HomeMy WebLinkAbout1992-06-09; City Council; 11732; APPEAL REGARDING RAPP AND LUXENBERG DEVELOPMENT NOTICE OF ASSESSMENT AND DETERMINATION OF TRANSIENT OCCUPANCY TAX, PENALTIES AND INTEREST,
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fUU CITY OF CARLSBAD - AGEW BILL
i 3 AB # 11; 7 3 & TITLE: APPEAL REGARDING RAPP & LUXENBERG DEP
CIT' MTG.
DEPT. FIN TAX, PENALTIES AND INTEREST CIT'
6/9/92 DEVELOPMENT NOTICE OF ASSESSMENT AND
DETERMINATION OF TRANSIENT OCCUPANCY
RECOMMENDED ACTION: It is recommended that the City Council affirm the determination of the City
Carlsbad Tax Administrator in accordance with the Carlsbad Municipal Co
Chapter 3.12 by adoption of Resolution No. 92-1b6.
ITEM EXPLANATION:
Chapter 3.12 of the Carlsbad Municipal Code provides that for the privilege
occupancy in any hotel, each transient shall pay a tax in the amount of t
percent of the rent charged by the operator (Section 3.12.030). All operatc
shall remit monthly the full amount of the taxes collected (CMC Secti
3.12.070(a)). Taxes remitted monthly and actually received on or before the 12
day of the following month shall be deemed timely; otherwise, the taxes a
delinquent and subject to penalties and interest imposed by Section 3.12.01
(CMC Section 3.12.070(b)). Any operator who fails to remit taxes impos
tax in addition to the amount of the tax (CMC Section 3.12.080(a)). A
operator who fails to remit any delinquent remittance on or before a period
thirty days following the date on which the remittance first became delinque
shall pay a second delinquency penalty of ten percent of the amount of the t
in addition to the amount of the tax and the ten percent penalty first impos
(CMC Section 3.12.080(b)). In addition to penalties imposed, any operator w
fails to remit any tax imposed by this Section shall pay interest at the rate of or
half percent per month on the amount of the tax (CMC Section 3.12.080(e
Every penalty imposed and such interest shall become a part of the tax requir
to be paid by this Section (CMC Section 3.12.080(f)).
Rapp & Luxenberg Development operated the Carlsbad Seashore Resorts as
beach resort facility occupied by transients (as defined by Section 3.12.020(7
during the years of 1987, 1988, 1989 and part of 1990, whereby Steven
Luxenberg and Darryl C. Rapp, general partners, assessed and collected transie
occupancy tax from the transients residing at the resort. They never notified tl
City of Carlsbad of their existence as a "transient" facility, nor remitted any
the tax to the City of Carlsbad. The disclosure was also never made during tl
annual renewal of the existing business license. An examination of the busine
license records revealed that Rapp & Luxenberg Development continued to repc
the facility as an apartment complex on the business license, when in fact, it hi
been converted to a beach resort facility with occupancies of 30 days or less.
On September 4,1991, the City of Carlsbad made a demand for an inspection
the records, by phone to Paul Peterson, Rapp & Luxenberg Developme
operations manager.
within the time required shall pay a penalty of ten percent of the amount oft
e a
Page Two of Agenda Bill No. / 1; 3 3 %
On September 14, 1991, the City of Carlsbad made a demand for inspection 1 the records, by phone to David Bookbinder, Attorney for Rapp & Luxenberg. C
October 22, 1991, the City of Carlsbad made a written demand for inspection
the records to Rapp & Luxenberg Development at their Solana Beach office. C
November 6, 1991, the City of Carlsbad made a written demand for inspectic
of the records to Rapp & Luxenberg Development at their Encinitas office.
On December 10, 1991, after receiving no response to demands for inspection
records, the Tax Administrator made an estimate of the amount due and filed
Notice of Determination and Assessment of Delinquent Transient Occupancy Ta
Interest and Penalties, in the amount of $247,396.78, on each of the gener
partners, recording same with the San Diego County Recorder's office (Ci'v
3.12.090). The amount of the assessment was compiled by staff by taking tl
number of rooms and the respective room rates at full occupancy for the entii
period.
On December 13, 1991, Steven B. Luxenberg responded to the Notice (
Determination & Assessment by phone, to Cheryl Allen, Assistant Finanr
Director, requesting a hearing; on December 18,1991, Mr. Luxenberg submittc
a written request for a hearing. After some inconvenience the hearing was final
set for January 24, 1992.
On January 24, 1992, the Tax Administrator of the City of Carlsbad conduct€
a hearing on this matter as required by Section 3.12.090 of the Carlsb:
Municipal Code. Rapp & Luxenberg Development was represented by Steven
Luxenberg, a general partner, and the Tax Administrator was represented by,
D. Capuchino, Auditor. Mr. Luxenberg presented records showing the amou
objections were stated by Mr. Luxenberg:
1.
of taxes collected from transient renters in 1989 and 1990. The followi1
Successor, who acquired possession of the property in December, 199
should be held liable (under CMC Sections 3.12.072 and 3.12.074) for a
amounts due to the City of Carlsbad.
RESPONSE: The successor came unto possession of the property as a result (
Foreclosure Proceedings as opposed to a sale. Therefore there was not a portic
of a sales price to be withheld as stated in Section 3.12.072. Also, the liabilii
of the successor does not eliminate the liability of the operator. In the eve]
there had been a sale of the property, both parties would be liable for tl
amount due.
2. Interest, as dictated by CMC Section 3.12.080(e), is usurious and illegal.
RESPONSE: Usury laws regulate the amount of profit a lender may make on
loan. The City of Carlsbad did not lend money to Rapp & Luxenbe;
Development. The operators took tax money which belongs to the City and
t e e
Page Three of Agenda Bill No. I i, 3 3 z
converted it to their own use. Therefore, the usury laws do not apply. TI
interest compensates the City for the loss of use of the money.
3. Transient Occupancy Tax payments made by the court appointed receiv
were made on the behalf of Rapp & Luxenberg Development and should 1
reflected as a reduction of amounts due the City of Carlsbad.
RESPONSE: The review of the records clearly indicates that the amour
period in which the Receiver operated the Seashore Resort and were not a p;
of the tax collected by Rapp & Luxenberg Development.
4.
remitted by the court appointed receiver to the City of Carlsbad were for tl
The statute of limitations has run on taxes, interest and penalties due
1987 and 1988, and accordingly, the appellant refuses to present copies
the 1987 and 1988 records.
RESPONSE: Since Rapp & Luxenberg Development never properly disclosed the
existence as a "transientt' facility and since disclosure of the facility only came
the awareness of the City of Carlsbad as a result of timely payments initiated 1
the court appointed receiver, an exception to the statute of limitations appli
because Rapp & Luxenberg Development fraudulently concealed the fact that thc
were operating a transient facility and collecting transient occupancy tax. Sin1
the appellant did not produce copies of the 1987 and 1988 records, the roo
rents for that period were estimated.
On March 6,1992, after a review of the Rapp & Luxenberg Development record
the Tax Administrator of the City of Carlsbad served each general partner of Ral
& Luxenberg with a Revised Notice of Determination and Assessment
Delinquent Transient Occupancy Tax, Interest and Penalties, in the amount
$81,801.30. This amount was later reduced to $65,556.72 and the appella
was served with an Amended Notice of Determination dated April 22, 1992.
The complete file of all the documents in this matter are on file in the office 1
the Tax Administrator and are available for review by the Council Members.
The staff recommends that the Council affirm the determination of the City 1
Carlsbad Tax Administrator and deny the appeal.
FISCAL IMPACX
The operators have been assessed $38,662.03 in delinquent taxes, $7,732.41
penalties, and $19,162.28 in interest, for a total assessment of $65,556.7
The granting of the appeal will result in the loss of this amount in TOT reveni
for the fiscal year 1991-1992.
EXHIBJT:
1. Resolution No. (?# -/b4 .
0
June 12, 1992
CERTIFIED MAIL
Steve B. Luxenberg, General Partner Rapp & Luxenberg Development 620 South Strand, #22 Oceanside, CA 92054
RE:
The Carlsbad City Council, at its meeting of June 9, 1992, adopted Resolution 92-166, denying the appeal of Rapp and Luxenberg, and affirming the determina' of the City Tax Administrator to require the payment of delinquent trans occupancy tax, interest and penalties.
Enclosed for your records is a copy of Resolution No. 92-166.
APPEAL OF DELINQUENT TRANSIENT OCCUPANCY TAX
Z$@ Assistant Cit Clerk
Enc.
c: A1 Capuchino, Finance Dept.
1200 Carlsbad Village Drive - Carlsbad, California 92008-1 989 - (61 9) 434-2
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RESOLUTION NO, 9 2 - 5 6 6
A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF CARLSBAD, CALIFORNIA AFFIRMING
THE DETERMINATION OF THE TAX ADMINISTRATOR
IN THE APPEAL OF RAPP 81 LUXENBERG DEVELOPMENT
WHEREAS, the City Council received the Amended Notice of Determination
and Assessment of Delinquent Transient Occupancy Tax, Interest and Penalties, of
the City of Carlsbad Tax Administrator, dated April 22, 1992, and reviewed the
record of the hearing held on January 24, 1992; and
WHEREAS, the City Council carefully considered the evidence and arguments
in the record, as well as any testimony presented at this appeal.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Carlsbad, California, as follows:
1.
2.
That the foregoing recitations are true and correct.
That the amended determination of the Tax Administrator attached
as Attachment "A" to this resolution is affirmed by the City Council.
1 PASSED, APPROVED AND ADOPTED at a Regular Meeting of the CitJ
17 Council of the City of Carlsbad, California on the 9th day of June , 1992
2o i
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AYES: Council Members Kulchin, Larson, Stanton and Nygaard
NOES: None
ABSENT: Council Members Lewis fi&d-&-Jk CLAUDE A. LE , ayor
ANN J. KULCHIN, Mayor Pro-Tern 24 ~ 1 ATI'EST:
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ALETHA L. RAUTENKFWNZ, City Clerk
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Certified Mail
Date Mailed: April 22, 1992
. Steve B. Luxenberg, General Partner
Rapp & Luxenberg Development,
A California General Partnership
620 South Strand, #22
Oceanside, CA 92054
NOTICE OF DETERMINATION OF DELINQUENT TRANSIENT OCCUPANCY TAXES
CARLSBAD MUNICIPAL CODE Section 3.12.090 - AMENDED RESPONSE
Hearing Held January 24,1992
Dear Mr. Luxenberg;
This will serve as the City of Carlsbad's amended response to your requested Hearh
the Assessed Delinquent Transient Occupancy Taxes in accordance with Section 3.1;
of the Carlsbad Municipal Code. We have adjusted the amount of the interest due fc
period of March 1, 1987 to February 29, 1992 on the delinquent taxes for the pen
February 1, 1987 through September 30, 1990 to reflect simple interest rather
compound interest. We have compiled the attached amended Delinquency Schedule
April 3,1992 from the documents presented for our review. Again, let us remind yo
the amounts shown on the schedule represent actual rent receipts as shown o
documents presented to the City of Carlsbad for the period of January, 1989 th
September, 1990, and rent receipts determined and assessed by the City of Carlsbad f
period of February, 1987 through December, 1988. The City of Carlsbad deer
necessary to determine and assess the rent receipts for 1987 and 1988 due tc
reluctance to provide documentation in support of the actual amounts for that per
The City of Carlsbad is now hereby serving you with an Amended Notice of Dek
Transient Occupancy Taxes, Interest and Penalties due in the amount of $65,556.72
will also serve to acknowledge the receipt of your appeal to the City Council as prc
in Section 3.12.100 (C.M.C.). We are in the process of setting the date of hearing
1200 Carlsbad Village Drive - Carlsbad. Callfornla 92008-1989 - (619) 43
Lrn
ATTL a 0
Mr. Steve 8. Lwenberg
page two
appeal before the City Council and you will be notified accordingly.
Please do not hesitate to call me at (619) 434-2884 if you any further questions regar
this matter. /q?.$@
AL D. CAPUCHIN0
Finance Department Auditor
for the Tax Administrator
Enclosure
cc: James F. Elliott, Director of Financial Mgmt.SeMces
Lisa Hildabrand, Finance Director
Karen Hirata, Deputy City Attorney
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May 14, 1992
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CERTIFIED MAIL P 086 635 412
RETURN RECEIPT REQUESTE
Mr. Steven B. Luxenberg
General Partner
Rapp & Luxenberg Development
708 Fourth Street, Suite 102 Encinitas, CA 92024
‘In accordance with Section 3.12.100 of the Carlsbad Municipal Coc
notice is hereby given that the hearing for your Appeal
Delinquent Transient Occupancy Taxes is scheduled to be heard
the City Council at the Regular Meeting of June 9, 1992. The C. Council meeting will begin at 6:OO p.m.
ALETHA L4- L. RAUTENKRANZ, C C
City Clerk
ALR: ijp
cc: A. Capucl?ir!r, Auditor
1200 Carlsbad Vlllage Drive - Carlsbad, California 92008-1 989 - (61 9) 434-2
0 e
CALL TO ORDER: 6:OO P.M.
ROLL CALL:
PRESENTATIONS; Presentation of a proclamation for National Association of Insurance Women Week.
AB #11,675 - Presentation by Historic Preservation Commission for National Preservation Week.
APPROVAL OF MINUTES:
Minutes of the Special Meeting held April 28, 1992. APPROVED
CONSENT CALENDAR:
WAIVER OF ORDINANCE TEXT READING: APPROVED
This is a motion to waive the reading of the text of all ordinances and resolutions at this meeting.
1. AB #11,676 - SETTING DATE TO HEAR APPEAL OF DELINQUENT TAX. Directing staff to set a hearing on June 9, 1992, to consider the appeal by Rapp & Luxenberg Development, of their notice to pay delinquent Transient Occupancy Tax,.interest and penalties. COUNC I L ACT ION : APPROVED
.............................................................................. * * * * In conformance with the Brown Act, no Council action can occur on * items presented during Public Comment. *
* PUBLIC COMMENT t
* *
* A total of 15 minutes is provided so members of the public can address *
* the Council on items that are not listed on the Agenda. Speakers are * * limited to three (3) minutes each. If you desire to speak to the * * Council about an item not listed on the Agenda, a pink "Time Reserva- * tion Request" form should be filed with the City Clerk.
* When you are called to speak, please come forward and state Your name * * and address.
* * * *
* * * ..............................................................................
ORDINANCES FOR ADOPTION: I
2. AB #11,680 - OFF-SITE REAL ESTATE SIGNAGE - ZCA 90-2. Adopting Ordinance No. NS-199, approving an amendment to Title 21 of the Jarlsbad Municipal Code to conditionally allow off-site real estate signs in the City,
COUNC I L
ACTION : APPROVED
2