Page 2: Sign of the times
I saw the Fifty Center had a front page story last week, credited to Mike Gervais, entitled “Grand Jury Tells TOML Finance to Shape Up.”
Unsurprisingly, the title was misleading, but that’s what often happens when a reporter does nothing more than cut-and-paste from a submitted report or press release and makes no follow up effort on their own to gain a deeper understanding of an issue.
This story is not about a Finance Dept. that needs to shape up. This story is about a Finance Dept. told to stand down.
The mysterious tax case referenced was a case involving Sierra Nevada Resort. A little background. Sierra Nevada Resort began charging a resort fee in May, 2014. However, Sierra Nevada Resort mistakenly believed that it did not have to charge tax on that fee.
Tim Lamb, then-General Manager of the Mammoth Creek Inn, who had been considering the imposition of a resort fee, called the Town and asked Finance Manager Cyndi Myrold if he would have to collect tax on resort fees
Myrold answered yes.
Lamb replied, if that’s the case, then I want the exemption that Sierra Nevada Resort is getting.
You see, he saw online that Sierra Nevada Resort was advertising its rooms for a certain price, but then, when you went to check out, that’s where you’d see the resort fee come in, without tax applied.
The logic appears simple. The more of the price they offloaded on the resort fee (which they weren’t charging tax on), the more attractive the rate they could offer to convince people to book.
Now we do need to back up here and explain that Sierra Nevada Resort, once it had established its Cub Club, spa, free wi-fi, complimentary drinks, free mini-golf, et. al., chose to charge a resort fee which would cover the cost of providing all these extra amenities that many other properties don’t feature.
And as owner Jim Demetriades pointed out in a phone conversation last week, at his resort (The Landing) in South Lake Tahoe, he is not required to pay tax on the resort fee charged there.
Nevertheless, Town Manager Dan Holler told The Sheet in an interview, “They should know better.”
After all, before moving over to Sierra Nevada Resort, Brent Truax served as General Manager of the Westin Monache, which charged a resort fee.
His accounting manager, Paul Chang, likewise was with him at the Westin and acted in the same role at Sierra Nevada Resort at the time the resort fee was being instituted.
Truax explained that at the Westin, it was complicated, because a portion of the resort fee was classified as taxable and a portion was not.
He also explained that where Sierra Nevada Resort was concerned, part of the resort fee package included complimentary drink tickets which were indeed taxed, at the 8.5% sales tax rate. When you give away drinks, he explained, you still have to pay tax on the full rate.
He estimated that during the five months in question, the Resort paid tax on $64,000 in drink giveaways.
So Sierra Nevada Resort was busted. It hadn’t paid TOT or TBID on resort fees from May, 2014 through Sept. 2014.
The resort fee had been mostly charged at $25 per room night, but as Truax acknowledged, “We had some people question it, and [subsequently] waived it.” During that time, on some level, he said it was optional, particularly for those who might have arrived late one night and left early the next morning and really didn’t have the opportunity to take advantage of the resort amenities.
So how was the issue resolved? The Grand Jury complaint alleged a back room deal where Sierra Nevada Resort would pay approximately $10,000 in back taxes, and another $1,300 to $1,400 in interest and penalties.
In a December 20 email obtained by The Sheet via a FOIA (Freedom of Information Act) request, Town Accounting Manager Susan Cash wrote to then-Finance Director Dan Izzo, “The figures that were provided to us following your meeting with SNL make no sense. Jenny (Im) has the Daily Occupancy figures from the already-submitted tax returns, and unless those were falsified, we are nowhere near $25/room/night, even before subtraction of whatever undocumented/unverified deductions you’ve deemed appropriate are taken into account. Also, your memo makes no mention of TBID fees to be paid. However you and SNL came to the figure mentioned in your memo, we would at least need it broken out by month to figure penalties and interest.”
She then adds, “ … When we started this particular assessment and sought the advice of counsel, you wrote—and I quote—‘It is a black and white rule. Follow the rules and send the letter.’ Since then, the process has been hijacked and the ‘rules’ seem to be in flux as you try to realign/reinterpret them with whatever end goal you are seeking and the prior direction already given.
I would be much more comfortable if you took over the process from here and leave me and my staff out of it. In no way can Jenny ‘verify the tax due’ since you are the holder of the verbal information that came up with the number. You are the only one that can ‘verify’—and take responsibility for this number. I think I speak for us all when I say that this fiasco has completely demoralized us as Revenue Team members and as employees for the Town of Mammoth Lakes. Your constant table-pounding mantra of, ‘We will follow all of the laws as written!’ doesn’t seem to be the case here.”
Two days later, Jenny Im sent the following email to then Finance Director Dan Izzo. “This is notification that if I do not receive amended tax returns and payment by 4 p.m. today, I will be preparing and sending out, via certified mail, a Letter of Assessment to Sierra Nevada Lodge for TOT, TBID, penalties, and interest owed on unreported resort fees from the time period of May 2014 to September 2014.”
Izzo replied “Please stop your assessment process on Sierra Nevada Lodge. You have completed all task [sic]necessary for the Town regarding SNL on this transaction.”
Dan Holler defended Izzo to The Sheet, saying that he did not authorize an audit because the staff did not have the proper training to do it. He said Sierra Nevada Resort received no preferential treatment and that the best way to get a “quid pro quo” with the Town is to pay your bill.
“We want to work with our businesses, have that good relationship … we’re all in it together,” Holler said.
He concluded by saying “Our staff may have blown it [the Sierra Nevada Resort case] a bit out of proportion.”
Which brings us to the Mammoth Lakes Town Council meeting of Wednesday, Auguist 19.
Council heard an agenda item regarding the Town’s proposed response to the Grand Jury report.
In the response, Holler adamantly refused the Grand Jury request for an audit.
Council backed him unanimously.
This is the same Council which unanimously backed Paul Chang (the aforementioned accounting manager at Sierra Nevada Resort) during Planning Commission interviews. They didn’t ask him about this issue, most likely because Town Manager Dan Holler has shielded them from ever even hearing about it.
Hmm. Maybe that’s what the second round of interviews is for.
In January, as some of you may recall, there was an announcement of the abrupt resignation of Finance Director Dan Izzo. Convenient fall guy.
This was not before Izzo sent a Dec. 30 email to Holler. In that email, he wrote, “After receiving the [Sierra Nevada Resort] November 2014 return late. Cyndi [Myrold] and I evaluated their return. The PACING data was again done wrong (Letter F dollars should match the Total Gross Rents Charged). We evaluated all of 2014 and found that only the January 2014 monthly return to be correctly filled out.”
Aside: Clearly, no audit required.
Finally, an email from Jenny Im to Dans Holler and Izzo which should make any citizen of the Town proud of the integrity of its staff.
“As Town employees, we have an ethical obligation to adhere to the Municipal Code to the best of our abilities, to apply said Code equitably and without bias, and to be as transparent in our actions as possible. I have already made my opinion clear that it is not within the scope and authority of the Town Manager or Finance Director to waive transient occupancy taxes/TBID owed to the Town nor to impede the assessment process for hand-picked preferential businesses. An attempt to circumvent the assessment process for select businesses would not only be a violation of the law but also an insult to the public we are supposed to serve. It undermines our entire compliance process.”
