][][j
Oo:mJJOOOlDDmJCIlI!IIlOO[][JO'J[]]][JJOIJOO::nDO []]J]]JO 00000 [[) DO IlJIlIIJDD 0
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PROGRESSIVE SOLUTIONS-
Foothill Motel
Page 2
In summary, the review process disclosed four sections of the city ordinance in which the motel
was not in compliance relative to the requirements of the transient lodging tax section.
Section 3.33.030 (A), (D) Collection of tax
A. Each operator receiving a room rental payment that is subject to the transient lodging tax,
at the time of receipt of the room rental payment, shall collect the amount of tax imposed.
The operator shall provide a receipt for payment of the transient lodging tax to the
transient
D. No operator shall represent to the public that the transient lodging tax will not be added to
the room rental charge, will be absorbed by the operator or will be refunded in a manner
contrary to this Chapter.
Violation: Failure to (1) Failure to assess and collect the transient lodging tax, (2) Failure to
provide a receipt to each transient at the time the rental payments are made, (3) Failure to report
the amount oftransient lodging tax to the transient, (4) Failure to not represent that the transient
lodging tax will be added to the room rental charge and the operator absorbing the payment of
the tax.
Section 3055.070 (A) Records - Registration Cards
A. Registration Cards. Each operator shall complete and maintain a transient registration
card for every transient that is provided lodging space in the operator's hotel. At a
minimum, transient registration cards shall list the following information.
l. The name of the person who will occupy, or who is entitled to occupy the lodging
space.
2. The total number of people who will occupy, or who are entitled to occupy the
lodging space.
3. The identification of the lodging space.
4. The date the occupancy will commence and the expected date of termination.
5. The room rental to be charged for the lodging space.
Transient registration cards shall bear consecutive numbers that shall be preprinted on the cards
by a print shop or manufacturer of the cards. Voided cards shall be kept for audit purposes.
Audit Division-Oceanside; 000 [1I!J[]]]]OOO[]][] DOOm OIJDDD[J[J(]][IJOD
D[]]J][[l][J[]!][]OCDDCIlllilO 0 []JJlJOODl!IIJlJDDDOOllJ 0 DI][jj]J 0 000 0 0 CD 0 0 rnomo 0
PROGRESSIVE SOLUTION~
Foothill Motel
Page 3
Violation: Failure to use preprinted numbered registration cards. Failure to reflect expected
date of termination.
Section 3055.070 (B) Records - Daily Summary Sheets
B. Daily Summary Sheets. Each operator shall maintain a daily summary sheet for each day
it's hotel is open for business. At a minimum, daily summary sheets shall contain the
following information.
1. The name of the person who will occupy, or who is entitled to occupy each
lodging space that is provided to a customer that day.
2. The identification number of each lodging space provided to a customer.
3. The daily room rental charge and the amount paid for each lodging space
provided to a customer.
4. The number of the transient registration card applicable to each lodging space
provided to a customer.
Violation:
Failure to maintain a daily summary sheet.
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JUI.. -2 P 3 :56
JAMES F, PENMAN
CITY ATTORNEY
July 2, 2004
Mr, Frank A. Weiser, Esq.
3460 Wilshire Blvd., Suite 903
Los Angeles, CA 90010
RE: Transient Lodging Tax Appeal Hearings and Evidence Presented
Dear Mr, Weiser:
I called your office last week concerning the above-indicated subject matter, left a message
on your answering machine, but as of the date of this letter have not heard back from you.
As you know, several transient lodging tax ("TL T") appeal hearings were held a couple of
months ago wherein you submitted boxes of registration cards, etc. to demonstrate that the random
sampling conducted by Progressive Solutions, Inc. was not an accurate measure of any moneys owed
to the City of San Bernardino as a result of under or inaccurate reporting ofTL T by your clients. It
was indicated at the hearings that the records would be reviewed by Progressive Solutions. It was
further indicated that such review could not commence until sometime in May.
The City Clerk was advised by Progressive Solutions after the TL T appeal hearings had been
concluded that the fee for such an "audit" would be $250 per hour, with a 5 hour minimum
requirement, payable before the audit commences. Subsequent costs would be billed as incurred.
Further, Progressive Solutions advised the City Clerk that such costs would be borne by the applicant
motels since they were requesting this audit service, This financial information was not known to
either side at the time of the TL T appeal hearings. After grappling with various ways to resolve this
dilemma, this letter is being sent to yoli to seek your thoughts on a course of action. It is proposed
that the boxes of registration cards, etc. be returned to you and/or your clients to be organized in such
a fashion as you deem appropriate so that the financial information contained in them can be
presented in a concise manner to the City Clerk to address the issue of the accuracy of the random
sampling method employed by Progressive Solutions. In this manner, you control the costs in the
presentation of your evidence. Obviously, if you and your clients wish to employ Progressive
Solutions at the rates indicated, that is your decision. The City cannot make that decision for you,
nor is the City going to incur these costs since the "evidence" to be offered is in your defense.
___ ..___.. ....... "".,.oC'C'T. C:AN BERNARDINO, CA 92418-0001 . (909) 384-5355. FAX (909) 384-5238
_.>>,~,>> p
.
~
Please let me know as soon as possible what your thoughts are on this matter so that the
appeal hearings can be resolved. As you may know, there are no additional penalties or interest
being incurred by your clients as a result of this situation, but I am sure that you are like me and
would want this matter brought to a conclusion. You will recall that in one of the TL T appeal
hearings it was conceded by Progressive Solutions that it had made a mistake and thus that hearing
will be decided in your client's favor.
~c: Rachel Clark, City Clerk
.J
.
OFFICE OF THE CITY ATTORNEY
CITY OF SAN BERNARDINO
JAMES F. PENMAN
CITY ATTORNEY
August 5, 2004
Mr. Frank A. Weiser, Esq.
3460 Wilshire Blvd., Suite 903
Los Angeles, CA 90010
RE: Transient Lodging Tax Appeal Hearings and Evidence Presented (rd Letter)
Dear Mr. Weiser:
This letter is sent as a follow-up to my prior correspondence to you dated July 2, 2004
concerning the same above-referenced subject matter. As of the date ofthis letter, I have not heard
from you. I know from past experience that you are a very busy sole practitioner, and for that reason
I have waited to send this second letter. However, it appears that at least one of your clients is
inquiring as to the status of his appeal hearing, and since you represent him, I have not taken nor
returned his phone calls. Hence, this second letter to you.
As you know, several transient lodging tax ("TL T") appeal hearings were held a couple of
months ago wherein you submitted boxes of registration cards, etc. to demonstrate that the random
sampling conducted by Progressive Solutions, Inc. was not an accurate measure of any moneys owed
to the City of San Bernardino as a result of under or inaccurate reporting ofTLT by your clients. It
was indicated at the hearings that the records would be reviewed by Progressive Solutions. It was
further indicated that such review could not commence until sometime in May.
The City Clerk was advised by Progressive Solutions after the TL T appeal hearings had been
concluded that the fee for such an "audit" would be $250 per hour, with a 5 hour minimum
requirement, payable before the audit commences. Subsequent costs would be billed as incurred.
Further, Progressive Solutions advised the City Clerk that such costs would be borne by the applicant
motels since they were requesting this audit service. This financial information was not known to
either side at the time of the TL T appeal hearings. The boxes of registration cards, etc. are ready for
you and/or your clients to pick up to be organized in such a fashion as you deem appropriate so that
the financial information contained in them can be presented in a concise manner to the City Clerk
to address the issue of the accuracy of the random sampling method employed by Progressive
Solutions. If you and your clients wish to employ Progressive Solutions at the rates indicated, that
300 NORTH "0" STREET. SAN BERNARDINO. CA 92418-0001 · (909) 384-5355. FAX (909) 384-5238
"
,
is your decision, The Hearing Officer does not incur these costs since she is the initial decision-
maker and the evidence is being offered by one of the parties,
Again, there are no additional penalties or interest being incurred by your clients as a result
of this situation, but I am sure that you are like me and would want this matter brought to a
conclusion. You will recall that in one of the TL T appeal hearings it was conceded by Progressive
Solutions that it had made a mistake and thus that hearing will be decided in your client's favor. As
for the other appeal hearings involving the afore-mentioned boxes of evidence, the Hearing Officer
is prepared to render her decisions by no later than the end of this month if she or I have not heard
from you by August 19,2004, which is two weeks from the date of this letter.
~c: Rachel Clark, City Clerk
.J
I
JAMES F. PENMAN
CITY A TTORNErY
November 19,2004
Mr. Frank A. Weiser, Esq.
3460 Wilshire Blvd., Suite 903
Los Angeles, CA 90010
RE: Transient Lodging Tax Appeal Hearings and Evidence Presented (3,d Letter)
Dear Mr. Weiser:
This letter is sent as a final follow-up to my two prior letters to you dated July 2, 2004, and
August 5, 2004.
You will recall that both prior letters concerned the issue of the costs associated with
ferreting through boxes of records which you produced at the several transient lodging tax ("TL T")
appeal hearings in support of your position that the audits performed by Progressive Solutions were
flawed, and thus the amount of taxes allegedly owed, as well as penalties and interest, were equally
in error.
The first letter solicited your thoughts on the best way to proceed concerning your burden of
proof requirement vis-a-vis your production of records in boxes, rather than in a fashion which
would be readily presentable to the hearing officer. The second letter stated the following:
"The boxes of registration cards, etc. are ready for you and/or your
clients to pick up to be organized in such a fashion as you deem ap-
propriate so that the financial information contained in them can be
presented in a concise manner to the City Clerk to address the issue
of the accuracy of the random sampling method employed by Pro-
gressive Solutions. . . .the Hearing Officer is prepared to render her
decisions by no later than the end of this month if she or I have not
heard from you by August 19,2004, which is two weeks from the
date of this letter."
Neither this office nor the City Clerk's office ever received a written response from you or
300 NORTH "0" STREET. SAN BERNARDINO, CA 92418'()()()1 · (909) 384.5355. FAX (909) 384.5238
-~
c_"'~~<,~__ "'
.I
,
heard from you as a result of either letter. This office and the Hearing Officer have even waited an
additional three months (from August 19), just in case you were on an extended vacation or involved
in a multi-month court proceeding and could not respond in a timely fashion. Again, no response
of any kind has been forthcoming.
Please make arrangements to have the boxes of registration cards, etc. which are currently
in the possession of the City Clerk's office picked up - you and your clients may need them in the
future. The Hearing Officer will be issuing her decisions within two (2) weeks of the date of this
letter. As you have been advised twice before, there are no additional penalties or interest being
incurred by your clients as a result of this situation, but this matter needs to be brought to closure,
even though the City has not received any response from you to its prior two letters.
cc: R}chel Clark, City Clerk
~indy Buechter, Business
Registration Supervisor
, '--".--,~ r -, c
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"'
OmCE OF THE CITY CLERK
RACHEL G. CLARK, CM.C. . CITY CLERK
300 North "D" Street. San Bernardino' CA 92418-0001
909.384.5002' Fax: 909.384.5158
www.ci.san-bernardino.ca.us
8M
July 25, 2005
Mr. Frank A. Weiser
Attorney at Law
3460 Wilshire Blvd., Suite 903
Los Angeles, CA 90010
Dear Mr. Weiser:
At the meeting of the Mayor and Common Council held on July 18, 2005, the following action
was taken relative to the appeal hearing regarding the results of a transient lodging tax audit for
the Foothill Motel:
The hearing was closed; and the Mayor and Common Council upheld the decision
of the City Clerk, adopting her letter of December 7, 2004, as its findings and
conclusions, based upon the backup information submitted and any additional
evidence presented at the hearing.
If we can be of further assistance, please do not hesitate to contact this office.
Sincerely,
~h.~
Rachel G. Clark, CMC
City Clerk
RGC:lls
cc: Ramilaben D. Patel, Foothill Motel, 2512 Foothill Blvd., San Bernardino, CA 92410
Cindy Buechter, Business Registration Supervisor
CITY OF SAN BERNARDINO
AIlOPTRn SlIARIm V..tLlms: Intel!l'i.tv' Accountabilitv' Respect for Human Dignity. Honesty
_, -: -;r~''''!''~'' P'''77 '""-"'w'[I'U"" " ""F', "r",m-.' " '." ,
OFFICE OF THE CITY CLERK
RACHEl. G. CLARK, CM.C. . CITY CLERK
300 North "D" Street. San Bernardino' CA 92418-0001
909.384.5002' Fax: 909.384.5158
www.ci.san-bernardino.ca.us
May 4,2005
Mr. Frank A. Weiser
Attorney at Law
3460 Wilshire Blvd., Suite 903
Los Angeles, CA 90010
Dear Mr. Weiser:
At the meeting of the Mayor and Common Council held on May 2,2005, the following action
was taken relative to the appeal hearing regarding the results of a transient lodging tax audit for
the Foothill Motel:
That the matter be continued to the Council/Commission meeting of July 18, 2005,
at 4 p.m., and the continuance fee be waived.
If we can be of further assistance, please do not hesitate to contact this office.
Sincerely,
~,/;J- cLuJL
Rachel G. Clark, CMC
City Clerk
RGC:lls
cc: Ramilaben D. Patel, Foothill Motel, 2512 Foothill Blvd., San Bernardino, CA 92410
Cindy Buechter, Business Registration Supervisor
CITY OF SAN BERNARDINO
AnnPTlll\ SIU.V1lll V,U.tIRS! Tntp.aritv' Arr.onntllhilitv. Rp.!:nect for Hnmlln Dianitv. Honp.!:tv
~'~"'-r~'~"T'v~="--'-<~C-O"'''''''~-'~'' '-,,~'''~'''_._-- -p_",.'m_'"
BRIEF IN SUPPORT OF THE CITY CLERK
REGARDING THE APPEALS OF TRANSIENT LODGING
TAX AUDITS OF VARIOUS MOTELS-
APPEALS HEARINGS OF JULY 18, 2005
1.
INTRODUCTION
Several hotels/motels have filed an appeal of the City Clerk's decision that imposed
additional taxes, penalties and interest following an audit under the City's Transient Lodging Tax
ordinance. The audit covered the three year period of January 1, 2000 through December 31, 2002.
The hotels/motels involved are the Budget Lodge, Desert Inn Motel, Econo Lodge, Foothill Motel,
Knights Inn and the Terrace Motel.
During the audit period, there were two separate tax ordinances in effect. The period of
January 1, 2000 through November 5,2002 was covered by Municipal Code Chapter 3.54. On
November 5, 2002, the City's voters approved Chapter 3.55 which took effect the next day.
Both ordinances impose a 10% tax on persons occupying a hotel room. Section 3.54.020
levies the tax on any "transient" which is defined as "any person who, for a period of not more than
ninety consecutive days, either at his own expense or at the expense of another, obtains lodging or
the use of any lodging space in any hotel. . ."
Section 3.55.020(A) states as follows: "For the privilege of occupancy in a hotel, each
transient is subject to and shall pay a transient lodging in the amount of ten percent of the room
rental charged by the operator." A "transient" is defined as "a person who, for a period of thirty
consecutive days or less, exercises occupancy or is entitled to occupancy by reason of concession,
permit, right of access, license or contract.
The audits were conducted by Al Capuchino, Principal Auditor for Progressive Solutions.
2.
Persons Subject to the Tax.
Under both ordinance sections cited above, anyone who pays a fee of any kind to occupy a
hotel room must pay the tax. This would include someone who is charged a fee to visit a registered
guest at a hotel. Neither the guest nor a person visiting the guest is allowed to enter or use the hotel
room unless the fee has been paid. The period that the tax is imposed was the first 90 days of
occupancy under Chapter 3.54. The period was reduced to 30 days under Chapter 3.55.
The 90 day period was upheld in the case of San Bernardino Hotel/Motel Association v. City
RLSljs [T01\TLT,Brief] ,
1
Nos. 33-3 g
7/1'1/05
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of San Bernardino (1999) 59 Cal.AppAth 237, 245.
3.
The Mayor and Common Council Can
Sit As the Hearing Body of the Appeals.
Hearings on the appeals initially began on February 22,2005. Frank A. Weiser, the attorney
for appellants asked that the matter be continued in order to do further preparation. At that time, Mr.
Weiser raised the argument that the Mayor and Common Council could not as act an "unbiased"
tribunal. Mr. Weiser cited Haas v. County of San Bernardino (2002) 27 Cal.4th 1017. The Haas
case does not support Mr. Weiser's argument. In Haas, the County of San Bernardino used hearing
officers who were selected by the County and paid by the County. The plaintiff argued that this
presented a conflict of interest affecting the hearing officer's impartiality. The California Supreme
Court agreed that it did create a conflict of interest. The court held that the hearing officers must be
disqualified when the governmental unilaterally selects and pays the officers on an ad hoc basis and
the officer's income from future adjudication work depends entirely on the government's goodwill.
The test is not whether the hearing officer is influenced in fact but only whether sitting on the case
would offer a possible temptation to the average judge to lead him not to be fair.
The Mayor and Common Council do not have a financial interest that is "direct, personal,
substantive and pecuniary," Aetna Life Insurance Company v. Lavoie (1986) 475 US 813, 820. The
Mayor and Common Council have no personal interest at all in the outcome of the hearing and no
financial interest.
In Andrews v. Agriculture Labor Relations Board (1981) 28 Cal.3d 781, 792 the court held,
in matters in which no financial interest is involved, "a party's unilateral perception of an appearance
of bias cannot be a ground for disqualification unless we are ready to tolerate a system in which
disgruntled or dilatory litigants can wreak havoc with the orderly administration of dispute -
resolving tribunals."
Mr. Weiser has not pointed to any actual bias on the part of the mayor or any councilmember.
Mr. Weiser's claim of bias should be overruled and the appeals hearings should proceed.
4.
Interest Accrues on Unpaid Taxes
From the Sixty-First Day of Delinquency Until Paid.
Repealed Municipal Code ~3.54.050(A)(3) and current Section 3.55.050(A)(3) both provide
that "interest at the rate of eighteen percent per annum computed from the sixty-first day of such
delinquency until paid" accrues on both the past due taxes and any delinquency penalty. The taxes
and penalties are several years past due. Therefore interest continues to accrue.
RLS/js [T01\TLT,Briel]
2
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5.
Audits of Appellants Were Not Done In
Retaliation for Appellants Exercising
Their First Amendment Rights.
The First Amendment of the United States Constitution includes the rights of freedom of
religion, freedom of speech, peaceful assembly and to petition the government to address any
grievances.
Mr. Weiser alleged at the initial hearing on the appeals of these matters that the audits were
done in retaliation for the appellants' asserting their First Amendment rights. Mr. Weiser did not
specifically identify which right was allegedly violated.
Mr. Weiser claims that the City only audited members of the San Bernardino Hotel/Motel
Association ("Association"). The Association is currently involved in litigation with the City. Mr.
Weiser has refused to provide the names of the members of the Association directly to the City.
However, in response to discovery in the litigation currently ongoing between the Association
and the City, the Association did provide the identities in response to interrogatories. The identities
were provided to the City's outside attorneys on January 22, 2004. The identities of the Association
members have never been provided to the City Clerk's office. The City Clerk attempted to audit all
of the hotels and motels in the City. Attached to this brief is a list of the audit results of thirty-six
hotels/motels in the City of San Bernardino. The members identified through the discovery process
in the litigation with the Association have been circled on the list attached as Exhibit A to this brief
and incorporated by this reference.
Of the twenty hotels/motels that were found to owe taxes only nine are members of the
Association.
A summary of the audits shows that nine of the Association members owed transient lodging
taxes to the City, three denied the auditor access and one had no discrepancy. Three of the nine who
owed taxes and penalties voluntarily paid them.
Three other identified members of the Association were not audited. Oasis Motel onMt.
Vernon, University Inn on Tippecanoe and a motel at 1363 North E Street.
Since the City Clerk did not know who the Association members were prior to initiating the
audits, she could not have been retaliating against the Association members. In addition, since the
goal was to audit all hotels/motels in the City, it made no difference who were Association members
and who were not. Finally, the same audit standards were applied to every hotel/motel that was
audited.
RLS/js [T01\TLT,Brief]
3
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6.
There is No Violation of the
Equal Protection Clause.
Mr. Weiser claimed at the initial hearing that the Appellants' right to equal protection is
violated since the tax is applied to hotels/motels and not to apartments.
The only distinctions the current ordinance makes are (1) between those who rent for less
than 30 days and those who rent for more than 30 days, and (2) between those who rent for the first
30 days with and without a written contract for more than 30 days rental. The prior ordinance added
a 90 day requirement. The obvious purpose of these distinctions is to tax short term renters but not
long term ones.
A tax measure which does not involve any type of protected class is reviewed under the
rational basis test.
As both the United States Supreme Court and this court have explained on many
occasions, '[i]n areas of social and economic policy, a statutory classification that
neither proceeds along suspect lines nor infringes fundamental constitutional rights
must be upheld against equal protection challenge if there is any reasonably
conceivable state of facts that could provide a rational basis for the classification.
[Citations.] Where there are "plausible reasons" for [the classification] "our inquiry
is at an end." , [Citation] Kasler v. Lockyer (2000) 23 Cal4th 472, 481.
This is an extremely low standard. See Buena Park Motel Association v. City of Buena Park
(2003) 109 Cal.App.4th 302, 311 (holding an ordinance prohibiting rental of hotel rooms for more
than 30 consecutive days is valid).
Appellants seem to be arguing the distinction is between those who can afford to live in
apartments and those who can only afford a hotel on a day to day or week to week basis. That
contention is contrary to the plain terms ofthe current ordinance (Chapter 3.55). The ordinance does
not apply to anyone, no matter what type of unit he or she occupies, who stays more than 30 days.
It does not apply to anyone during the first 30 days, no matter what type of unit he or she occupies,
who signs an agreement to rent for more than 30 days. The ordinance does not impose any
obligation to pay the rent up front. Nor does the ordinance prohibit a written agreement to rent for
more than 30 days but to pay the rent daily or weekly. Plaintiffs economic arguments are contrary
to the actual terms of the current ordinance. The prior ordinance (Chapter 3.54) was for a 90 day
period and did not allow for a written agreement.
Transient occupancy taxes are the rule rather than the exception. California law expressly
allows cities to impose transient occupancy taxes. Revenue and Taxation Code ~7280. In the City
of San Bernardino Hotel-Motel Association v. City of San Bernardino (1997) 59 Cal.App.4th 237,
the Court held that the statute does not apply to charter cities such of the City of San Bernardino, but
RLS/js [TOnTI..T.Brief]
4
'~r~ -
R~ -
the appellants' arguments would inherently invalidate the statute and every transient occupancy tax
nationwide. State law makes a number of distinctions between transient occupants and more
permanent occupants. See, e.g., Civil Code ~1940 (excluding transient occupants from the entire
chapter on hiring of real property).
Most other states also levy transient occupancy taxes. See Rocky River v. Center Ridge Hotel
Association (Ohio 1989) 572 N.E. 2d 767; Covenant Community Church v. Lowe (Tenn. 1985) 698
S.W. 2d 339; Admiralty Suites and Inns LLCv. Shelby County (Tenn. 2004) 138 S.W. 3d223; Delta
Airlines, Inc. v. County Board of Arlington County (Virginia 1991) 409 S.E. 2d 130. See the
discussion in Atkinson Trading Co. v. Shirley, 210 F.3d 1247, 1264, n. 15 (9th Cir. 2000), reversed
on other grounds in 532 U.S. 645 (2001)
Challenges to transient occupancy taxes in those other states have been uniformly rejected,
including challenges based on the equal protection clause. In addition to the cases cited above, see
Menlove v. Salt Lake County (Utah 1966) 418 P.2d 227, which expressly rejected an equal protection
challenge.
7.
Challenges for Vagueness Should Be Overruled.
Mr. Weiser at the initial hearing made some allegations that both Chapters 3.54 (now
repealed) and 3.55 are unconstitutionally vague. Mr. Weiser did not clearly delineate what portions
are vague.
The question in this proceeding is whether Appellants had any actual problems telling
whether they should have collected the tax from their actual hotel guests. No facts were alleged at
the initial hearing to suggest any problems determining when the tax applied.
A statute or ordinance is void for vagueness only if a reasonable person is unable to tell what
he or she is required to do. The application of the void for vagueness doctrine to an ordinance
imposing a transient lodging tax was recently addressed in Patel v. City of Gilroy (2002) 97
Cal.App.4th 483. In that case the plaintiff hotel owners were assessed after they failed to collect a
hotel tax and filed a petition for writ of mandate challenging the validity of the tax ordinance on the
ground that it was unduly vague. The court stated the applicable standard as follows:
An enactment may be declared unconstitutionally vague under the due
process clauses of the United States Constitution and the California Constitution
(U.S. Const., Amends V, XIV; Cal. Const., art. I, ~7) "ifit fails to provide people of
ordinary intelligence a reasonable opportunity to understand what conduct it prohibits
[or] if it authorizes or even encourages arbitrary and discriminatory enforcement."
[Citations] A tax law in particular" 'must prescribe a standard sufficiently definite
to be understandable to the average person who desires to comply with it. [Citation.)'
" [Citations] We therefore must consider whether chapter 25A of the Gilroy City
RLS/js [TOTlTLT.Brief]
5
~-"~ ...r ~
Code (the Transient Occupancy Tax ordinance) gives fairnotice of the tax collection
and reporting requirements and provides reasonably adequate standards to guide
enforcement. [Citations] 97 Cal.App.4th at 486-487.
The primary attack in the Patel case was on definitions contained in the ordinance. The court
had no difficulties in upholding the ordinance.
The primary focus of the parties' dispute is the definition of the terms used in
section 25 Al - specifically, "hotel," occupancy," and "transient." From 1994 to
1996, the period for which appellant was audited, "hotel" was defined as "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, and 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." (Former ~25Al; Ord. No. 928, ~ 1 (1971) [Footnote] The term
"occupancy" refers to "the use or possession, or the right to the use or possession of
any room or rooms or portions thereof, in any hotel for dwelling, lodging or sleeping
purposes." (~25A1.) And a "transient" is "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 (30) 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 (30) 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 chapter may be considered." (~25A.1.)
Appellant's argument is self-defeating, as it expressly invokes a
"hypothetical" scenario appellant himself does not face. Whether a month-to-month
apartment rental would create confusion in the lessor and lessee is not the problem
presented here. Rather, here the only issue was whether appellant failed to collect tax
for those guests who stayed in his motel for 30 or fewer days without a written
agreement for a longer stay. Appellant "cannot prevail by simply suggesting
hypothetical situations in which constitutional problems may arise." [Citation]
"[S]peculation about possible vagueness in hypothetical situations not before the
Court will not support a facial attack on a statute when it is surely valid 'in the vast
majority of its intended applications.'" [Citations]
Appellant maintains, however, that we must exercise stricter scrutiny of the
ordinance because it prescribes criminal penalties for violations. [Citations] Penal
RLS/js [TOTllL TBrief)
6
"'<'~'-'17~'~e- "., ,...
enactments are given greater scrutiny when their enforcement threatens the exercise
of constitutional rights, such as freedom of expression or freedom of movement.
[Citations] But where no such constitutional rights are at stake, it is the facts of the
case and not hypothetical situations that determine the viability of a vagueness
challenge. [Citations] Thus, if the conduct with which appellant is charged falls
clearly within the bounds of the ordinance, appellant may not be heard to complain.
[Citation]
Even considering appellant's challenge as properly presented, we do not find
the ordinance unconstitutionally vague. Appellant acknowledges that the Transient
Occupancy Tax ordinance is presumed to be valid and must be upheld unless its
unconstitutionality" 'clearly, positively and unmistakably appears.' " [Citations]
Furthermore, even when criminal penalties apply, a statute or ordinance will be
upheld against a vagueness challenge" , " , "if any reasonable and practical
construction can be given its language." . . . ' " , " [Citations] We are bound to give
the ordinance before us "a liberal, practical common-sense construction. . . in
accordance with the natural and ordinary meaning of its words." [Citations} 97
Cal.AppAth at 487-489.
State Board of Equalization v. Wrick (2001) 93 Cal.AppAth 411 elaborated on the standard
applicable to tax statutes and ordinances.
The standards for certainty in a civil statute are less exacting than the
standards for a criminal statute. [Citation] 'It is true that "[c]ivil as well as criminal
statutes must be sufficiently clear as to give a fair warning of the conduct prohibited,
and they must provide a standard or guide against which conduct can be uniformly
judged by courts. . ." [Citations.] However, " '[r]easonable certainty is all that is
required. A statute will not be held void for uncertainty if any reasonable and
practicable construction can be given its language.' [Citation.] It will be upheld if its
terms may be made reasonably certain by reference to other definable sources."
[Citations.]' [Citation.] To be valid, a tax statute must prescribe a standard
sufficiently definite to be understandable to the average person who desires to
comply with it. [Citation.]" (Ibid.) 93 Cal.AppAth at 420.
Settled federal law requires a party who asserts a vagueness challenge to a specific
application, rather than in a request for injunctive relief, to prove that the alleged vagueness actually
affected the person raising the challenge. United States v. Powell, 96 S.Ct. 316, 319 (1975) ("We
said last Term that 'lilt is well established that vagueness challenges to statutes which do not involve
First Amendment freedoms must be examined in the light of the facts of the case at hand.'
[Citation]"); United States v. Midwest Fireworks Mfg. Co., 248 F.3d 563, 567 (6th Cir. 2001)
("Because defendants allege a due process violation, this is not a First Amendment problem.
Therefore, defendants must show that the regulation is 'unconstitutionally vague as applied to the
specific facts of the case, not whether it is unconstitutional on its face.' [Citation]"); Holman v. Page,
RLS/js [TOl\TLTBrief]
7
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95 F.3d 481,487 (7ili Cir. 1996) ("Vagueness challenges to statutes not threatening First Amendment
interests are examined in light of the facts of the case at hand. ").
Hypothetical difficulties that a hypothetical hotel operator potentially could have had in
determining whether the tax applies would be relevant to an action seeking to enjoin the operation
of the ordinance in the future. But these appeals are based on the past application of the ordinance.
Appellants have alleged no facts to suggest that they had any actual problems, ever, in determining
whether the tax did apply. Specifically:
1. Appellants contend it might have been difficult under some circumstances to
determine who is subject to the tax. Appellants admit they are members of a hotel/motel association.
2. Appellants alleged no facts to suggest that they ever had any difficulties during the
relevant time period, concerning any specific hotel guest, in determining whether the tax applied or
not. The only argument was they paid the tax without setting it forth separately on the registration
and should not be penalized. The argument was simply that the City received all taxes due.
3. Appellants allege no facts to suggest any problems, in any specific instance, of
determining what was room rent to which the tax applied.
The cases cited above set forth the standard by which the ordinance must be measured. The
question presented in this case is whether any possible ambiguities in former Chapters 3.54 and 3.55
made it impossible for plaintiffs to tell when the tax did and did not apply. Whether other owners
of rental housing may have had problems telling whether their rentals to other persons were or were
not subject to the tax is simply irrelevant.
This challenge to the statute should be denied.
8.
The City's Transient Lodging Tax
Does Not Violate the Commerce Clause
Or The Right to Travel.
Mr. Weiser stated at the initial hearing that the TLT violates the right to travel. The
commerce clause prevents the states and other public entities from passing legislation that impedes
commerce between the states. The short answer to this argument is that the City is not taxing the
right to travel. The TLT is a tax on the "occupancy" of a hotel/motel room. The tax applies equally
to any guest at a motel no matter whether the guest's present home is in San Bernardino or another
city or state.
The California Supreme Court in Pacific Merchant Shipping Ass 'n v. Voss (1995) 12 Cal.4th
503 summarized cases interpreting the Commerce Clause as follows:
RLSljs [TOnUT,Brief)
8
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The commerce clause of the federal Constitution empowers Congress to enact
laws 'To regulate commerce with foreign nations, and among the several states, and
with the Indian tribes.' (U.S. Const. art. I, ~8, cl. 3.) . . . Thus, any state statute or
regulation that impacts domestic interstate or foreign commerce is subject to judicial
scrutiny under the commerce clause unless the statute or regulation has been
preempted, or expressly authorized, by an act of Congress. [Citation] The commerce
clause's implicit, self-executing restriction on the states' power to regulate domestic
interstate and foreign commerce is commonly referred to as the "negative" or
"dormant" commerce clause. [Citation] 12 CaI.4th at 514.
The Court stated the applicable standard as follows:
[T]he first step in analyzing any law subject to judicial scrutiny under the
negative Commerce Clause is to determine whether it 'regulates evenhandedly with
only "incidental" effects on interstate [orforeign] commerce, or discriminates against
interstate [or foreign] commerce.' . . . If a restriction on commerce is discriminatory,
it is virtually per se invalid. [Citations.] By contrast, nondiscriminatory regulations
that have only incidental effects on interstate [or foreign] commerce are valid unless
'the burden imposed on such commerce is clearly excessive in relation to the putative
local benefits.' " [Citation] The party challenging the statute's validity bears the
burden of showing discrimination. [Citation]
In this context" 'discrimination' simply means differential treatment of in-
state and out-of-state economic interests that benefits the former and burdens the
latter." [Citation] Such discrimination may take any of three forms: first, the statute
may facially discriminate against interstate or foreign commerce; second, it may be
facially neutral but have a discriminatory purpose; third, it may be facially neutral but
have a discriminatory effect. [Citation] 12 Cal.4th at 517.
None of those apply here. First, the tax applies evenly to anyone who rents a hotel in San
Bernardino, whether that person comes from another country, another state, another city, or within
the City itself. Second, Appellants allege no discriminatory purpose and none is apparent. The tax
was enacted to raise revenue (section 3.55.020(B)) and contains no regulatory provisions not directly
related to collection of revenue. Third, Appellants alleged no facts to suggest a discriminatory effect.
Again, the tax applies equally to anyone who rents a hotel in San Bernardino, no matter where that
person lives when not staying in the hotel. There is no unequal treatment or effect
Finally, Appellants do not have the right to make this argument. That is, Appellants lack the
legal standing to raise this issue. The tax is imposed on the transients who occupy hotel/motel
rooms. The Appellants are not taxed (See Nordlingerv. Hahn (1992) 505 U.S. 1, 10-11, California
homeowner has no standing to raise the right to travel by others as a basis for challenging a property
tax). Appellants did not allege how the TLT affects anyone's right to travel. Clearly there is no
effect on Appellants who merely collect the tax and transmit it to the City.
RLS/js [TOT\l1.T,Brief]
9
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9.
There Is No Requirement That There Be
A Transition Period Prior To A New
Law Taking Effect.
Mr. Weiser raised the argument at the initial hearing that a law cannot go into effect the day
after it was passed. This argument presumably goes to Chapter 3. 55 which was approved by the
voters on November 5, 2002.
The California Election Code ~9141 provides that ordinances "fixing the amount of money
to be raised by taxation or the taxes to be levied" are effecti ve immediately upon passage. Similarly,
Government Code ~36937(d) provides that a City ordinance takes effect immediately, if it is an
ordinance "relating to taxes for the usual and current expenses of the city."
The general rule in California is that measures approved by the voters take effect the day after
the election unless otherwise provided in the measure. California Constitution, article IT, ~1O.
There is no provision in either state law or the City Charter or Municipal Code that requires
a transition period. Thorough legal research has not found any legal requirement for a transition
period.
CONCLUSION
Appellants' legal arguments should be disregarded. The Mayor and Common Council should
uphold the City Clerk's decision and deny the appeal.
Dated: July / ~ ,2005
~,4~
ROBERT L. SIMMONS
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INTER OFFICE MEMORANDUM
OFFICE OF THE CITY ATTORNEY
CITY OF SAN BERNARDINO
TO:
Sandra Medina, Assistant to the City Clerk
City Clerk's Office
FROM:
Robert L. Simmons, Sr. Assistant City Attorney
DATE:
July 14,2005
RE:
Agenda Item 33 through 38 on Mayor and Common Council
Agenda of July 18, 2005
Enclosed is the Brief! discussed with you in support of the Clerk's position on Agenda Item
Nos. 33-38. Please attach the brief as part of the back-up.
~
Robert L. Simmons
Sr. Assistant City Attorney
Enclosure
RLS/js [TLT.Medina.Mem]