20-0707_DC PROPERTIES 2, LP_Agenda Report_E13City of San Juan Capistrano
Agenda Report
TO: Honorable Mayor and Members of the City Council
FROM: Benjamin Siegel, City Manager
SUBMITTED BY: Ken Al-Imam, Chief Financial Officer
DATE: July 7, 2020
SUBJECT: Transient Occupancy Tax Payment Deferral Agreement (Best
Western Capistrano Inn)
RECOMMENDATION:
Approve and authorize the City Manager to execute a Transient Occupancy Tax Payment
Deferral Agreement (Attachment 1) to provide an eight-month extension to pay transient
occupancy taxes applicable to the quarter ended March 31, 2020.
EXECUTIVE SUMMARY:
The COVID-19 global pandemic has significantly reduced the revenues of the Best
Western Capistrano Inn (Hotel). In response, the Hotel has requested an eight-month
extension (payment deferral) to pay transient occupancy taxes collected in the first
quarter of 2020. If approved, this deferral would support the Hotel’s continued operation
by providing working capital while its revenues continue to be impacted by reduced travel
during the COVID-19 global pandemic.
DISCUSSION/ANALYSIS:
The travel and tourism industry has been particularly impacted by the COVID-19 global
pandemic, with effects expected to extend beyond the imposition of shelter-at-home
restrictions due to lingering concerns of some travelers regarding a possible resurgence
of the pandemic. Since mid-March, the Hotel has experienced a significant decline in
revenue. For the period of April 1 through June 20, Hotel revenues were 68% less than
the same period in 2019.
As a result of this significant decline in cash flow, the Hotel is experiencing fiscal distress.
Seven employees have been laid off and workers’ hours have been reduced to one to
two days a week. Approval of the deferral agreement would provide critical working capital
to the Hotel, which would be used to continue Hotel operations during this period of
substantially reduced demand for travel and tourism services.
7/7/2020
E13
City Council Agenda Report
July 7, 2020
Page 2 of 2
Section 3-3.603 of the Municipal Code requires that hotels within the city collect a 10%
transient occupancy tax from guests residing in the hotel. The tax paid by the guest is
separate from and in addition to the amount that the guest pays the hotel for lodging
services. The Municipal Code requires that on a quarterly basis, each hotel report to the
City the amount of tax collected on behalf of the City and remit such taxes within 30 days
of the end of each quarter.
Under the terms of the proposed deferral agreement, transient occupancy taxes for the
first quarter of 2020 must be paid in full no later than December 31, 2020, with 2% interest,
provided that all taxes due for the other three quarters of calendar year 2020 are paid by
their due date. Failure to comply with these terms will result in the imposition of all
penalties and interest that are set forth in the Municipal Code. The City’s interest in the
deferral agreement will be recorded as a lien against the property.
FISCAL IMPACT:
The amount of tax collected by the Hotel in the first quarter of 2020 was approximately
$47,000. An eight-month deferral of payment for the Hotel’s first quarter taxes would not
significantly affect the cash flow of the City.
ENVIRONMENTAL IMPACT:
Not applicable.
PRIOR CITY COUNCIL REVIEW:
Not applicable
COMMISSION/COMMITTEE/BOARD REVIEW AND RECOMMENDATIONS:
This item does not go through the Commission/Committee review process.
NOTIFICATION:
• Jignesh Leva, Best Western Capistrano Inn
• George Peppas, Chamber of Commerce
ATTACHMENTS:
Attachment 1 – Proposed Transient Occupancy Tax Payment Deferral Agreement
ATTACHMENT 1 - Page 1 of 7
ATTACHMENT 1 - Page 2 of 7
ATTACHMENT 1 - Page 3 of 7
ATTACHMENT 1 - Page 4 of 7
ATTACHMENT 1 - Page 5 of 7
ATTACHMENT 1 - Page 6 of 7
ATTACHMENT 1 - Page 7 of 7