Modesto could use court to collect delinquent motel taxes

Superior Court could be Modesto’s next step as it tries to collect $68,304 it is owed in back taxes and penalties by Budgetel Inns & Suites, a McHenry Avenue motel that has drawn attention from the police because of its high level of calls for service.

City Attorney Adam Lindgren said his office is looking into filing a lawsuit against the motel for what it owes the city. United Resorts LLC operates the Budgetel, and Lindgren said his office will research whether legal action also can be brought against the corporation’s members. He added that the city may ask the Stanislaus County District Attorney’s Office to consider filing criminal charges against the motel over the debt.

Prosecutors would review any information Modesto sends them to determine whether a crime has been committed, District Attorney’s Office spokesman John Goold said in an email. He added that prosecutors could not recall a similar prosecution in recent memory.

Lindgren said he and his staff would bring Modesto’s options to the City Council for a decision on how to proceed. He could not say when that might be.

The council on Tuesday upheld a city decision that the Budgetel owes the city $101,304 in unpaid transit occupancy taxes and penalties from June 2009 through January 2015. The taxes are what lodging establishments are required to charge guests and then pay to the city. Modesto’s tax is 9 percent of the room rate.

But Budgetel officials gave city officials at the council’s May 3 meeting two cashier’s checks totaling $33,000, reducing what the motel owes to $68,304, and asked for a payment plan to pay off the balance. The council on Tuesday gave Budgetel 72 hours to pay the $68,304.

United Resorts CEO and President Shavi Ahmed said one of his employees gave the city an additional cashier’s check Friday for $30,000 and that he plans to pay off the balance soon.

Modesto Customer Services Division Manager Leslie Curtin said she could not confirm or deny Ahmed’s statement because it involves confidential tax information. Lindgren said if Budgetel paid $30,000, that does not change the city’s plans because the check does not pay off the entire debt as required by the council.

Budgetel officials were appealing to the council a January 2015 city decision that it owed Modesto $101,304. With the council’s decision Tuesday to uphold that decision, Modesto has exhausted its administrative remedies and can pursue legal action.

Budgetel owes Modesto additional money. City officials said at the May 3 council meeting that the motel had racked up about $97,000 more in unpaid taxes and penalties since the January 2015 decision. That amount is not part of the appeal or what the council demanded be paid within 72 hours.

United Resorts also owes back taxes to other government agencies for the Budgetel.

The Bee reported May 5 that the Internal Revenue Service filed two liens this year against United Resorts for $108,943 and the California Employment Development Department filed four tax liens in 2014 and 2015 against United Resorts for $20,138, according to documents filed with the Stanislaus County clerk-recorder's office. The liens are for taxes, interest and penalties.

Since then, the IRS has filed an additional lien for $13,719. Ahmed said United Resorts’ attorney is working with the IRS and state to resolve all of the liens.

The city has had other problems with the McHenry Avenue motel, which is two blocks south of Briggsmore Avenue and in recent years also has operated as an America’s Best Value Inn and a Vagabond Inn. The Police Department in August singled out the motel and another one for generating high numbers of calls to police for service. Police Chief Galen Carroll said the high numbers of calls have not let up.

Ahmed has said a significant amount of the motel’s business comes from vouchers issued by Stanislaus County to provide temporary lodging for people who would otherwise be homeless. He also has said the Budgetel has had trouble paying its taxes because the city has required extensive repairs of the 92-room motel. City officials have said Modesto has worked repeatedly with Budgetel to get it to pay its taxes, but with limited success.

This story was originally published May 28, 2016 at 5:42 PM with the headline "Modesto could use court to collect delinquent motel taxes."