Court orders Patterson hotel owner to pay city tax

City officials claimed victory in a lawsuit to force a hotel owner to pay the city’s transient occupancy tax.

Stanislaus Superior Court Judge Roger Beauchesne ruled that Patterson Hotel Associates LLC must pay the city $237,147 in overdue hotel taxes, plus interest. The city has tried to collect the taxes from the Best Western hotel at Villa Del Lago, a commercial center near Sperry Avenue and Interstate 5 developed by Dominic Speno.

In the 2011 lawsuit, the city sought unpaid taxes back to 2007 from the hotel operated by Patterson Hotel Associates and Speno.

The court denied Speno’s demand in a cross-complaint for $4 million in reimbursements from the city for Villa Del Lago’s stormwater improvements, which he claimed had broader benefits for the community.

In a prepared statement after last week’s tentative ruling, Patterson officials said they would seek to recover up to $1 million in legal costs from Speno. “Since we are considered the prevailing party, we will be seeking reimbursement for all of our attorney’s fees and costs,” City Attorney Tom Hallinan said.

San Francisco attorney Andrew Bassak, representing Speno, said they are reviewing the tentative decision to determine their response. Speno could appeal the ruling.

City leaders enacted the 8 percent tax on hotel rooms in 2004. Speno did not contest that the Best Western hotel owed the taxes, but said the city should recover the money from Sanjay Bakshi, who was hired by Speno to help run the hotel.

In 2009, Bakshi was convicted of embezzlement in a Bay Area courtroom and served six months in jail. Speno charged that his former employee embezzled $1 million from him.

Speno built the drainage improvements for Villa Del Lago, including a detention basin and weir, a few years after the county Planning Commission approved his 50-acre commercial project in 1992. The city eventually annexed the center, which includes the hotel, gasoline stations, a Starbucks and other food outlets.

Speno maintained that the city should reimburse him for “oversized” drainage facilities because they help provide protection against flooding in Patterson.

Based on evidence presented at the June trial, Beauchesne agreed with the city’s arguments that the county ordinance did not require oversized improvements, and the facilities did not address the city’s historic problem with Salado Creek flooding.

“The stormwater improvements required by the county and city were part of the approval process for (Villa Del Lago) to prevent his land from flooding,” said attorney Barbara Brenner of Churchwell White LLP, the Sacramento law firm that represented Patterson. “What he built did not have the regional benefits he claimed.”

In court documents, Speno said he used a federal loan to build the drainage improvements before local officials came up with solutions to flooding in Patterson. Speno negotiated an agreement with the county in 1996 that entitled him to reimbursements and credits against any special district assessments.

Patterson’s attorneys argued the city was not bound by Speno’s agreement with the county because it pertained to formation of an assessment district that was never created.

This story was originally published December 24, 2014 at 6:22 PM with the headline "Court orders Patterson hotel owner to pay city tax."