Portola Hotel files suit against Monterey asking a court to overturn a tax payment penalty.

“We’re all in this together,” is a phrase often quoted since the beginning of the Covid-19 pandemic. The owners of the Portola Hotel and Spa are claiming in a new lawsuit they were told that very phrase by Monterey City Manager Hans Uslar back in March at the start of the Covid-19 pandemic when hotels shut down and faced economic peril.

Based on statements the owners, Custom House Hotel, L.P., claim Uslar made that indicated the city would waive late fees, the company didn’t pay the hotel’s $346,300 January-February transient occupancy tax bill by the March 31 due date, according to court documents.

The hotel did pay by May 1. As a result of missing the March 31 deadline, the city charged the Portola a late fee of 10 percent, or $34,600. The hotel appealed, and on Aug. 4, the Monterey City Council denied the appeal.

A city staff report states Uslar never said the city would waive TOT late fees, that he was referring to late rent payments made to the city. “As an initial matter, the City Manager does not have the power to orally alter the City Code,” the staff report states, refuting the claim that Uslar promised waiving late fees on TOT payments.

The city report also points out that Uslar sent a letter to hotels on March 25 laying out that city code requires the payments, which include assessments to pay for the Monterey Conference Center. “Essential public services, especially public safety during this health pandemic are dependent on TOT revenues,” Uslar writes. Ninety percent of hotels did pay their TOT by March 31, according to the report.

On Aug. 26, the Portola’s owners, Custom House Hotel, L.P., filed suit in Monterey County Superior Court appealing the penalty. The suit asks for a judge to approve the hotel’s appeal, reimburse the $34,600 penalty it paid the city and court costs.

The lawsuit states that on March 18—the same day Portola shut down due to shelter-in-place and laid off 300 workers—the hotel’s general manager, Janine Chicourrat, told Uslar at a meeting of the Monterey Conference Center Advisory Committee that Portola was projecting an economic hit of $4.8 million in lost revenue between March and May of 2020.

Uslar is quoted in the lawsuit as saying at the meeting that the city was “looking into deferring payment like TOT,” and, “We don’t want to take money if hotels are having cash flow problems and then they have to foreclose. We are all in this together. We have reserves as well and can hang in there,” according to court documents.

The claim that Uslar said late fees would be waived stems from a virtual business roundtable on March 31. “In reliance upon defendant’s City Manager’s above-described affirmative representations and his specific representation that the ‘City will waive late [TOT] penalties,’ Plaintiff did not make its TOT payment on March 31, 2020,” the lawsuit reads. The lawsuit also asserts that the city ignored its own code by not approving the hotel’s request for a hearing with the city’s finance director.

"We obviously deny there was anything improper about the penalties that were imposed and the city will defend the matter vigorously," says Monterey Assistant City Attorney Karin Salameh.

As of Thursday, there was no date set on the court calendar for a first hearing of the case.