City Council - Special Meeting

Welcome everybody to the Tuesday, May 12 special council meeting. Roll call please, mister Montgomery.

Yes, mayor. Thank you. Mayor Gilman. Here. Mayor Pro Tem Mang. Here. Council Member Rule.

Here.

Council member Lang.

Here.

Council member Wood.

Here.

Thank you. Would you please lead us in the pledge? Yes. Thank you.

Honorable mayor and council and members of the community. Ready to begin. I pledge allegiance to the flag of The United States Of America and to the republic for which it stands, one nation under God, indivisible, with liberty and justice for all. Thank you.

Any objections to the agenda or approval of the agenda for our special session?

I'll move approval.

Second that. Any objections? Okay. We will go on then to the first item, our public hearing, appeal hearing to uphold or overturn the tax collector's determination dated 04/08/2025, enforcing the TOT and penalties and audit findings against Cameron Lerner, business owner of Sunito Inn. Ms. Burgess, would you take over now? Yes. Thank you.

Yes, good evening. Bethany Burgess with the city attorney's office. So the purpose of tonight's hearing, and I just, you know, at the beginning of these public hearings, like to make sure I remind you of what the scope of your review is tonight. So you will be asked to consider today whether pursuant to sections eight-1.431 and eight-1.432 of the Ojai Municipal Code, whether the determination of the tax collector was correct or not, and if not, what tax interest or penalties, if any, are due to the city from the appellant. Before we kick it off, our procedures tonight, we will start again with ex parte disclosures as we did in the last City Council public hearing.

There will be a presentation from city staff, which is gonna be provided by outside counsel with AMLO and they are representing staff. I have not been involved in representation of staff on this matter. Then we will have the presentation from the appellant. Then we will take public comment, is which a little different than our last public hearing. And then following public comment, we will do, we will allow the city to provide rebuttal arguments, the appellant to make their rebuttal arguments, and then we'll open it up for council questions before we close the public hearing.

I would say that while our procedures contemplate questions will occur after the end of the presentations, you know, if the presenters are comfortable taking questions during the presentation, I also don't object to that. But I do want to be mindful of the fact that if they have a prepared presentation that it can be helpful to let them get through that before we open it up for questions. And then following council questions, we'll close the public hearing and then move into council discussion and deliberation before closing out each matter. And there will be two separate hearings. The first one on the agenda is for the Sunito, Sunito Inn and then the second one is for Casa Ojai Inn. Are there any questions about that? Go ahead.

If there is similar content either from the city or the appellant in principle, not in detail, that is the same for both hearings, might we be able to offer the city or the appellant to say there's no need to repeat yourself if something that's clear and understood?

I would say that's fair.

Okay.

I think instead of presenting the exact same information again that it would be for them to refer to their previous presentation.

Okay, thank you. Thank you.

With that we'll move to Ex Parte disclosures.

I have something funny which is in 2012 I designed a website for Jeffrey Weltz who is here in the piece so that was a long time ago. Feels like ancient history but there it is.

And one other thing I will disclose on behalf of all of counsel is that all of counsel did receive some communications from the appellant. I think he's aware that those would need to be disclosed as ex parte communications. We did share those with AMLO for purposes of ensuring that there's fair due process on both sides.

And we did receive all, I've received that. I assume everybody did. Any other ex parte communications?

When this first came up, I think in September, I did get an email from Mr. Larner. I do not remember what it said other than we have a problem here. And I did not respond and or have any communication from them. Because one of his one of the properties is in my opinion.

Understood. Okay? So then shall we open with the city staff presentation? And I would ask Mr. Montgomery to use the timer.

Thank Yes, thirty minutes. Okay. Thank you.

Whatever is easier for you. Think

where you're sitting is fine. Yes. Yeah.

Good evening, Mayor, Mayor Pro Tem and Council members. My name is Chelsea Ballot with Olivares Madruga Law Organization. Together with my colleague, Shelly Priceler, we are presenting city staff's argument that the tax collector's determination dated 04/08/2025 should be upheld assessing $11,423.37 in tax and penalties against Cameron Lardner, the appellant and operator of the Sunito Inn located at 301 North Montgomery Street in the city of Ojai. A copy of the tax collector's determination is included in the administrative report as attachment I. This argument begins with a history of the city's transient occupant occupancy tax.

I'll then provide a fat factual background leading up to this appeal, and then finally an assessment of the appellant's arguments. The city is authorized under California revenue and taxation code section 7,280 to impose and enforce a transient occupancy tax on hotels located within the city. The city's uniform transient occupancy tax codified in title eight chapter one article four in the Ojai Municipal Code was first adopted and imposed in 1971 at a rate of 10%. In March 2020, city voters elected under measure c to increase the tax to 15% and to express confer to expressly confirm that the definition of rent shall include resort fees, cancellation fees, and parking fees, and other fees tied to occupancy consistent with the City's long standing interpretation of rent and tax assessment methodology. As amended by Measure C and reflected in Ojai Municipal Code Section eight-1.407, the city's definition of rent is in part the consideration charged whether or not received for the occupancy of space in a hotel inclusive of resort fees, cancellation fees, parking fees, and other fees tied to occupancy of a space in a hotel.

I would like to quickly mention that any code section I refer to is a reference to Title VIII, Chapter I, Article IV of the Ojai Municipal Code, a copy of which is included in the administrative report as Attachment O. A copy of the March results and the certifying resolution adopted 04/14/2020 is also included with the report as attachment a. The Sunnido Inn is a hotel as that term is defined in section four zero four. The appellant is a hotel operator as that term is defined in section four zero eight. Pursuant to sections four one zero through four one nine, the appellant is responsible for collecting 15% tax on all rent charged to transient guests, holding the collected tax interest for the city, and reporting and remitting these taxes to the city on a quarterly basis.

The TOT is a significant portion of the city's revenue, and failure to collect required tax undermines the city's financial stability and hampers the city's ability to achieve strategic goals. The city's finance department is responsible for monitoring and enforcing the city's uniform transient occupancy tax. The Senodio Inn was randomly selected in 2024 for a compliance audit for its TOT payments from 01/01/2021 to 03/31/2024. HDL, the city's auditor, issued the audit findings on 10/17/2024, finding the appellant owed $1,650.26 in TOT because approximately 11,000 in deposit forfeiture fees were charged to guests but were not taxed. A copy of these audit findings is included in the report as attachment B.

Due to Sunito's failure to collect and pay tax on deposit forfeiture fees, the audit found that Sunito owed an additional $330.05 in penalties and $103.83 in interest pursuant to the city's penalties and interest sections at four two zero four two one and four two three. The audit findings made several findings but the appellant only disputed the first and second finding. The first finding identified a discrepancy between the appellant's reported taxable rent and overall rental revenue in the appellant's accounting systems and or third party revenue reports. The second finding identified deposit forfeiture fees that were omitted from taxation despite qualifying as rent. The appellant provided HDL additional information to address the discrepancies under finding one but disputed and asserted his right to appeal finding two arguing that deposit forfeiture fees are not rent and are therefore not taxable.

On 01/14/2025, HDL sent a revised audit findings incorporating the information the appellant provided to resolve discrepancies under finding one, reducing the amount of uncollected taxes to $1,450.56 $3.00 $1 in penalties and $320.5 in interest. A copy of the revised audit findings is included with report as attachment D. On 01/29/2025, the appellant emailed HDL to dispute finding two arguing that deposit forfeiture fees are not taxable rent requesting a hearing and attaching a statement describing why the appellant believed the identified trades that transactions were not taxable. The email and statement are in the report as attachments E and F respectively. A hearing was scheduled for 02/27/2025 at which the appellant appeared in person, presented in support of himself for over two hours, and entered 11 multi page exhibits which are attached to the administrative report as attachment h.

These exhibits overlap with the appeal hearing for the CASA OHAI in which the appellant also operates. Please be aware that appellant's exhibits in attachment eight, exhibit numbers one, two, three, four, and six include incomplete or incorrect quotes of the Ojai Municipal Code sections four zero seven, four ten, four eleven, and four twelve, and or include amalgamations of law. On 04/08/2025, the tax collector issued a determination upholding the revised TOT audit findings and $1,630.67 in tax and penalties, $549 of which the appellant agreed to pay for finding one regarding the discrepancy. The tax collector waived all penalties and interest assessed for finding one, but only waived the interest assessed on the unpaid balance for finding two. Again, the tax collector's determination is included with the administrative report as attachment I.

The appellant requested city council review for the determination on April 23 within the fifteen day appeal window under section four two nine, seeking to appeal both the tax collector determination and perceived procedural and due process issues leading up to and during the February hearing, and a hearing was thereafter scheduled for 09/16/2025 at the appellant's request. Copies of the appellant's appeal request and the due process complaints are included as attachments J and K. Although Section four thirty does not require, only requires five days notice, notice for the 09/16/2025 hearing was sent to the appellant twelve days in advance of this hearing, and it directed the appellant to submit any supporting materials for counsel consideration on September 10. However, the appellant did not submit any documents until the afternoon on September 16, hours before the hearing was scheduled to begin. Citing the inability to review the documents and seeking to adopt citywide hearing procedures, the city council voted to continue the hearing.

After adopting hearing procedures on on 04/14/2026, the city scheduled this appeal hearing for today's date. The appellant's challenge to the tax collector tax collector's determination consists of three main arguments, each of which fundamentally misinterpret the city's uniform transient occupancy tax code and complicates the audit process. First, the appellant argues that deposit forfeiture fees do not fall within the city's definition of rent. Second, the appellant argues that the City has no authority to collect uncollected taxes from a hotel operator. And third, the appellant argues that the audit should have been based on transaction level records.

I would like to note that the appellant previously argued against the hearing procedures and due process requirements leading up to and during the 02/27/2025 hearing and leading up to the September 2025 hearing. However, the appellant does not raise this argument in the briefs and evidence submitted for today's hearing. Appellant's first argument that deposit forfeiture fees do not qualify as rent ignores the definition of rent approved by voters pursuant to Measure C and relies on incorrect interpretations of the definitions set forth in the City's Uniform Transient Occupancy Tax Code. The term rent is defined in Section seven to mean, in part, the consideration charged, whether or not received, for the occupancy of space in a hotel, inclusive of resort fees, cancellation fees, parking fees, and other fees tied to occupancy of a space in a hotel. Cancellation fees are explicitly included in the definition of rent under section four zero seven, which are imposed when a transient cancels their reservation or does not show up, forfeiting their right to occupy a room at the hotel.

Upon cancellation, any entitlement or right to occupy is revoked and the transient must pay a fee to the hotel operator. Similarly, when a transient makes a deposit and prepays for part or all of their future occupancy but does not follow through with a reservation, any right to occupancy is revoked and the deposit is forfeited to the hotel operator. Cancellation fees and deposit forfeiture fees are both taxable rent because they are related to the right to occupy a room. Both are imposed when a right to occupancy is revoked and are therefore tied to occupancy and within the definition of rent. Therefore, the plain language of the OMC clearly contemplates deposit forfeiture forfeiture fees as rent refuting the appellant's argument.

The appellant also argues that including deposit forfeiture fees as rent unlawfully expands the definition of occupancy. However, the definition of occupancy includes not only the actual use or possession of a room but also the right to the use or possession of a room. Regardless of whether reserved rooms are later occupied, a forfeited deposit falls within the definition of rent and is subject to the TOT because a deposit grants an entitlement to occupy and is therefore tied to occupancy. Appellant's second argument that the city cannot collect taxes from hotel operators who fail to collect taxes ignores the express responsibilities of operators under multiple TOTOMC sections including section four twelve which states that each operator shall collect the tax imposed by the provisions of this article to the same extent and at the same time as the rent is collected from every transient. And section four twenty five which states that if any operator shall fail or refuse to correct to collect the tax and to make within the time provided in this article any report and remittance of the tax or any portion thereof required by this article, the tax collector shall proceed in such a manner as he or she may deem best to obtain facts and information upon which to base his or her estimate of the tax due.

The OMC is clear that hotel operators must collect the tax from each transient and are subject to enforcement should they fail or refuse to do so. Furthermore, the OMC does not require the City to pursue payment from transients or prevent the City from pursuing the operator for taxes owed as provided in Section four eleven. Adopting the appellant's interpretation would ignore the plain meaning of the OHA Municipal Code and make the audit findings unenforceable, overlooking the city's duty to enforce its own laws. Lastly, appellant's third argument is that the audit should have been based on transaction level records otherwise known as folios. To be clear, the appellant is not arguing that he paid taxes on deposit forfeiture fees.

Therefore, this argument is irrelevant absent evidence that the audit overlooked the payment of TOT on these fees. Notwithstanding this statement, I invite the City Council to review the series of events detailed in the summary for finding one in the audit dated 10/17/2024, included with the agenda report as attachment B. In the summary HDL explains that it discovered a discrepancy between reported taxable rent and rental revenue in a trial balance the appellant provided for the audit. The summary goes on to say that The auditors gave the hotel ample opportunity to provide evidence to show the discrepancy was incorrect, but the hotel was unable to provide such evidence. But after receiving the 10/17/2024 audit findings, the Appellant did provide additional records which informed the revised audit findings dated 01/14/2025.

The email included as Attachment C details this exchange between the Appellant and HDL. Based on this summary and the email exchange provided in attachment C, the appellant was clearly afforded the opportunity to provide records to HDL to inform the audit and HDL did request and was provided individual folios which provide a detailed ledger of charges and payments during guests' days. If the appellant remained unsatisfied with the audit findings, he had ample opportunity to provide the transaction level records he now argues was required for the audit. For this reason and because the appellant did not raise this as an issue at the 02/27/2025 hearing, appellant's argument that the audit required transaction level records or that he can now provide those records cannot stand. Please be aware that, Carrie Calloway, audit manager with HDL, is available to answer any questions the city council may have regarding the audit process and methodology.

At this time, city staff recommends that the city council independently review, consider, and analyze the administrative report, the information presented, oral, and written testimony by all parties and their witnesses and the record, and make a decision to uphold the tax collector's determination dated 04/08/2025, which held the TOT and penalties from the revised audit findings dated 01/14/2025 were properly assessed against the appellant. I reserved the remainder the remainder of this time allotted to answer any questions from the council or for council to ask any questions to HDL with Carrie Calloway regarding the audit process or methodology. Thank you.

Thank you. I do have a question and maybe this is the right time or the wrong time. So when we look at I'm looking at this is page seven of the large packet but this is the section 80 one-four zero seven where the language which you read, inclusive of resort fees, cancellation fees, parking fees and other fees tied to occupancy of the space in the hotel. I'm asking a comparative question so if it's inappropriate let me know. Do other hotels question this kind of charge on these sort of items, other hotels that you also in the area work with? Does that make sense what I'm asking?

Yes it does. So we have not done another TOT hearing for any other hotels in the area.

I guess I'm asking if they pay them. That's what I'm sort of asking. In other words, if we're talking about like a cancellation fee, the way we're talking about right now, do other hotels pay those fees?

That might be a question for Brenda. Yeah.

Yes. Those paid through those items are taxable and through.

Right. So other hotels are paying them is what I'm asking and you're saying yes.

Yes.

Okay. Thank you. Any other questions? Thank you. That was clear. Okay. We'll move on to the appellant presentation. Mr. Larner, if you'd like to come up. Thank you.

Hello. Hello.

Thank you for allowing me this chance to speak. Yes. I'd like to start with a procedural objection that I'd like to read into the record. Your mayor and council members before I proceed on the merits, I need to preserve a threshold procedural objection. I submitted written procedural materials challenging whether the tax collector determinations are properly before the council at all.

I understand those materials were not provided to council and may not be considered because the city attorney has characterized them as late submissions. I object to that exclusion. These materials are not mere late merits evidence. They are threshold objections concerning notice, finality, hearing access, due process, and whether the tax collector process complied with the OMC. The core procedural problem is this: I first requested review of the CASA audit findings in December 2023, and then expressly confirmed my hearing request under OMC eight dash one four two seven.

Yet the city did not promptly provide the tax collector hearing. Instead, city officials later delayed or conditioned hearing access by telling me I needed to file a city form and remit the assessed amount on my audit findings before a hearing would be scheduled. That requirement does not appear in the OMC sections eight-fourteen 27 or eight-fourteen 28 which are the governing sections for hearing. Tax Collector hearings. Those sections provide that an operator may apply in writing for a hearing.

That is all. That the tax collector shall give notice of the hearing and that the amount is not payable until after the tax collector hearing determination unless an appeal is taken. So, before council reaches the tax merits, I ask counsel to address whether this first tier tax collector process was procedurally reliable enough to affirm. A hearing right is not a meaningful right if access to the hearing is delayed or conditioned on non OMC requirements especially payment of the various assessment being disputed. I therefore request that counsel either receive and consider my written procedural submissions before proceeding to the merits, continue the hearing long enough for counsel to review them or state on the record that counsel is declining to consider them and identify the authority for doing so.

I also object for to being required to use my limited merits presentation time to orally reconstruct a written procedural motion that staff or council declined to provide to the decision maker, the council. Without objection preserved, I ask for a ruling before I proceed.

Question, are you speaking about the interaction with mister James Vega in 2019?

I am speaking of the pre hearing motion. That I submitted to council. Via the city, miss Burgess and. Okay, the recent.

Something recent.

This is a multi page 40 plus points of procedural defects, due process violation, or due process issues, and fair notice concern.

I'm I'd love to hear from my colleagues. I'm not seeing the due process problem. I would like to proceed but I'm willing to hear your thoughts.

I think we should hear from the attorney and ask whether it's appropriate for us to receive those materials.

So pursuant to your hearing policy, quasi judicial hearing policies that were adopted in March or early April, the requirement is that if an appellant is going to submit written evidence as part of their appeal that that needs to be submitted in advance. And so where notice of a hearing is provided, I believe it's at least fourteen days in advance, then the written materials are generally required to be submitted at least ten days in advance of the hearing. In this case we did allow a shortened time period to produce those because ten days before the hearing fell on a Saturday. So Mr. Lerner had inquired about this deadline in advance of that deadline and we let him know that we would allow him until noon on Monday, which I believe was May 4, to submit those written materials.

And then we actually ended up, because there were some technical difficulties, I believe his submittals came in shortly thereafter. And we did advise him that materials that were submitted after that deadline would not be presented to counsel for consideration. So whenever he did submit additional documents after that deadline, I did inform him that we would not be forwarding those on to counsel with the rest of his submissions, But that he would have an opportunity to raise these objections in the meeting. And so I think for purposes of, you know, this objection, your procedures do not require you to rule on evidentiary objections. You can hear them and proceed with the hearing.

You don't have to necessarily rule on those objections. But if you feel that you need additional information, you know, above and beyond the information that was submitted as part of the proceeding, you always have the opportunity to continue the hearing to a future date. Yes,

go ahead.

If I recall the last time when you were here when we were going to do this and there was, it was brought to your attention and ours that you were turning in information past the deadline. So it's something that you were aware of. And so I don't understand why if you knew the last time, why you're trying to put it in this time when you know that there's a time frame. Mhmm.

I'd be happy to explain.

Please.

So the first and foremost, the information that I'm submitting is above and beyond the hearing apparatus and the question of the taxpayer determination. What it is is a is related to the tax determination and the tax collector hearing. But it is an account of the procedural defects from the moment that I've got my business license through the hearing process. And that whole scenario, all of the different elements like not having a tot certificate, not getting a hearing when requested. I mean, I I can read them to you formally so that you have them on the record.

I I prepared a statement like this subsequent to my tax collector hearing. After I received the determination, I wrote a brief and a complaint and I addressed it to the council. I did not send it directly to the council or the city's instruction. I sent it to the city. I sent it to the city manager, the city assistant manager, the city clerk, and I request that it be submitted to the council for reading.

Later, I learned when I had some ex parte communications with council members that they had never received that at the at the beginning of my hearing. Without any, I had no time to, I came into the hearing thinking that that will have already been processed, read, understood, and yet I came to the hearing to learn that it was never received. I submitted it to the council. That is a devastating procedural defect and a due process issue that needs to be addressed before we can entertain a an evaluation of the merits of the tax collector hearing of which I was complaining the process. For which I was complaining the process.

So it's it's a chicken and egg issue.

Jessica.

So I I'm curious how that information was different than some of because you included in your documents, emails, some of your concerns. Absolutely. And I did actually read Mhmm. Every page of this.

I appreciate it.

So and there were several emails that you were between Mr. Vega, between different James, between different members of the team that where you expressed the procedural issues that you had. So are you saying that there are documents in addition to the ones that we have?

Oh, yes.

Okay.

And I I was unable to prepare them given the time provided to me when I received notice of the hearing. When I received notice of the hearing, there was there were questions about the nature of the hearing, procedural guidelines. There was a new resolution that I had to process. I had questions about the resolution. I went back and forth with the city attorney to iron out those questions.

And then that alone took several days. Meanwhile, I'm in the trying to compose all of my materials and information so that I can make a a an organized casework, you know, presentation on the merits and then, once I had submitted those, I could, I didn't want to, I didn't want to use my time to work on my procedural defect because I had already submitted that and I wanted to get my merits in because if I didn't get my merits in, then, I would be in, you know, a very bad situation here before you. So, I barely was able to reach the deadline and then, once I did that, then, I sought to work on my procedural defect motion. So, it was just the natural and only, you know, course of action that I had to provide these. You know, consider I had already sent the complaint for procedural defects.

It was never heard. I don't know if you even after I complained about that, if you ever received it, maybe you can tell me if you received that initial, it would have been in April, May 2025.

I'm having the feeling that we have enough information to proceed.

Okay.

Yes, please.

I have a procedural question. So he's about eight minutes into his presentation. And I'm just wondering if this is part of his thirty minutes or if this is all kind of, you know, prelude argument where if we, I mean, I'm not sure exactly how long his argument on the merits is going to take.

I would like the full time and I would not want this to be subtracted from that.

So we did advise Mr. Larner that any procedural objections he would like to raise that he could raise as part of his thirty minute time period. I will say that in counsel's discretion, if you would like to provide him, I think we've spent roughly eight, not quite eight minutes talking about this, if you wish to provide him with some extra minutes, you can. You would need to offer the same thing to the AMLO team. Since they've completed their initial presentation I think we would you know just ask if they have any additional remarks before we move to public comment.

But

that's in the discretion of City Council.

Did you have a thought, mister Whitman? In other words, if we were to proceed now with the merits of the case to start it

at thirty minutes and go forward? Well, I'm thinking about the idea that our city attorney says that mister Larner was informed that the thirty minutes would be inclusive of procedural arguments. I just wanted to make sure that that wasn't going to become an issue. If that's what our rules are, then I think we should follow. Yes.

If there's not a procedural objection that we want to dig into then I would suggest that you go into the merits of the case but I'm happy to hear from my colleagues if there is. I oh please go ahead.

I'm inclined to separate the due process issue from the merits, although I do understand that that was explained prior, but I think that due process is different than merit, and I think that it is reasonable to raise a due process issue. So, for that reason, I am would I would not have a problem and would be in favor of returning the seven minutes understanding that I I don't mean to overrule our city attorney. Mhmm. It just seems to me that they are two different things and I would like to afford you know, as fair as I can. That having been said, that is simply my sort of take on it.

Seven and a half minutes is seven and a half minutes. It's not. And I'm certainly agree that we would have to accommodate opposing.

I would happily offer the seven and a half minutes and that we proceed. Any objections to that? No, I support that. Okay.

Okay. Thank you.

Please proceed. Okay, just to be clear.

On that. Now, your time is running.

Okay. Okay.

Well, I understand and I object to that this forces made you you extended me the time and I appreciate that. But I have not had a chance to read a summary of my of my motion for pre hearing threshold evaluation. And thus, I haven't been able to put the core procedural defects in the record which I will do so now really quickly. Delayed access to hearing, I'm sorry, delayed access to the tax collector hearing, combined tax collector hearing officer role, pre hearing recommendation of liability, inadequate notice of adversarial format, no reason determination, premature enforcement, and portal barriers. The resolution twenty twenty six dash nine does not retroactively cure the February 2025 tax collector hearing or the September 2025 appeal process.

It is a step toward clearer procedures going forward, but any remanded hearing should be governed by Resolution twenty twenty six-nine and any necessary supplemental procedures provided far enough advance for the operator to meaningfully comply, including participant disclosures, burden of proof, exhibit rules, witness procedures, time limits, and any deviations from the resolution. I do request that you address the threshold procedure objection before the hearing, but you have declined. If you decide to proceed with the merits, I preserve the procedural objections and issue a written okay. If counsel proceeds to the merits review, preserve the proceed I ask that you preserve the procedural objections and issue a written decision explaining how each threshold objection was resolved. Hold open or supplement the record as necessary for material CPRA records and missing record evidence relevant to consistency, fair notice, and audit methodology.

I also have a question based on your interactions before the hearing. Again, I didn't quite understand when witnesses would be allocated or called. I did not recall that in your

I believe the letter that we sent a couple of weeks ago did provide that witnesses could be called during your thirty minute

Okay. So it's during my thirty minute. Alright. Thank you. Alright. I'll proceed with the merits. I respectfully submit this forward to orient you, orient your evaluation of the briefs analysis and evidence filed in connection with my appeal to the tax collectors' determinations for Casa Ojai and Sunito Inn. I am combining the two here for expediency. The pages that follow present detailed legal and evidentiary arguments. This forward summarizes the core issues so that council may evaluate those agreements with a clear framework in mind.

Do I understand that the council did receive my casework and has processed, read the casework? Okay. Thank you. I do not come before you to deny that Todd is owed on room rent nor to challenge the city's authority to conduct audits. I conceded a specific identified reporting error for Sunito, and I paid for it.

What I can test is whether the methodology used by the tax collector to assess the disputed amounts reflected to assess the disputed amounts reflects the law as written, whether the audit findings evidence meets the standard of the law that the law requires, and whether the enforcement process afforded the basic fairness that any administrative proceeding demands. Dear mayor and council members, before I address the specific audit findings, I want to be clear about why I'm here. This appeal is not about avoiding the roughly 13,000, $14,000 I've I've spent far more time, energy, and business attention to this matter that matter that would make sense if this were merely about avoiding a payment. I'm not here because I object fulfilling my duties as a hotel operator. I understand that operator obligations under the city's transit occupancy tax ordinance, and I've always tried to comply with those obligations in good faith.

I'm here because this has become a matter of principle, process, and the rule of law. The city is asking operators to comply strictly to its top rule, while the city itself has not consistently followed, explained, or demonstrated command of those rules. The city has imposed harsh retroactive consequences based on interpretations that were not clearly stated in the ordinance, not published in guidelines, and not consistently communicated to operators. Is deeply troubling. The OHAI Municipal Code imposes the tax for the privilege of occupancy.

Rent is the measure used to convert that occupancy into a monetary tax base, upon which tax can be computed 15%. But rent cannot be interpreted so broadly that occupancy becomes meaningless. Nor should the city impose penalties on an operator for failing to follow an interpretive methodology that was not clearly set out in the Code and was not provided through clear prospective guidance. It's also deeply troubling to me to be asked to pay tax debt that the code identifies as the debt of the transient, particularly where the tax was never collected from the transient, and particularly because the city requires the operator's duty and entrusts in the operator interpretive implicit interpretive role in determining how to apply the tax. And that's especially true when no when the city has not provided guideline for such.

The code distinguishes between tax owed and owed by a transient and tax collected by an operator but not remitted. And I wanna emphasize that. There is a distinction in the code that is very clear between tax owed by the by the transient and tax collected by the operator but not remitted. I do not believe the city can simply collapse that distinction after the fact and treat uncollected guest tax as operator debt. After all, think it's section four ten essentially says that the transient's debt can only be extinguished by payment to the operator.

Does not give the city the right to extinguish the transient's debt by collecting it from the from the operator. The only time it has that right is if the operator elected the tax and didn't remit it. And that's why section four thirty eight specifically says the tax is the debt of the transient and the of and un I mean and collected tax is the debt of the operator. Collected unremitted taxes, the debt of the operator. So, the question before council is not merely whether it is administratively convenient to uphold the tax collector's determination.

The quest question is whether the city will apply its own ordinance as written, follow a fair process, and require evidence before imposing tax penalties and interest. If the city believes its ordinance should tax broader categories of hotel related charges, it can clarify that ordinance respectively. My predecessor, Jeff Wells from OHG, said exactly this to the council in 2019. And yet, no respective guidelines, no change to the definition of occupancy. But operators should not be punished retroactively for the City's failure to provide clear rules, fair notice, and consistent methodology.

What I'm asking for is not special treatment. I'm asking for the city's top procedures and interpretations to align with the ordinance due process, fair notice, and basic evidentiary fairness. Council now has a choice. It can uphold the tax collector's determination as a practical matter despite these defects or it can insist that the city follow its own rules before enforcing them against others. I respectfully ask counsel to choose the rule of law.

Now, I'll proceed to the forward that I did submit to counsel, although one day late, which summarizes my overall brief because there's no way I could read through all of that brief, and I'm hoping and relying on the fact that you have read through it or at least familiarize yourself with The ordinance taxes occupancy, not hotel revenue generally. The Ojai Municipal Code imposes taught on the privilege of occupancy, the use, possession, or right to use or possess a hotel room for dwelling, lodging, or sleeping. Not a freestanding tax base. This structure matters because it means not every charge in a hotel imposed on a guest is automatically taxable. Only those that constitute consideration for occupancy of space in a hotel for lodging purposes.

That's the definition. The City's audit methodology, as reflected in auditor communications, proceeded in the opposite direction. It defined revenue categories from trial balance summaries and treated them as taxable rent. It assumed that gross revenue reported on trial balances should be taxed in in its entirety assuming that gross revenue was equal to rent revenue. It then took any deviance between those two balances and considered that amount taxable, regardless without investigating the actual underlying data that resulted in that difference.

The correct approach under the OMC is to begin with occupancy, identify a specific transaction in which a transient paid for the right to use a room, and then determine whether the disputed charge was consideration for that occupancy. The auditors applied informal tests not found in the ordinance. Anything room related, mandatory, cannot opt out, pass through charges, these were all identified by HDL auditors as their tests and their rules for determining whether a summary category would fall under tax. Taxability. None of these appear in the OMC.

All are charges and all are charges are rent unless exempted presumptions. When the operator, myself, directly asked what ordinance text supported those tests, no citation was provided. An assessment cannot stand on standards the ordinance does not contain. Measure C, confirmed pre existing methodology. Measure C, as the city stated earlier, does not expand the definition of the ordinance or the definition of rent.

It clarifies and confirms the definition as the pre existing tax methodology of the city. Measure C amended the definition of rent to expressly include cancellation fees, resort fees, parking, and other fees tied to occupancy. The City now relies on this amended language to justify the disputed assessment. However, ordinance nine zero seven, the ordinance that enacted Measure C, contains a dispositive preamble recital that constrains the reading. It says, Whereas this ordinance clarifies the term rent and its definition, consistent with the City's existing interpretation and method of assessment, And thereby confirms the existing applicable definition of rent.

So in other words, the definition of rent didn't change. They just added some clarifying details to it. So if an operator was doing his job, he could assume that the interpretive framework that he was using to determine whether something was taxable would be the same before and after Measure C, because according to this, it's the same meaning. And to continue and therefore confirms existing application of rent in a matter that is declaratory of existing law and the City's existing tax policy. A declaratory confirmation amended does not change the law it restates it.

The City therefore cannot simultaneously argue that Measures C merely confirmed pre existing methodology and used the amended language to assess charges that were not taxed under pre existing methodology. Both cannot be true. And as I've provided to you in evidence, my predecessor OHG under Jeff Wells did not tax for these items. We have folio data that I've provided to you. Demonstrating that the cited charges or categories that were deemed taxable by the city were not taxed.

There is dialogue between Mr. Wells and Mr. Vega about how Measure C will potentially change the rules for tot collection. That would violate this whereas clause because it stated that nothing was changing, that the city was proceeding with existing tax methodology. In addition to that, we have numerous operators undergoing audits being assessed for these tax categories indicating that they believed that they were not taxable, and that only after Measure C, after the audit, retroactively, were they being enforced, which is a due process issue.

The pre-twenty nineteen and 2020 evidence is directly relevant here. Pre measure C hotel property management records show that pet fees, crib fees, cleaning fees, roll away beds and deposit for forfeitures were not subject to TOP. That is evidence in your possession. The prior operator, Jeff Wells, testified that he did not tax those categories because he did not interpret them as rent under the then existing code, His understanding was consistent with the city communications at the time, which I've provided to you, focused the measure c discussion on resort and amenity fees. Resort and amenity fees are not among the fees for which I have been assessed.

Not the ancillary categories now in dispute. In those categories, if those categories were not taxed before Measure C, they were not part of the existing methodology as stated in the ordinance and in Measure C ballot. Taxing them now using Measure C language is not confirmation of its expansion. And if it is expansion, it must be evaluated as such, narrowly with ambiguity resolved against the taxing authority as deemed per law, and without retroactive penalties imposed on operators who acted consistently with prior practice. Now this raises, of course, my CR PA record request concerns for which I requested from the city any evidence that they could provide of prior audit material.

They denied one of my one of my request for such information on the basis that it was a privacy concern and qualified for a privacy exemption. However, nothing I had asked for redacted information and no operator level information need be submitted. Only evidence that such taxes were collected prior to measure C. I was refused. I I modified my CRPA request.

You have them all before you. There are also outstanding CRP requests for which the city claimed that it had responsive information pertaining to emails between the city, HDL, council members, etc. And yet, although they acknowledged they had the information, they failed to provide it. Another due process issue a procedural issue, which is why proceeding with this hearing is probably unfounded in my opinion, until those issues are addressed in full. All right.

The audits lacked transaction level evidence. Both audits were constructed from trial balance categories, year to date revenue summaries, and variance reconciliations, not from individual guest folios, receipts or hotel property management system records showing specific transactions. This is not a technicality, it's a fundamental evidentiary failure. The OMC taxes rent for occupancy at the point of collection from a specific transient. To prove a violation, the city must show a specific charge was consideration for occupancy under the OMC.

And two, TOP was not collected on that specific transaction. A trial balance category shows that revenue existed in a particular accounting bucket. It does not show that any individual charge was for, whether it constituted taxable rent or whether Tot was or was not collected. HDL's own initial audit request letter, which called for sample month folios, daily rental reports, monthly rent and tax summaries, and detailed general ledger records, confirms that HDL itself knew transaction level records were appropriate evidentiary basis for top compliance review. The final audit methodology departed from that framework.

The auditor divided year to date category amount by 12 and distributed them evenly across months and used a plug figure where categories did not reconcile to the alleged understatement. The tax collector upheld these category based findings without requiring the city to supply the missing transaction level proof. Council should not compound that error by confirming a determination that assumes what should have been proven. It's not the operator's job to prove that the audit was done correctly. It's the city's job to ensure that the audit is performed correctly in the first place.

Deposit forfeitures and cancellation fee. Potential rent is not taxable rent. Potential rent is not taxable rent. The tax collector's determination treats all forfeited deposits as taxable rent on the theory that paying a deposit secures the right to occupy a room, making the payment consideration for occupancy. This analysis fails to engage with what actually happens at the moment of forfeiture, where a guest cancels before arrival, the room is released to inventory, the operator retains the deposit, no occupancy has occurred, no enforceable right to occupancy survived the cancellation, and the retained amount is contract damages for the breach or non performance.

It is not consideration for the right to occupy. A deposit with the potential to be applied to future rent, as the tax collector's own determination phrases it, is not taxable rent. Potential rent is not rent, it's not found as described in the OMC. There was a group folio that is a concrete illustration. I provided it.

A film production company booked a room block, canceled before arrival, rooms were released to inventory, and a nonrefundable deposit was retained for damages. The tax collector's broad rule that paying a deposit automatically creates a taxable event would not require pot collection on the deposit even if it subsequently refunded it, producing an absurd oh, I'm sorry. The tax collector's broad rule that paying a deposit automatically creates a taxable occupancy event would require top collection on the deposit. Does the city require top top collection on deposits? I don't believe they do.

They've never asserted such. The OMC doesn't state it. In fact, the OMC has talks about the exchange between tax and rent at the time of of of payment essentially. For the occupancy not on deposit plus the other element to that is that deposits are not booked immediately as revenue. They are booked as a receivable as a liability that then is converted to a payment.

So they go under the term of advanced deposit, the liability owed to the individual making the payment. And then if they forfeit that, it gets placed into a revenue category that is non occupancy. If they follow through and apply the deposit to rent, at that moment, it becomes rent or occupancy and is taxable. The distinction that matters is this: Did the transient retain an enforceable right to occupy the room when disputed amount was charged or retained? If yes, the charge may be taxable.

If no, the right was revoked, cancelled, never matured. It's payment for damages, not rent. The OMC does not transfer uncollected transient debt to the operator. There is no section in the ordinance that provides for that or justifies it. A structural issue runs through both determinations that the city has never squarely resolved.

The OMC imposes Taut on the transient. The operator's duty is to collect that tax from the transient and remit what is collected. Only tax actually collected by an operator and not remitted becomes operator debt according to section four thirty eight. Uncollected tax remains a debt of the transient. The city relies on four twelve and four twenty five to hold the operator liable for allegedly uncollected amounts.

Section four twelve establishes a duty to collect. Section four twenty five is an assessment mechanism, not a debt transfer mechanism. Neither provision read in context constitutes a clear transfer of the transient's tax debt to the operator. Reading four twenty five as debt transfer clause would render four thirty eight's careful distinction between transient debt tax and operator liability for collected but unremitted tax largely meaningless. A duty to collect is not the same as liability for the tax if collection does not occur.

If the city wishes to impose that liability, the ordinance must say so clearly. Under settled law, ambiguity is resolved against the taxing authority and in favor of the taxpayer. The city has not produced a clear textual basis for the debt transfer. It is seeking to accomplish. And the council should not supply one by implication.

This has I passed out to you one of the slides that addresses this issue and it's the closed loop slide. If the city should seek to collect tax from the operator, which the operator has never collected, it leaves the tax debt on the transient, and that loop is never closed. The many sections, several sections, make it clear that in order to close the loop, the tax must be collected. So either the city collects the or either the operator remits elected tax that has been that extinguishes the debt from the from the transient. They collect the the tax.

They remit it to the city. That closes the loop. The other option is the transient never pays the tax to the operator. It is uncollected tax. It doesn't matter why it wasn't collected.

It it's because it doesn't state the the the ordinance doesn't address that but it does address the fact that if for whatever reason, it is uncollected, the city may collect it from the transient directly. That closes the loop. Those are the only two options that can be read harmoniously within the ordinance. Otherwise, you have an a remaining unextinguished debt by the transient. Case law supports narrow ordinance specific construction.

The city has invoked BAT versus City of San Francisco to support a broad reading of taxability. That reliance is misplaced. As the California Court of Appeal explained regarding transient occupancy tax cases, BAT's result that parking charges were taxable depended on San Francisco's broader definition of occupancy, which expressly covers the furnishings or the services and accommodations accompanying the use and possession of those rooms. That is a very broad definition of occupancy. It clearly contemplates a broader tax than OHAI's very narrow tax on a room for lodging.

OHAI's occupancy tax does not contain that language, and OHAI or the City of OHAI cannot borrow that language. They must be governed by the OMC. The same court stated that the governing principle plainly: In every case involving the interpretation of statutes levying taxes, it is the established rule not to extend their provisions by implication beyond the clear import and language used. In cases of doubt, they are construed most strongly against the government and in favor of the citizen. If the city wishes to tax services, furnishings and accommodations as occupancy, as San Francisco does, it must broaden OHAI's occupancy definition to say so, to not import San Francisco's broader language through case law without enacting it.

The City knew guidelines were needed and they didn't issue them. Before Measure C was adopted, Mr. Wells testified in November 2019 to the City Council that amending the definition of rent without correspondingly broadening occupancy would create a structural ambiguity and that operators needed clear written guidelines before new definitions were enforced. The city acknowledged the guidelines. That guidelines could address the gaps.

The city manager scheduled an operator meeting for March 2020 to discuss the definition and he cancelled it. No written guidance was ever issued. HDL confirmed in writing that it applied only the municipal code and that no city guidelines existed. Operators were left to interpret and and amended ordinance. The city itself had been warned was ambiguous and no administrative guidance and no binding published standards on which categories were taxable in the water.

Sir, I'm going have to ask you to stop now. Thank you very much. We got it. Thank you.

Alright.

Okay. We'll go to public comments. I only have one card. Oh, yes.

Go ahead. Before we go back to public comment, because we did extend mister Larner's time by seven and a half minutes. Please. I just wanted to check with the Omlo team to see if if they need any additional. Yeah. Or if they would like the additional seven and a half minutes beyond what they will have for rebuttal.

Yes, we'd like to take advantage of the additional seven

and a

half minutes.

Please do.

So to quickly address to quickly mention and address some of the due process issues that were raised, the appellant has been afforded abundant due process and procedural fairness leading up to and during the February 2025 hearing and the continued September appeal hearing and for tonight's appeal hearing. The city is required to provide actual notice of a violation then provide adequate notice of a hearing if a hearing is requested, provide a reasonable opportunity to be heard, and provide the appellee a chance to present evidence and controvert that evidence presented against them and be heard by an impartial decision maker. The appellant received notice of the OMC violations when he received the audit findings in October 2024. Because the appellant quickly responded to HDL after receiving the findings, the city honored his appeal request that was received months later well outside the ten day appeal window under section four twenty seven and then issued written notice fifteen days before the 02/27/2025 hearing even though only five days notice is required under section four twenty eight. The appellant exercises opportunity to be heard by an impartial decision maker that being the tax collector and again presented in defense of himself for over two hours and entered 11 different multi page exhibits.

When the appellant timely appealed the tax collectors 04/08/2025 tax determination, the city provided the appellant notice of the 09/16/2025 appeal hearing again twelve days in advance in excess of the five days notice required under section four thirty. And then in response to the appellant's concerns regarding the lack of hearing procedures the council opted to continue the September hearing to today's date and the appellant was notified of tonight's hearing on April 22 in excess of the fourteen days notice required under the city's newly adopted hearing procedures. And I do want to state that the appellant's reliance on a prior operator's actions not to tax specific fees was a business decision, and the appellant cannot rely on the actions of a previous hotel operator. Thank you.

Thank you.

Alright and with that, I would recommend we open it up for public comment. Yes.

I have one card at the moment which is Larry Steingold.

Good evening. Hello. When I first heard about this couple of months ago and I got read, I said to myself, gee, taxa on a bed, a crib, a dog should be because without those being offered, that room's gonna be empty. So that was pretty obvious to me. The law says on cancellation.

It's pretty obvious. But if what mister Lardner has said is 10% correct, forget procedure and fairness because fairness has nothing to do with the ambiguity of all this. Fairness has to do with the technical dates and times of applying and all that stuff. But this is all about the the ordinance. If some of what he said is true, this thing is so ambiguous, I'm surprised we're not here all the time.

There's just too many ifs, could bees, maybes. It's not clear. And laws and ordinances and taxes should be very clear and very succinct and very pointed. Because people we don't like paying taxes, but I if I wanna pay a tax, I wanna pay a tax on something specific that I'm paying for, not on something that it's up to their opinion. It's an opinion. It's this. It's that. And that's where I think you have a opportunity to clarify and clean this up even if you sent out and and brought him in and said, okay. Let's clean up the law. Let's clean up the ordinance you bring in from the other hotels.

And you just clean it up and make it very clear that you're taxing this and taxing that, and there's no questions. And if there's something else down the road, which there will be, you deal with it. Not pay the money and we'll figure it out later. Have them pay the money, put the money on the shelf, straighten out the ordinance, clean it up, and just make it so that there are no more arguments where somebody has to put up a thousand page document with arguments that some of them are probably wrong. Some of them may be right.

That's the question, which ones are right? And those you have to act on because that's your responsibility. I mean, we all want transparency. I know when I get my tax bill, it says bond, bond, bond, this, that, and everything else. We know where the money's going, but at least we know what's paid for. We don't know where it's going. But this is something else. So I would, put it on the shelf, work with it, figure out the new ordinance, tax him, he'll pay the items on which he should be paying, my guess is. But like you said, he's here on principle. Did he collect the tax?

That's a procedure which he should have been doing. Because once you pay it, then you argue it. You don't not hold it back because now you're gonna get penalized for not paying. So I think you need to work on this ordinance and clear it up really quickly.

Thank you, sir. Anybody online?

Mayor, no raised hands on Zoom for our special meeting. Okay. The cards I received were for our next agenda, our regular meeting.

I should mention to the people who are waiting in the audience. This probably has another hour to go. Just so you're aware. Okay, so we'll move on to the city. With the there's another public comment on this? Next agenda. Okay. Then come turn in a card and then we'll hear you. Oh, not at all. No, we want to hear. Or just come forward, sir. Do you have a public comment on this issue?

It doesn't look like it.

Yes. Alright. Yeah, sorry about that.

That's okay.

My first time.

That's alright.

My buddy, same thing. We didn't we didn't realize

no problem.

So thank you for giving me a chance to comment. I just gotta say sitting and listening to both arguments. I feel for the guy. You know, I it seems like based on what I've heard that he has like a reasonable interpretation that the tax, in regards to the cancellation policy, think it was what it was called, is not rent, you know, which I mean it makes sense. It's like someone cancels.

That's not the same as them actually renting the space and so it's a reasonable interpretation and then having that interpretation then finding out from the city later on going. Hey, like actually no, you owe this amount of taxes. It seems like you've got a case and I don't know from Joe Schmo on the street looking at this, I'm saying, hey, I don't get why we're kind of nickel and diming this guy instead of just going, oh, well, we should have made this more clear, made it so that he understands that if this happens, he needs to collect because if he had collected the tax from these people and then refused to pay it, Hey, I'm with you. You know what I mean? Like, that's one thing but if he never collected it and then he's saying that there's a chance for the city to collect it from the person who cancelled and it's not on him to collect it from them retroactively.

Seems like it's the balls in the city's court on this one and that they should be the ones who are, you know, collecting the tax from the transient who didn't pay the tax, you know? So, that's my 2¢. I feel for the guy. I mean, seems like a small business owner. You know what I mean? It's not the end, you know, if it was the end, hey, different case. Sorry. I if that's a lot. But anyways, that's, that's my opinion on it. Thank you guys for your time. I, I give the rest of my time to you guys.

And just tell us your name so we understand.

Oh, I'm Zach. Zach, okay. Thank you. Thank you.

Okay. Yes, please.

Sorry. I'll be very quick.

No.

It's okay. With regard to, collecting tax versus remitting tax, just for your information, when the state, assesses, sales tax. I know from my years as working for a retailer in California, if a customer buys something on credit and then fails to pay their bill, then you do not collect either the price of the item or the sales tax. And the state does not require you to remit sales tax for purchased items where the person basically stiffed you for the item. So there is a precedent with regard to the difference between assessing a tax and collecting it.

And to the extent that that's useful, I'm sure that your attorneys will be able to connect those dots or not. The other thing is, with regard to the audit, I heard some comments that the audit was commenced with an assessment of trial balance numbers. I also have a great deal of experience with audits, not surprisingly. And I can tell you that a good audit never starts with tribal balances. What it does is it takes a sample of transactions.

The size of the sample is determined by several things, one of which is the confidence level that the auditor wants to have to establish to make sure that the audit is reliable. So if I have thousand transactions, they might say, okay, I'm going to look at 50, and if I find a mistake in the 50, then I'll go deeper. But if I don't, then I'm done. So when I heard, and I certainly have not in any way investigated this at a deep level, but to hear that the audit started with trial balance assessment rather than individual folio examination, to me, tells me that it was a shortcut audit and probably defective. Thank you.

Thank you, sir. Okay. So what I now would be the city rebuttal. Please come up, this is dragging out too long. Hurry. That's okay. That's alright. Just tell us who you are.

My name's Griffin Trader.

Oh, know you. Hi.

Thank you all for having me. During the presentation, two issues came to my mind as as potential problem with the city's conduct. The first would be that I heard from mister Larner here that there was a series of hotel operators in the area similarly assessed as having committed similar infractions or not paying the taxes that they were due. These audits took place at a similar time at which point there was retroactive penalties imposed upon them for their erroneous interpretation of the tax code as it was written prior to measure c. And as as far as I can tell, if numerous hotel operators were making this interpretation over a substantial period of time interpreting it in the way that mister Larner did, the city reasonably should have known that that was their interpretation and their lack of action on it prior to measure c either was tacit agreement with that interpretation or so blind as so as to disqualify any sort of retroactive penalties.

Given that the city later amended in measure c the ordinance specifically the language around rent, the natural question that was raised for me was, was that a clarification in any real means or was it a substantive, a substantial expansion of tax base? Which seems to be mister Larner's allegation which has some genuine merit in in my estimation. And as a clarification could be applied retroactively, a substantive change could not and seeming as there was a pattern of reasonable interpretation that was not in line with the city's clarification, I I feel that there's a a genuine question right there. The other point that was the most salient, at least in my interpretation of the argument, was the occupancy rent distinction. The city did amend their language regarding the distinction regarding the definition of rent.

However, his argument was that tax is the that that the taxable event is occupancy and that rent is the consideration for occupancy. And so not every fee that's associated with a guest relationship with a hotel automatically becomes that occupancy consideration. And the question that I have yet to see answered is what is the limiting principle on what factors into that? You know, we have you have pet fees, you have cleaning fees, you have cancellation fees, you have Wi Fi, you have food packages, you have various other amenities, all of which are involved in a guest relationship with a hotel, but certainly not all of which are being taxable here. So there's an argument for cancellation fees, but not for certain equipment rentals and, you know, WiFi and food packages and where is the limiting principle?

If there is none, then where does the city suggest they get their authority from defining these other things as?

Thank you. Anybody else? Okay. We'll have the city rebuttal please. First of ten minutes on the clock. Thank you.

So, pursuant to the hearing procedures, council does not have the authority to decide whether a city ordinance or resolution is legal, unenforceable, or unconstitutional. Council decision is list is limited under section four three one to whether the determination of the tax collector was correct. And if not, what tax, interest, or penalties, if any, are due to the city from the applicant from the appellant. The record demonstrates that Cameron Larner, owner and operator of the Sunito Inn, failed to collect TOT on qualifying rent for the period between 01/01/2021 and 03/31/2024 and failed to remit the same amount to the city. Therefore, the city the city should uphold the tax collector's determination dated 04/08/2025, finding $1,630.67 of tax and penalties as properly assessed against the appellant.

Deposit forfeiture fees are taxable rent under the OMC. The city's definition of rent under section four zero seven clearly covers deposit forfeiture fees.

Can I just ask you to pause one second? Is somebody's phone? Oh, that's okay. Alright. No problem.

Thank you. Okay.

The appellant's interpretation of rent ignores the inclusion of cancellation fees in the definition. A cancellation fee is imposed when a transient cancels their reservation or does not show up forfeiting their right to occupy a room at the hotel. Similarly, when a transient makes a deposit and prepays for part or all of a room or rooms but does not follow through with the reservation, any potential right to occupancy is revoked and the deposit is forfeited to the hotel operator. In this way, cancellation fees and deposit forfeiture fees are tied to occupancy and are taxable rent. The appellant has also has not provided any evidence that a guest has not paid for their stay at the hotel nor has the appellant presented any evidence that other hotels have had the same interpretation of the OMC or have specifically excluded deposit forfeiture fees from being taxed.

The OMC clearly requires hotel operators to collect a 15% tax on all rent charge to transient guests, to hold the collected taxes in trust for the city, and to report and remit these taxes to the city on a quarterly basis. The OMC does not exempt an operator from its duty nor does it prevent the city from collecting taxes owed from the operator. Here the appellant, as the hotel operator, should have collected taxes on deposit forfeiture fees from transients and is not excused from paying the TOT because of this failure. The city is not required to pursue transients for unpaid tax nor is the City prohibited from going after operators for uncollected taxes. While the City may go after a transient directly under Section four eleven, it is not required to do so, and it is empowered to go after the operator that has failed to collect TOT under section four two five.

Adopting the Impellate's interpretation would ignore the plain meaning of the OMC, would make the audit findings unenforceable, overlooking the city's duty to enforce its own laws, and it would create a loophole that hotels would simply not have any responsibility to remit TOT by not collecting the TOT from transients, making the city's TOT optional for hotels. Lastly, the audit did not need to be based entirely on transaction level records. As noted in the summary for finding one in the 10/17/2024 audit report, the appellant had ample opportunity to object to the audit methodology used and provide the transaction level records he now argues are required for the audit. The appellant is not arguing that he paid TOT on deposit forfeiture fees and has not provided evidence that the audit should have found that he paid TOT on these fees. The appellant's argument that the audit required transaction level records or that he can now provide those records cannot stand.

At this time, city staff request the city council make a determination after independent review, consideration, analysis of the administrative report, the information presented, oral and written testimony by all parties and their witnesses, and the record to uphold the tax collector's determination dated 04/08/2025, which held that the TOT and penalties from the revised audit findings dated 01/14/2025 were properly assessed against the appellant. Thank you.

Thank you. And the appellant rebuttal please.

Thank you. The

audits of several operators which I have in my possession some of which were delivered to me by the city in violation of privacy rights constructs. I I myself raised these issues and and submitted a request that the city look into why these violations were made and that request was never there I never received a response to that request. But specifically the city indicated that no other operator had mischaracter or had uncollected tax on on cancellation fees but one of those audit findings reports for another operator was for cancellation fee. With respect to cancellation fees, Sunito itself was not audited or assessed for cancellation fees, though I do grant that a deposit forfeiture has similarities with the cancellation fee. That said, neither deposit forfeiture nor cancellation fee is defined in the OMC.

So, to determine what the nature of the cancellation fee whether it is has a nexus towards or is actually consideration for occupancy, one would have to investigate the nature of the actual fee, the reservation, why that fee was assessed. I can tell you that cancellation fees come in different flavors. You've got a cancellation fee basically for a no show. And in that case, the hotel reserves the room, holds the room, the guest doesn't show, and then there's a fee but the but the the room was held. So, there was a right to occupancy that was never forfeited.

However, other cancellation fees like deposit forfeitures, the guest or the the guest, not the guest, but the payer of the of the fee, or of the deposit, cancelled their right or their reservation before exercising their right for occupancy. When I say exercising their right, that's you know, when they obtain the codified right under the ordinance. So, they have the right or or to use or possession of the room. If a cancellation occurs, that right is revoked. They have no right to that and thus at the point that the the taxable moment is when the fee is exchanged for liquidated damages.

It is not exchanged for occupancy.

Okay.

Alright. The city asserted that the record did not reflect, I'm sorry, the city asserted that the record showed that Sunito owed tax based on the audit findings. That was not shown by the audit findings. And as evidence of that, I'll just go through the audit findings themselves for Sunito and and and you have a copy of this, you might want to bring that up but first and foremost, I'll point out that the audit findings that were sent to both Casa and Sunito were categorized as preliminary audit findings and to my knowledge, those audit findings were never finalized. There was, I've never received a notice that the audit findings were finalized at in their form as sent to me.

Yes, we had a tax collector hearing. Yes, there was a determination but the findings were never advanced from preliminary to final. In the in the audit findings for Sunito, I will not address finding one because that was an area where I agreed, admitted that I had collected tax and failed to submit it. So, soon as I discovered the air, I corrected the air. Under the summary, it says audit auditors found discrepancy between the hotel's reported tax filings and the rental revenue reported in its accounting system.

So, there is evidence that the auditor is taking reported tax filings. So, the tax that I remitted and they're comparing it to rental revenue reported in its accounting systems where our accounting systems don't report rental revenue like that. They report gross revenue and then they categorize that. Well, the auditor included all gross revenue in their comparison and they so they had determined what gross revenue was and then they backed into the fact that the tax paid was less than the tax would have been had we collected 15% on the full growth. So, there is presumption was that everything we collected is taxable.

For example, he says the hotel filed X number of dollars in rent for the calendar year with no exemptions. However, the hotel reported a sum greater than that in gross revenue from its trial balance. Creating a discrepancy. So is that that discrepancy comparison between gross and rental revenue that the auditor determined that there must be a a taxability issue. I would say that's the first mistake because that doesn't indicate that.

It indicates that some of the charges were not taxable. And they didn't seek to prove through folio evidence that it was otherwise. Auditors gave, yes. So, they say the auditors gave hotel ample opportunity but where's the evidence of that? I don't recall ever having ample opportunity after these before this audit was filed. I received the audit findings and then we started a dialogue. It there was not a lot of dialogue before. I sent all my information that was requested. Trial balances, summaries, sample folios were sent. So, they had the information.

They had the opportunity to get the information that they need. They never sought it and the and the record is clear on that because I've provided Emails that demonstrate those dialogues. The hotel, okay. If you look at what they did is they calculated that gap and then they calculated it for the year and then they took the sum of that gap and then they distributed it evenly across the entire year. So they basically said, oh, well, have a difference between what we expect you to pay and what you actually paid.

So we're just going to take that difference and we're going to throw it into a spreadsheet and divide it by 12 and assess it across every month which is ridiculous. The hotel admitted omitted and this is what they say from taxation the below transient guest charges deposit forfeited. It says, these charges fall under the category and untaxed. Guest charges because they are clearly considered rent by definition. Stating something is something by definition is not an argument or proof of anything.

They just state and assert that it's under the municipal code but they never quote the municipal code or the definition of rent. They they paraphrase. They say rent is defined as all charges on a transient guest for the rent of the room for lodging purposes. Okay, that's true for lodging purposes. Yet, why, if that's the case, why are they seeking to collect rent outside that box?

Then they go on, rent is taxable unless exempted. Since the here's the part I want to focus on. Since the business of the hotel is to provide short term lodging and transient guests engage in business with the hotel for that purpose, all charges imposed by the hotel are considered rent. All charges. Where is that in the OMC? It's not. That's their guiding rule. That's their definition. I'll read it again. Since the business of the hotel is to provide short term lodging and transient guests engage in business with the hotel for that purpose, all charges imposed by the hotel are considered rent.

With notable exceptions approved by the tax administrator. Notable exceptions. What exceptions? I've never seen an exception. Is this a published exception? Also, just reading that on its face, the emails that we have back and forth that you have of which I submitted to you evidence. Talk about other charges that are not taxable like food and beverages are asserted by the auditor to be not taxable. Wi Fi, bike rentals. So if that's the case, why is the auditor asserting that all charges are taxable, while at the same time asserting that some are not? It's very confusing.

There needs to be published guidelines. There needs to be a list. The city has to sit down and collaborate with operators. Figure this out. It's ridiculous.

Thank you, sir. Appreciate it. Alright. Council questions to either the appellate or the city. It's a lot to take in.

If there's no questions, we can go directly. We can close the public hearing and go to discussion deliberation. Yeah, go.

Yes, I actually have a question for Carrie about so there were some questions that were raised about the auditing process and I was just wondering if you could speak to that for us, please.

Yes. So, our process is to review everything. You know, we don't ask them to provide thirty six months of records. We ask for samples, sample folios, and then we ask for profit and loss statement, income tax returns. Those are the income tax returns are normally done by their CPA, somebody outside of the hotel.

So, look at those and compare the revenue that's on those to the revenue that's reported to the city. Now, keep in mind, when we look at that revenue, there are different types of revenue. And normally, on a a normal profit and loss statement, it's gonna have room revenue, and then down below, it may have miscellaneous revenue. And that's where you're gonna see the things like the pet fees and the cancellation fees and the forfeited depositors and things like that. And, also, you're going to see things that aren't TOT taxable, like if there were food and beverages and things like that.

So there are items on there that we do consider not TOT taxable. We just consider taxable for the room. Again, anything that the operator can't opt out of. And I would like to say that, you know, when he says that we took the totals and divided it out, we did. And he had the opportunity to provide additional documents to show us what those monthly, amounts were.

But he never got past the point of, you know, disputing just rent and the occupancy in general and whether the forfeited depositors are actually taxable or not. That was his, you know, dispute and rebuttal to the audit. So we never even got to the point where said he wanted to provide additional information to break down the calculations. Now I do 100% believe that the total for that year is correct. And again, we did take that and divide it over twelve months because we didn't have anything else to go off of.

So yes. And this is the same audit method that we use for every one of our jurisdictions that we audit for there in California. So this is not something that's unusual or anything like that. But we do go down to the folios. We do review folios and and things like that.

Thank you.

Any other questions? Okay. We can close the public hearing and move to council discussion deliberation. There there is a few I'm looking at the code right now and it's what's been said but it says rent shall be the consideration charged whether or not received, I'm just looking at the municipal code, for the occupancy of space in a hotel inclusive of resort fees, cancellation fees, parking fees and other fees tied to the occupancy of the space in the hotel. It's it's not what's it's what we have said here several times.

And then when I also look at the TOT portal where a hotel would pay their tax, I see very similar language. And then there's just something else. You have this in your packet as well. I'm looking at this would be in the in the large packet, it's page 85. And it looks like it's email exchanges dating back to 12/02/2019.

There's first an email that we're seeing from Lisa Carter, OHAI office concierge with a question. I have a question about TOT tax and can't seem to find the info I need online. I want to know if TOT tax should be charged on no show revenue and a charge to a guest for not showing up for their guaranteed reservation and then should be charged on rollaway beds, the equipment rented that they are now charged for the extra bed. And the answer from David, City of Ojai, Number one, cancellation early late check-in. Early late check-in. As they pertain to occupancy in the room are TOT taxable. This is before measure C. Extra bed in the room is not TOT taxable. It's similar to room service. That is not the standard charge.

Now, this is not just anything, just to say the conversation seemed to have been happening even before Measure C and here's, I mean, there's a lot to look into and I'm not saying this is definitive but to say it should not have been out of the blue that that conversation would have been taking place.

Could I just note something for the record? Yes please. That particular email if you look at the domain.

Yes.

It is to happyfox dot com

Okay.

Which was raised during the first hearing with the tax collector.

I see.

As potentially not a legitimate Email.

Okay. Well. Yeah. It's okay. Sorry. What does that mean? Tell me what that means.

I think the concern is that that particular email does not clearly seem to be sent from HDL that it was sent from a different email domain.

Okay.

So I think the point is that it's unclear as to the origins.

Oh, thanks. Okay.

Yes, it says HDLprofessionalservices@happyfox.com.

Okay.

Which would not be their domain name.

No, that makes perfect sense. I'm curious about it. Is some piece of evidence to say this was mistaken information that was sent to the applicant? Help me understand how are we supposed to read this, If at all. I guess I'm I'm.

So, this would be.

I'll I'll come to ask you in a second.

So, just because it does not appear to come from HDL. Okay. This would not be an HDL opinion.

Okay. Fair enough. Thank you. Does that end? Would you say the same thing? Yeah. Okay.

I I would say that whether it has an HDL domain or not, it's not the important aspect. It has an indication in the email that it is from HDL. You have an interaction between an operator and someone in the city of Ojai that subsequently was used in her audit with Mei Jing, an HDL employee, to modify her tax findings result. So what I would ask is I would ask Carrie if she has any knowledge, can she deny or affirm that HDL ever used a service that might be Happy Fox or their HDL email communications? I would also ask her to deny or affirm whether.

Just be succinct please sir. Okay. No I'm sorry. I know you I I understand where you're coming from.

Yeah. Whether the caravan outpost audit findings initially found extra beds and then as a consequence of this email, those extra beds were not assessed on their final audit findings

report. Okay.

I didn't understand the it sounded like two questions at once.

Do want me to repeat?

No, that's okay. But I guess if this isn't material, it just flagged me as a time. But thank you, sir.

Thank you. Okay, yes.

Just to clarify, so we don't know who it came from but we know that the city answered it. Okay, so it could come from anybody but the city answered question. Mhmm. So it's kind of irrelevant who it came from as long as the question was posed and the city, a legitimate response came from the city. Am I understanding

this? No.

No. The city did not answer. So the it look so it looks like I I looked up happyfox.com and it looks like it's like an AI

Okay.

Email assist assistant Uh-huh. Like an aggregate that helps people answer emails. This didn't come from the city, this came from the HDL representative who was auditing the city on behalf. So they were sending it as the city's processing center. Okay. That's what it looks like.

And for me, all I was, I've noted it to ask the question, well, the conversations were, seem to be going on before Measure C, but even if we were to pause that, I am seeing on the website where, as I said, the portal going in where hotels would pay their TOT, the language is the same post Measure C, I guess. So I guess there's some dispute with the applicant to say the language on the portal is not correct. Fair enough. I know, I'm sure you're going to object to a lot of what we're going do. You have to hold on to you. I'm sorry. You have to hold till we we ask you a direct question. Thank you. Yes.

Yeah, I'm just going to say that I understand the city's position. But I do believe honestly and truly that there is a lot of ambiguity and I I did look up whether or not, you know, the tax approach is that it is up to the tax levier to be extremely clear Mhmm. On what they are levying versus it's up to the the person levied whether or not they need to take a standard approach. And it generally comes down, from what I understand, somewhere in the middle. And so I look to, do I believe that this was unclear enough?

And I do find it so. I also I mean, I appreciate the narrow versus broader definition. And I think it appears to me that the audit used a very broad definition. And that leads to ambiguity. And so so that's that's how I'm looking at this.

I don't look as though the city itself has made any errors, but I also don't find it nearly as clear cut as, I could. Like, these things are listed. This is what you charge the TOT on. This is what you don't charge the TOT on. And, you know, so then it comes down to, do I believe that there was, you know, honest intentions here and goodwill? And I do. Mhmm. I believe no one would go through this amount of time and effort Mhmm. If for a matter of $12,000 for hoteliers.

Mhmm.

So, and I want it to be very clear. I I want it to be very clear. I want a list of the things that you would charge people for, and whether or not they are TOT. I think that's the least that we can provide to our local businesses, our local businesses. So not that I think that there's anything that was done incorrectly.

But I do believe there was a wide swath of ambiguity here, and honest, and true mistakes. And it is a matter of interpretation if it's not clear. Mhmm. And I'm not willing to say that that, you know, that one interpretation here was incorrect because I don't find it to be clearly incorrect. I find it to be possible and plausible.

And so for that reason, I would like to figure out a way to solve this, whether or not it's coming up with going over the code so that it's very, very clear. And we've had, you know, other people I mean, I think the Lavender Inn sent a comment saying they were confused too, but it's not worth their while. So they're just going to pay it. Which is normally what people would do, you know. So that's that's where I stand.

And I do feel like the city has an obligation to be to narrowly define, not broadly define, allowing others to come in and say this counts as rent, which counts as occupancy, or this counts as occupancy, which counts as rent, but this doesn't. So that's I'm I'm going to kind of leave it at that, but I've not been well, get my drift. That is where I fall down on this question.

There's one other piece that I'm looking at the code again. It's the same code. It's section eighty one dash four eleven payment by transients, And it says the last line, if for any reason the tax due is not paid to the operator of the hotel, the tax collector may require the transient to pay such direct tax directly to the tax collector.

So that would lead lead more ambiguity. And so how does the city determine de facto that we're not going to go one way, we're gonna go to the other. And it's those kinds of determinations that the city isn't even doing. Our our vendor is doing that for us.

But on on our behalf.

On our oh, certainly on our behalf. Mhmm. You know, no doubt about it. And we've hired them, and this is what we hired them to do. Mhmm. But it's not the city doing it. And that's, I think also different.

So Any thoughts? Well, I'm just curious.

So I understand, you know, everything he said. I totally get it. But it doesn't seem crystal clear. We have the Lavender Inn that had the same issues. But how many hotels are we actually dealing with that are going if there aren't any issues? There haven't been. They've just paid what they said to pay and moved on. Which I know now it's not an issue. Does it go back? You had issues with other hotels before saying I don't agree with this and you come to a compromise?

In the most recent audits, specifically cancellation was not an item or a finding.

How many other hotels are in the area of this area?

Believe it's 11.

11. So out of the 11, it's just his two and Lavender Inn that have questioned the taxes?

I could jump in here. No. We we have had other taxes in the tech questions in the past from other hoteliers and other disputes.

So a question. If if hotelier were to say to call the city of Bohai and say, can you tell me exactly what is taxed and what's not taxed? What's the website link they would look at?

Well, we generally try to not send them off to a website. We try to sit down and explain it to them. That's always our first approach. Our opinion is a bit different than some that you've heard today. We feel that the TOT language is very straightforward.

Essentially if there's a fee charged in association with the use of a room, it is taxable. The language that the voters approved is very simple and straightforward and we don't have a difficult time explaining that. So yes, if there is a cancellation fee that was in exchange for a room that was to be rented and it is the obligation of the hoteliers, it is a fiduciary responsibility. They are not paying the tax. They are not paying the tax.

They are passing along the tax they collect from the transient, the person who intends to rent the room. It's a pass through, so it's their responsibility to provide that to the city. And the voters approved Measure C because they outlined certain things that they wanted that money to be used for. So that's why we take it very seriously because there's a list of things which Council directs us to spend it upon that improve the community and it was an exchange for that use of our town, if you will, that, you know, that additional the trade off.

So if I could let me ask you this. So I'm looking at the Measure C language and it says, rent definition as including resort fees, cancellation fees, parking fees, and similar fees. That that's right out of the measure. So cancellation fees is really interesting to me because on some of those things you could say, oh they're attached to the occupancy of the room. The cancellation fee in the measure that's approved does put, it seems to me, it puts it in the category of saying, is the occupant getting something not explicitly but implicitly they are.

They're getting the right to go there. I think that's the argument and which again, that's not interpretation. That's just right out of the measure. So, in that sense, it seems like there is an argument there to say, if the dispute is something like, oh, there was a deposit that was let go of but there was revenue taken in and the argument is that's not a cancellation fee. That that's a hard one for me to make a distinction of personally but I'm I'm with the spirit of what you're saying is well, I agree with 100%. I'm just also trying to look at some of the things that do seem not ambiguous like a cancellation fee being in the bedroom.

And Yeah I think there are things that are not ambiguous. That doesn't discount the things that

are ambiguous. Fair enough. Course.

I think you could make the argument about cancellation for sure. And if was, if you were to split hairs on it, then be very clear how you're splitting hairs and why you're splitting those hairs. I agree with you. It says cancellation fees. So anything that shows up as a cancellation fee, you know, the language is very clear there.

So I wouldn't particularly agree with that argument. But I, you know, like I said, it doesn't to me resolve the issue of the ambiguity and the responsibility of the city to be very clear. What can appear on this bill and of those things that can appear on that bill, what which ones are TOT attached to? And and the measure C language, you know, it states a couple of different things but it doesn't really clear, there's no clarifying language there. There's broad, there's sort of broad categories that and then you have to interpret what falls into these broad

No, I I totally understand.

That that's my and and I feel like we have an obligation. Mhmm. To be very clear. We have an obligation to our, you know, our constituents and our citizens. And and I don't, you know, in any way disagree about a TOT generally or in any way make an argument that we shouldn't have a TOT and what it does to benefit for us. That's not, you know, ever a question here for me.

I understand. This might be a question for Ms. Joe or maybe Mr. Harvey, but are you in the position that you would request further clarification about TOT charges or are things fairly clear from your perspective?

Miss Joe, do you want to go first?

No, it's okay. I know I put you

on the spot. There you go.

I believe that there are items that we mentioned that are clear that are laid out like the parking fees, cancellation fees. I would think that any items that are not optional, for example, like a cleaning fee, would be subject to be TOT taxable in that area.

And if I may, one thing I do wanna just remind the council of is tonight's question is not whether the ordinance could be written more clearly include, it's the question is because the scope of the appeal is not, know, the validity of the ordinance, it's whether the tax collector applied the ordinance correctly. And I understand that that will, you know, each of you may have, based on the evidence in the record, you may formulate your own opinions about whether that was or was not the case, but I do wanna just remind the counsel that the scope of the hearing is whether the tax collector correctly applied the So

I will just say, just to be really clear, I do not believe that the tax collector did. I believe that there was a large amount of interpretation there, And I probably not being as deeply invested in all of this, might very well have interpreted it differently. I feel like there was a lot of interpretation, and I know I do not feel comfortable making the evaluation that the tax collector interpreted this correctly with language. So I appreciate your distinction.

Mhmm.

And I appreciate the opportunity to clarify that within, the constraints of what you just gave us. Absolutely.

No, appreciate that. Anything, Mr. Whitman?

Yeah. My view is that, you know, an event happens where the where the inn or hotel collects an amount of money from a transient for the right to occupy the room. And that to me establishes the right to occupation. And to me, to a certain degree, you know, calling it a cancellation fee is is, you know, semantical in terms of, okay, you know, I'm charged the full amount, but now I'm not coming, so I'm going to get all but a certain amount back. That's still like part of this, you know, transaction that's taking place between somebody who wants to rent a room and so my other view is that we have experts here and remotely who we rely upon to look at and interpret this correctly.

And what I haven't heard from any of our experts is that there's a hole in the way that we've defined how we tax. Can you know, to the point made by our city attorney, if the issue is perhaps because it has been, you know, interpreted ambiguously, we should make further clarification. I think that's a different question. I would fully support if there needs to be some type of an additional explanation of the tax. But you know, going back to what the city attorney just said, what we're doing here is to decide whether these are taxable events that were properly charged and including, you know, what the mayor said in terms of going through those terms, I think that's a strong indication that those were taxable events.

The I don't I also find it semantical to a certain degree, the idea that because you didn't collect it, then it, you know, then it's not a tax. But if the event happened and the tax should have been collected, then I think it is appropriate to tax the person who was supposed to collect the tax. So that's kind of where I am on what we've heard tonight. Yeah.

So I think the

I

think that that HDL has a history of working with different jurisdictions of going through this process in the way that they did. It seems to me like we that other hotels have not had issues paying these fees or understanding I know that there have been some questions, but that that that that there's a a template that we followed. And and the cancellation fees are mentioned right there in the code. I think what what I get stuck on with anything related to this is that this is a measure that came from the voters. And so the language was something that was approved by the voters.

And so I'm I'm lean I'm more in favor of of going following the advice of our attorneys, of outside counsel, of our auditors who are here to protect what the voters voted on. And and I think that that could things be cleaned up? Yes. We're not talking about that right now. If there's also a slippery slope that you mentioned, miss Ballot, that that the the hotels that have paid these fees, that have understood them and and that that that if we go backwards and we, you know, and we look at and we we don't collect from this, then what does that mean for other hotels that have been following the rules?

And so, you know, you hear my hesitation because I'm all about small businesses and I'm all about making things easier for our small businesses in this town. And so, you know, my on on a heart level, I don't want to I don't wanna hurt a small business. But in terms of what's fair, in terms of what we've done for other venues, I have a hard time making an exception here when we're not making an exception for other hotels. And and so that's that's where I'm leaning. You know, HDL has a process that they go through.

Our our there are certain aspects of our code that are very clear about what's included in terms of fees. So, yes, so that's where I'm leaning.

I'm leaning the same way and if that is the case, it seems to me then we would affirm the findings. Correct? That would be the motion?

It would be a motion to I'm just gonna make sure I get the wording correct.

I'm looking

at the agenda report right now.

Yep, it would be a motion to uphold the tax collector's hearing determination that the audit findings concerning the transient occupancy tax and penalties should be assessed against the appellant. And I think I did have one question and this, I don't know if this is, I'm not sure who this is for, it might be for the finance director. Was the does the $16.30 67, it includes the amounts that have already been paid? Any was the $5.49 96 already collected from finding one? And then and if you don't know the answer to that my only point in clarification is just that if if a portion of the $16.30 has already been collected, while we would be upholding the original assessment, it's, I just wanna make a note that we wouldn't be recollecting something that's already been collected.

I'm reading the sixteen thirty, sixty seven as the final amount. Is that what you're saying?

So when look at under the background section on paragraph M as in, I never know.

Or just the On bottom page

page seven.

Okay.

It states that sixteen thirty, sixty seven, that that was the tax collectors and that 549.96.

The appellant

agreed

And

so to I just, as we're, while we would be upholding the assessment which is for the full amount,

I

would just want to make sure council understands. I don't know if that full amount is still owed. I have a question.

Would any of my colleagues be in support of waiving the penalties and the interest on the amount? Because I think that would be a good agree balance. 100%.

And we have done that before.

And what would that amount be if the penalties were waived?

Penalties and interest.

Penalties and

interest. It would be, I think it would be the $16.30 without the plus the $5.49, which we're not sure

I think $5.49 is part of the $16.30. Is it?

So the penalties are $3.30, interest is 103.83. So it would be a savings of $4.33 $4.34.

Are you looking at

I'm looking at page number 27.

Okay. Thank you.

And I guess that's a question for clarification. Does the $16.30 include penalties and interest or? Yes, it does.

Okay. I think that's a good compromise if we could find that number.

So I think we could make the motion and we can determine the exact amount. But the motion would be a motion to uphold the tax collectors 04/08/2025 hearing determination that the audit findings concerning the transient occupancy tax for the period of 01/01/2021 to 03/31/2024. Should be assessed against the appellant. Less penalties and interest. Yep.

Okay. That's the motion.

Yeah. I have a request. Is it possible to split those into two different motions because I'm in favor of one and not the other? And if I vote no, then I mean, it carries, it carries. But we often split motions when, you know, half of it is we support and the other half we don't support.

Are you saying you don't want to uphold their findings but you want to remove tax penalty?

That is correct. I mean, we we

because essentially, you're saying you don't want to you you want to vote no on upholding the fight.

Right. And and, you know, exactly. So That is correct.

No on that.

Okay. We we we did use to split them and allow people

to Okay.

To vote so that it wasn't, I mean, it then it becomes, oh, well, you voted no on that. Oh, I see. No, I didn't really vote no on it. I really had no choice.

I understand.

Yeah. I mean, in the end, we used to do that. Susan was was Council Member Francina was famous for doing that and remains famous.

So there were two motions. We're upholding the findings would be one motion and the second motion would be to reduce the penalties and the interest.

That is correct.

So the findings from the tax collector included the penalties and interests? Okay.

So this is a judicial so I I Yeah.

Was just saying, you're saying you're just thinking about no, which is okay.

Yeah. Yeah. Yeah. It's fine.

This is this

is a different kind of

Understood.

Situation. So, yes. I I don't wanna make it more difficult.

I get where you're

coming Separate it. That that's absolutely fine.

Okay. I think we have we have the motion that's clarified. Mhmm. Yes.

Pray for roll call mayor.

And what did the there wasn't a second. I think an official second. I'll second. Thank you. Okay. Yes.

Council Member Rule. No. Mayor Pro Tem May. Yes. Mayor Gilman. Yes. Council Member Whitman. Yes. Council Member Lang.

Yes.

Motion passes.

Alright. We need to do a little process check-in here, a procedural check-in. So, we spent two hours and ten minutes on the first item. I'm assuming the second item is very, very similar but obviously, we can't just run through that but we have a room full of people for two very important items as well. So what's and we have paid people here for the second item but this could literally take two more hours.

So just maybe you could explain to the audience.

So what's happened, yeah, know the wet, we're all having a wet. The special hearing had two items from the two hotels. We just finished one. So if we were to go to the second hotel, you would see a similar presentation, although we had mentioned if there's identical language, we need not repeat that language, that's here. But we also have a room full of people that I also want to take care of.

So we what procedurally how

we What are options here?

So you have a few options. Okay. One option is we could continue the rest of the TOT discussion to a later meeting. Mhmm. We could continue the TOT discussion until conclusion of the City Council's regular business. That of course means that the appellant and our AMLO team would need to stick around.

Understood.

We could also delay beginning the regular meeting until conclusion of this. I do think that with respect to the first hearing, the first ten minutes or so were more procedural and those would not need to be repeated. We would need to repeat the ex parte disclosures.

I

think we would I think we would also, have to inquire with Mr. Larner whether he has the same procedural objections that he raised on the first hearing and whether those can be accepted for the record on the second hearing or whether he will have, you know, additional procedural objections to make on the second hearing and then I think counsel would have to decide whether you wish to extend the time for his presentation as you did in the first hearing. So my only point with that is there may be some things you could do to reduce the period of consideration on the first one because we won't have, at the very least you won't have my procedural discussion upfront.

But just to be realistic, we're probably looking at least an hour. You mean having the people here are part the process?

I'm sorry to just power through, get it done, you know, of bringing it back again.

Yep. Also that cost, it costs us money to do that. I

mean, I would agree. You know, it would be up to the Mr. Liner if he wanted to. Yes, I agree. We have we have a lot of professionals that have come in to to deal with this matter. Okay.

Let's proceed.

But that having been said, we also have a room full of folks.

That's right.

So it's

Well, let's Here's so my

Yeah. Yeah. I agree. It's the agenda. And and so in the end, yeah. I we have to move. I think we have to move forward.

So I'm gonna ask all the parties then. Obviously, let's be efficient in our speech. Okay. So do you want to kick it off? Yes.

Do we need a five minute break first off? We've been out sitting in Tahiti for a tour. Five minute break. We'll be right back. One, two, check, check.

So their concept is Welcome

back. I'm gonna propose one thing to my colleagues about the agenda before proceed and that is if you are agreeable to this, we have many people in the audience waiting for our general item which is number 11, consideration of the city's ability to at large voting. That will take a while and it's worth a lot of public comment. So the proposal is we let these people leave who would like to and that we have a special meeting dedicated just to that. Do you think?

When's a proposed date to do that? Yes.

We will have to come up with a calendar date so we can do that over email, I guess, but

And please don't combine it with another Just

one thing, one. I'll take responsibility for that. We thought maybe we could expedite.

Yeah, mayor and council, we do already have a special meeting on the nineteenth. Correct. Of course, have your regular meeting on the twenty sixth and then you have an additional special meeting on the twenty eighth. So you have four meetings this month. That's the tree ordinance workshop.

That's a

Thursday. That's a Thursday.

So that's okay. We know that you all have lives and other things that you have to attend to, so you might not be able to hit all those. But we can make it around with all of you very quickly and announce to the public. That that's

I would also offer that the nineteenth, while it's highly important to have this conversation with OUSD, if that were to move a week or two, it may not change things substantially, possibly.

I think it just depends on Okay. The availability of the assistant superintendent and the superintendent and I'm going to see them tomorrow. Okay. I can certainly ask them that.

There's a Yeah. I I There's another item on the nineteenth.

It was the pool.

Yes. Yes, the pool is on is on the that agenda as well.

We were grouping a bunch of

that one, the pool part probably needs to be.

That's the problem. Whereas the other conversation.

The other conversation is not as

urgent. We can't just do one thing possibly back.

We we could definitely make sure that the pool part lands, if you will, on the twenty sixth so that it gets considered this month, that that is okay with the council.

I think what we're saying

is there's My suggestion would be that we take the nineteenth and we do the pool and we do the

Oh, okay.

Large loading. And that's fine. I'm seeing it. Because I don't Sure. I don't think the pool item would go as long as an hour. Yep. Maybe between thirty and forty five It shouldn't be. Think.

That's what I would propose as well. Let's tentatively suggest. Yes.

I'm not available on the nineteenth.

Okay.

At all. Okay. So, I

would like to be involved

in the conversation. So, then, what, I guess, might we, instead of all of our calendars out at the moment, we will at say, this is, we will resolve it.

Oh, that's okay.

I'll. And we'll move that. I'll get it all timely in way.

We'll figure this out.

So. Does anybody object to that? Okay. So, everyone who's here for the at large voting, I thank you for staying. We will get to it very very soon. So, feel free to leave. Thank you. Sorry about that.

And we will officially modify that agenda once we enter into that.

And we'll let you know ASAP.

Thank you to everybody who came.

Yes.

Thank you.

Thank you. And thanks to everyone who emailed too.

Yes. We'll

we'll see you soon.

Alright.

Right. Thank you for being flexible, team. Okay, let's move on now. Back to the special hearing and we'll now move on to item number two, the hearing for Casa Ojai.

So I will not repeat the first part. But we do need to make sure there are, that the ex parte disclosures are disclosed as with the previous hearing. The entire city council received several emails from Mr. Larner regarding the matters to be discussed today. There are any additional disclosures, please go

ahead. Nothing other than what everyone was emailed.

Anybody else? For me. Okay. I only got what I understood everybody. Yeah.

And I got the same call that I got for the previous discussion and there was there was no substantive or meaningful conversation back and forth.

Thank you.

Okay. Alright. So, can we proceed? First, we'll go to the city stat presentation And I'll just remind both the city and the appellate if there's the same information, no need to repeat. Thank you.

Good evening, mayor, mayor, president, council member members. We are presenting the staff's argument, the tax collector's determination dated 04/08/2025 should be upheld assessing $11,423.37 in tax and penalties against Cameron Larner, the appellant and operator of the Casa Ojai Inn located at 1302 East Ojai Avenue in the city of Ojai and a copy of the tax collector's determination is included with the administrative report as attachment H. Because I've already presented history of the city's TOT and the background on the February 27 and September 26 hearing, I will only provide facts specific to the unremitted TOT for Casa Ojai and then assess the appellant's arguments that were not previously assessed with Sunito. So like Sunito, the Casa Ojai Inn was randomly selected in 2023 for a compliance audit for its TOT filings from 06/30/2020 to 03/31/2023. For Casa Ojai, HDL, the city city's auditor, issued the audit findings on 12/05/2023, finding the appellant owed $9,519 in uncollected taxes on $63,463 in rent charged to hotel guests, including cleaning fees, crib fees, pet fees, and rollaway bed fees.

A copy of the audit findings is included in the report as Attachment B. Due to Casa Ojai's failure to collect and pay on these taxes, the audit found that Casa Ojai owed an additional $19.00 $3 in penalties and $974 in interest based on the city's penalty of interest sections at four twenty, four twenty one, and four twenty three. Between December 2023 and May 2024, HDL and the city exchanged emails with with the appellant to address his concerns regarding the audit findings, which have been included in the report as attachments C, D, and E. The appellant requested a hearing, which occurred on February 27, where the appellant appeared in person, presented in support of himself for roughly an hour, and then entered 14 multi page exhibits outlining his arguments, which are attached to the administrative report as attachment G. Like Sunito, please be aware that the appellant's exhibit numbers one, two, four, five, six, seven, and nine within attachment G include incomplete or incorrect quotes of OMC sections four zero seven, four ten, four eleven, and four twelve and or include amalgamations of law.

On 04/08/2025, the tax collector issued a determination upholding the audit findings for $11,423 in tax and penalties, but waived all assessed interest. The determination is included with the administrative report against attachment h. The appellant requested city council review the determination on April 23, and copies of the appellant's appeal request and due process complaints are included as attachment I and j respectively. Although section four thirty only requires five day notice, notice for the September 16 hearing was sent to the appellant twelve days in advance. And of course, as stated for Sunito, the September hearing was continued to this date after the City Council adopted hearing procedures on April 14.

The appellant challenge the appellant's challenge to the tax collector's determination consists of three main arguments, one of which I will not repeat. But they funnel it they fundamentally misinterpret in the city's uniform transient occupancy code and complicates the audit process. First, the appellant argues the cleaning that cleaning fees, crib fees, pet fees, and rollaway bed fees do not fall within the definition of rent. Second, the appellant argues that the city has no authority to collect uncollected tax from a hotel operator. And third, the appellant argues that the audit should have been based on transaction level records.

Regarding the first argument that cleaning fees, crib fees, pet fees, rollaway bed fees do not qualify as rent ignores the definition of rent approved by voters pursuant to Measure P C and relies on incorrect interpretation of other definitions set forth in the OHA Municipal Code. The term rent is defined in four zero seven again to mean in part consideration charged whether or not received for the occupancy of space in a hotel inclusive of resort fees, cancellation fees, parking fees and other fees tied to the occupancy of a space in a hotel. The appellant argues that rent should only include mandatory fees or fees applicable to all reservations. However, the definition of rent explicitly includes cancellation and parking fees, which are optional fees that are only imposed when a transient cancels their stay or brings a car. These fees provide an example of other fees tied to occupancy of a space in a hotel because they only apply when a transient seeks to occupy or exercises occupancy at the hotel.

Similarly, cleaning fees, crib fees, pet fees, and roll over bed fees are only charged when a transient occupies a room at the hotel and brings a pet or requests a crib, again tying these fees to occupancy and falling under the definition of rent as other fees tied to occupancy. The plain interpretation of the OMC therefore contemplates cleaning fees, pet fees, crib fees, and rollaway bed fees as rent disproving the appellant's argument. Appellant also argues that including cleaning fees, crib fees, pet fees, rollaway bed fees are rent as rent unlawfully expands the definition of occupancy. However, the definition of occupancy includes not only the actual use of possession of a room, but also the right to the use of possession of a room. As mentioned, these fees are only imposed when a transient brings a pet, an additional person, a baby, or baby to the hotel or did something while in the room that mandated imposition of additional cleaning fees.

Appellant's second argument was explained for Sunito. It was that the city had no authority to collect uncollected tax from the hotel operator, so I will not repeat that argument. Appellant's third and final argument was that the audit should have been based on transaction level records, otherwise known as folios. To be clear, the appellant is not arguing that he paid the tax, rather that pet cleaning and rollaway bed fees are not rents subject to TOT. Therefore, this argument is irrelevant absent evidence that the audit overlooked the payment of TOT on these fees.

Notwithstanding, I invite the City Council to review the second page of the audit report dated 12/05/2023, included with the agenda report as Attachment B, which requests the appellant to contact HDL, the City's TOT processor, within fifteen business days to discuss the audit and provide documentation demonstrating the submitted were properly made. When HDL emailed the audit report to the appellant seen in attachment C, HDL again requested that if the appellant disagrees with the findings, please send an email with your supporting documents for possible revision. Furthermore, before the audit was complete, the appellant provided HDL with trial balance sheets as shown in the appellant's exhibit email three dated 05/16/2023. At no point during the multiple email exchanges with HDL and city staff seen in the attachments c d and e did the appellant raise the issue regarding the audit methodology. The appellant was clearly afforded the opportunity to provide records to HDL to inform the audit.

And if the appellant remained unsatisfied with the audit findings, he had ample opportunity to provide the transaction level records he now argues was required for the audit. For this reason and because appellant did not raise this as an issue at the 02/27/2025 hearing, The appellant's argument that the audit required transaction level records or that he can now provide those records cannot stand. Like Sunito, please be aware that Carrie Calloway, audit manager with HDL, is available to answer any questions the city council may have regarding the audit process and the methodology. At this time, city staff recommends that city council independently review, consider, and analyze the administrative report, the information presented, the oral and written testimony by all parties and their witnesses in the record, and make a decision to uphold the tax collector's determination dated 04/08/2025, held that the TOT and penalties from the audit findings dated 12/05/2023 were properly assessed against the appellate. Thank you.

Thank you. Okay. Please come up, sir. Thank you.

So first, thank you. Again, I'm just going to refer back to my procedural objection for the record. Ditto for Casa Ojai, all that was said. Mhmm. Want to start by also objecting to the council's previous decision regarding Sunito and that the issue that I raised regarding uncollected taxes did not appear in my observation or ears to have been addressed only cancellation fees was addressed and in fact, the actual controversy was over deposit forfeitures which was not specifically discussed by counsel and a deposit forfeiture is not equivalent to a cancellation fee and not all cancellation fees are the same and the OMC does not define a cancellation fee.

So, just the fact that the name is included does not give license to tax whatever the city wants. And that is my objection. Let's see. I just wanted to rebut briefly something that the city said. They claimed that I indicated that the fees that were assessed against me do not fall under the definition of rent.

That is not exactly what I had asserted. My mains assertion was that they don't fall within the definition of occupancy. And that rent doesn't determine occupancy. Occupancy is the is what the ordinance is authorized tax and thus, rent is a mechanism in the ordinance that is to be understood as a whole and the ordinance has different functions as laid out in the different sections and rents function is not to determine occupancy, it's to monetize occupancy, weigh it, and translate it into a monetary value so that a percentage rate can be assigned to it to calculate rent. When the definition of of rent is or understood to expand the definition of occupancy, it creates structural incoherence with the ordinance itself.

It's not a rent tax. It's an occupancy tax. Rent is just a mechanism, a calculation. It's a calculator. It weighs the occupancy.

Once the occupancy is weighed, it comes up with a value and then it calculates tax on that. So, the fact that measure C put language into rent created structural disharmony in the ordinance itself which in part is why we have confusion on this issue. When it's when you read the definition of rent myopically in and of itself, yeah, okay. It says cancellation fee must be cancelable. That is a short sighted and very narrow look.

You have to look at the ordinance as a whole. It's an occupancy tax and the ordinance defines occupancy and when you add language to the definition of rent to append other fees to the definition of occupancy, you've just expanded the tax base beyond the initial understanding and since the initial understanding was as it was originally defined an occupancy tax and rent was consideration for occupancy adding additional other charges that are related to occupancy is not structurally feasible and an interpretation that allows such to expand the tax base should be excluded. Now since CASA did also have deposit forfeiture, I, assessed against it. I would like to address that first, as I did before but the central issue before the council is whether the city, the OMC permits the city to impose tax liability and related penalties on an operator for taxes that were never collected. Oh, I'm sorry.

That's the wrong. There's a positive for renters. Alright. Cancellation fees and occupancy. So, what counts as occupancy? Occupancy is the use or possession or right to use or possess a hotel room or lodging. That's the definition of occupancy. If neither use nor a legal right has attached, there is no occupancy. Just because the word occupancy or the intention of occupancy or there's an expectation of occupancy does not give the right of occupancy. Just because someone pays a deposit expecting occupancy, that is not a transactional right to occupy.

Obviously, because it can be revoked, rescinded, removed before occupancy. The measure C made it very clear and the proponents of measure C made it very clear that the occupancy tax was a tax against or or against tourists and the purpose of the tax was to replenish the city for the impact that tourism had on its municipal services and the city as a whole. So the fact that someone could intend to stay in Ojai, intend to stay at a room, book a room, and then cancel it, never stay, never set foot in in Ojai is not in the intended vision or contemplated as taxable under measure C's provisions and under the the advertised mechanism by the city council, by the proponents of literacy. It was very clear it was a tax or stay in a hotel room, not a tax on someone that never stays. Rent is the consideration charged whether or not received for occupancy and expressly includes cancellation fees and other fees tied to occupancy.

I grant you, the words are there and tied to occupancy seems to be the operating means by which all these charges whether they are occupancy or not are folded in to the tax base. But the original ordinance didn't say that and since the measure C indicated that it was just affirming the original ordinance, I don't understand why all these additional fees are suddenly being brushed in to the overall definition of occupancy. It seems like a cute little trick to change the definition of rent to expand the definition of occupancy without ever actually increase or modifying the definition of occupancy. Who owes the tax and when? The tax is imposed for the privilege of occupancy and is owed by the transient.

It's a debt extinguished only by payment to the operator. The transient pays the tax to the operator at the time rent is paid. So, to address Councilman Whitman's comment about the timing whether it happens you know, when they make the deposit or not, the code says and you are, you know, bound to uphold the code, the OMC says in four ten and four eleven, the transient pays the tax to the operator at the time the rent is paid. The rent is not paid when a deposit is made. That is a preliminary payment.

A prepayment is not equivalent to a payment. So, again, the tax event is when rent is paid. The rent is paid when there's an exchange of consideration for occupancy. A cancellation that occurs before the arrival date and the room is released, it's made available for occupancy for somebody else, that room now can be rented. If that room is rented, we collect tax on it.

If we collect tax on the cancellation fee, we've just collected tax twice for the same occupancy. That doesn't seem like what the, you know, founders of this ordinance anticipated. Not to mention the fact that in general, double taxation is not something that is typically permissible on the same exact date, on the same exact room, taxing it twice. The operator's duty is tied to collection timing. The operator must collect the tax to the same extent and at the same time as the rent is collected.

This anchors the operator's duty to actual payment events, not to mere accounting accruals like deposits. Deposits are liabilities. They are not revenue. They are not payment for occupancy. Pre arrival cancellation where no right ever attached. The room released for sale. If a guest cancels before arrival and no enforceable right or use or to I'm sorry. No enforceable right to use or possess the room ever matured. The only potential for, I mean, it never matured. Only the potential for occupancy existed and was severed by cancellation.

Why would an occupancy tax tax something that occupancy that never occurred? It doesn't make any sense. At the very least, it's ambiguous but I would say it's more than ambiguous. It's a contradiction. Any resulting charge is contract damages. Contract damages are not taxable. They're not defined under occupancy. They do not provide occupancy. Not it is not it is it is not rent and no tax collection duty arises because no rent is being collected. If a fee is associated with a retained right that is not used.

No show fee. That is occupancy. The the right is retained but it wasn't used. The the transit gets charged anyways. It's a no use fee. They had the right. They could have used it. They didn't. The hotel reserved the room. They didn't rent it twice.

Where a conferred right to occupancy is retained and not cancelled by the transient. Yet the transient fails to use the room. The rent associated with one or more of the reserve reserve nights depending on the terms is charged as taxable. Again, I said this, no double tax on a single room night. If pre arrival cancellation with no right attached is treated as damages and the room is later sold to a substitute guest who pays rent and tax, taxing both the the breach charge and the latter would tax one unit of occupancy twice contrary to the ordinances focus on the privilege of occupancy as the taxable event.

Non refundable reservations. The refundable nature of the contract does not determine occupancy. If the guest never cancels the reservation to release the room for sale, the fee charged is taxable. For occupancy, whether the guest is present or not. However, if the guest cancels the reservation, thereby releasing the room for sale and forfeiting the right to occupancy, The deposited funds are charged as deposit forfeiture.

Not a cancellation fee. A deposit forfeiture. And not taxed as the payment does not constitute consideration for the right to occupancy. At the very least these arguments create ambiguity but I would say the whole the fact that the the language cancellation fee is in the ordinance requires a further definition and guidelines as to what cancellation means, when it attaches to occupancy, and when it doesn't. General guidelines.

What would support taxability? Non refundable prepayment when the guest still has the right to stay. Deposits applied to room rent. Deposit retained while the room remained held for the guest and unavailable to others. No show charges where the room was held and the guest could have occupied it. What wouldn't support taxability? Deposit forfeited as damages after cancellation. Deposit retained after the room or room was blocked and released. Deposit security deposit retained for breach, damage, or failure to meet pickup terms in in terms of groups. Deposit that never gave the payor an enforceable right to use or possess the room.

The taxable question is not whether money was paid to reserve a room. It is whether the payment brought or preserved the right, the legal right to occupy the room. Now to the individual, ancillary fees. So as I asserted, one of the problems with Measure C and adding these additional rooms is that it I mean, the adding these additional fees is that it does seem that this brought new collection methodology to the city. We have, I have provided Emails from former city manager Vega with Jeff Wells that discussed this, that indicate that the collection of certain fees that previously weren't collected would begin to be collected and specifically, they spoke of resort slash amenity fees.

In that case, Vega and Wells in their discussion determined that if amenity fee was mandatory, Vegas position that that might be taxable. Wells' position was that if the guest has a right to opt out, then it's not taxable. So, would like to ask the tax collector, mister Harvey or miss Cho, to elaborate on that. Does that mean that and I also heard miss Callaway, missus Callaway mention it and they referred to opting in or opting out. So, does that mean that if fees are optional, they are no longer bound to be taxable?

Is it that the is the is the test whether they're the substance of those fees are occupancy as defined a room for lodging or is the substance whether they've been added because of the expanded definition of rent where anything that gets paid that's tied to occupancy is suddenly occupancy. I don't think rent can determine the substance of occupancy. It's the tail wagging the dog. Occupancy is the dog. Rent is just a calculator.

The architecture of the OMC has written. I'm just going to go over this because it doesn't seem like it's I'm making it clear or have made it clear. So, four ten imposes a tax for the privilege of occupancy. Occupancy. That's the taxable substance.

The tax exists because a person occupies a room, not because they paid fees, not because they brought a pet, because they occupied. Four zero five defines occupancy as use, possession, or right to use a possessor room for dwelling, lodging, or sleeping purposes. This is the load bearing definition it defines what is being taxed. Four zero seven defined rent, the consideration charged for occupancy. Its structural role is to define what counts as payment for that taxable thing.

It answers when the city says tax 15% of rent, what is the value of that occupancy? That's what rent is. Cash, credit, services, goods for other property, that's the payment side of the exchange. Rent is defining, hey, you can exchange all these different modes of payment. These goods, services, labor, that's all included. It doesn't matter. But they all constitute consideration. That consideration goes on the scale. The scale is rent. In my exhibit, in my diagrams, I I one of the diagrams illustrates this with the scale.

It weighs occupancy against consideration. All the money, the gold, the chickens, labor, whatever you wanted to pay for occupancy. That's rent is making that adjustment. It's saying, okay, you're going to pay this. You know, for this room.

That's that's the balance. When measure C added these fees, other fees to occupancy, it confused the matter. It made it seem like, oh, well, then, those must be included in occupancy but if you look carefully, and mathematically and I put a mathematical equation on one of the diagrams, it shows that in doing so, you actually enlarge the tax base beyond occupancy because you've included fees that are not occupancy associated with occupancy, a charge that's associated with occupancy, a a crib fee, food, extra beds, a rental, Wi Fi, you know, almost anything that's not the room itself that's associated with occupancy but that's not defined as occupancy is additional to occupancy. So by adding these this terminology to rent, essentially what Measure C did was it said, okay, well, we're going to create another tax base. That other tax base is going to be ancillary items that are associated with occupancy but that aren't occupancy.

So it seems to me it's like, I don't know if it was on purpose. I don't know if it was a cute trick. But anyways, when you try to wrap your brain around it, when you think about what is the taxable thing, it's occupancy. It's not everything that's associated with occupancy. Okay.

So the exchange that triggers the tax is the occupancy exchange for rent. The tax is levied on that rent paid in exchange for occupancy. That's the event. What Measure C did, and I'm reiterating because I'm I'm free wheeling and also reading off the page. So, by inserting resort fees, cancellation fees, and parking fees, and other fees tied to the occupancy of space in a hotel, into the definition of rent, the city attempted to expand the taxable race by redefining the payment side of the exchange, not the substitute side of the exchange.

The pay rent is just the payment. Occupancy is the tax, the thing that's being taxed. But rent structural role is already fixed. It is the consideration for occupancy. And before measure C, this wasn't a wasn't confusing because that additional language didn't exist. There was no other fees tied to occupancy in the definition. And that's part of my argument. In measure C, it says that the city wasn't attempting to change the definition of rent. Yet, they patently did because they started collecting on other fees tied to occupancy. That's not occupancy.

So, and even in the case of a parking space, let me see here. So, The City attempted to expand the taxable base by redefining the payment side of the exchange. But rent's structural role is already fixed. It is the consideration for occupancy. You can't make a parking fee taxable by calling it rent. If parking is not occupancy. Parking is not tied. It's tied to occupancy but it is not the substance of occupancy. And the case BAT versus San Francisco, bared this out. The complaint there was that the guest paid tax on parking.

And she said, What's parking got to do with the room? It's not part of the room. So occupancy is supposed to be a tax on the room. San Francisco said, Well, our definition of occupancy is the room and services and furnishings and everything associated with the room at the hotel. So, that says, yeah, tax everything. Right? But OHAI doesn't say that. OHAI says tax this. Does anybody wanna know what this is? This is lodging.

This is space in a room for lodging, dwelling, or sleeping purposes. It's not anything else. So if you wanna if you wanna agree with the city, what you're doing is you're saying that, well, because they put this little trigger in rent, now that now, it's like change the calculation. It's it's like putting a weight on the scale as my illustration shows. It's changing the dynamic so that they can actually increase the tax base without modifying the definition of occupancy.

It's a Trojan horse. So the additional language in four zero seven, it doesn't expand the fact. It actually overwrites the relationship between rent and occupancy. It severs rent from its predicate. A charge can now be rent under four zero seven even if it has no connection to the four zero five definition of occupancy.

That's not clarification. It's structural incoherent. The two definitions no longer speak coherently together. The model of the ordinance has been broken. The purpose of defining occupancy, the purpose of defining rent, the purpose of defining the tax as for the privilege of occupancy is broken by Measure C and the way the city's interpreting it.

There's two independent failures there. Structural, Measure C language inserted into four zero seven is incoherent in context because rent's role is to be the consideration, the money for occupancy as defined in four zero five. Expanding rent to include charges that aren't for occupancy doesn't just expand tax, it breaks the definitional chain. Section four ten taxes the privilege of occupancy. Four zero five defines occupancy.

Four zero seven defines what counts as consideration for occupancy. Not what counts as rent. I mean, not what counts as taxable, but what counts as the consideration. You know, which goods, which services, what what barter exchange is, you know, applicable for rent. Not the, you know, not something that changes the definition of occupancy.

All three must point at the same thing. After Measure C's codification, the way in which the City is attempting to assess tax, they don't. No longer is there an equivalence across those three load bearing definitions. Now the fair notice issue. The ballot summary voters read said similar fee.

A narrower formulation that operators could reasonably read as limited to fees analogous to expressly listed examples like resort parking cancellation. The codified text says other fees tied to occupancy of space in a hotel, which the city now reads as a sweeping sweeping in anything incidental to a hotel stay. Regardless of whether it's consideration for the room itself. Neither formulation was accompanied by any guidance to operators about what specifically would now be taxed that wasn't taxed before. And critically to maintain structural harmony with the entire ordinance, neither formulation can legally do what the city claims.

Because you can't make non occupancy charges taxable by redefining rent without also amending the definition of occupancy. If they wanted to tax for those additional items, they could have done that. They could have said occupancy includes the room for dwelling, sleeping, lodging purposes, and all fees associated with that experience. That's what Bat did and that's what the the the judge for Bat focused on. That was wide. It specifically said what occupancy was in the definition. So parking was included in that. OHAI doesn't do that. They didn't do that. It still doesn't do that.

Operators aren't trying to evade the tax. I'm not trying to evade the tax. If the city had ever clearly communicated pet fees are now taxable, that's what you need to collect right or wrong, I would have done it. You know, why go to all this trouble? My big thing is I don't want to pay somebody else's tax. And I also expect clear tax guidance from the city. But that wasn't given. Operators most likely would have passed on the cost of the transit and be done with it. That's what everybody else is doing. All the other operators, they have the same problem but they just don't want to stand up here and talk about it.

They don't want to pull it out. It's the juice ain't worth the squeeze, right? They don't feel like the council or the city is going to listen to them. So, they just pay it, move along, just another cost of doing business but I just found that to be wrong. The entire mess, the debt reassignment, the retroactive assessment, the fourteen month hearing saga, all of it flows directly from the city's failure to communicate a coherent, legally grounded taxable standard before enforcing it. I even asked, Mr. Harvey over here says, you know, come to the city. We will explain to you how the tax code works and what's taxable. I asked him point blank. I gave him a list of things.

You know, which of these are taxable? He refused to answer. And the same with Saul, HDL. I mean, he answered vaguely. He said, well, it's mandatory stuff or if it's room related or whatever. There wasn't anything structurally in the ONC that that had a nexus to how he was evaluating what should be taxed. It was just, well, it's tied to occupancy. Occupancy, the word occupancy, if it has anything to do with the hotel's day. Taxable, that's not what the ordinance says. That's why I'm here. The ordinance doesn't say it. Fix the ordinance. I'm I'm good with it. Give us, you know, published guidelines that say, well, the ordinance doesn't say it but here's the clarifications. So, this is what we really want you to do.

So, if you don't want us coming after you, and you don't want us assessing you, and you don't want to pay somebody else's tax, here, this is what you should do. Pet fees, fine, done. Could have been settled years ago, but it wasn't. And so here I am. And and then I'll I'll save my point on uncollected tax for my rebuttal because it didn't seem that anybody in the council gave that thought. In their determination in the prior hearing. Thank you.

Thank you. Okay. Any public comments out there or are you receiving any cards on this?

No new cards received and just double check. We have no raised hands on Zoom.

Okay. Alright. We could hold and there was we could ask some questions but let's go to the rebuttals and then we'll have council questions. If there are any, please.

Pursuant to pursuant to hearing procedures, council does not have the authority to decide whether a city ordinance or resolution is illegal, unenforceable, or unconstitutional. Council decision is limited under section four thirty one to whether the determination of the tax collector was correct and if not, what tax interest and penalties, if any, are due to the city from the appellant. The record demonstrates that Cameron Larner, owner and operator of the Casa Ojai Inn, failed to collect TOT unqualifying rent for the period between 06/30/2020 and 03/31/2023 and failed to remit the same amount to the city. Therefore, the city should uphold the tax collector's determination dated 04/08/2025, finding $11,423.37 in tax and penalties was properly assessed against the appellant. Cleaning fees, crib fees, pet fees, and rollaway bed fees are taxable rent under the OMC, which imposes tax on rent under Section four ten.

The City's definition of rent under Section four zero seven clearly covers these types of fees. The appellant's interpretation of rent ignores the inclusion of cancellation fees and parking fees, which are examples of non mandatory fees tied to occupancy in the definition. Cleaning, crib, pet, and rollaway bed fees are only charged when a transient occupies a room at the hotel and brings a pet or requests a crib, tying these fees to occupancy and falling under the definition of rent as other fees tied to occupancy. The plain interpretation of the Ojai Municipal Code therefore contemplates cleaning fees, pet fees, crib fees, and rollaway bed fees as rent, disproving the appellant's argument. Moreover, it is commonly understood that occupancy includes services and accommodations that may be enjoyed outside the room rented.

The OMC also clearly requires hotel operators to collect a 15% tax on all rent charged to transient guests, to hold that collected tax and trust for the city, and to report and remit these taxes to the city on a quarterly basis. The OMC does not exempt an operator from this duty nor does it prevent the city from collecting taxes owed from the operator. Here, the appellant, as the hotel operator, should have collected tax on cleaning fees, pet fees, crib fees, and rollaway bed fees from transients and not and is not excused from paying the TOT because of this failure. The city is not required to pursue transients for unpaid tax nor is the city prohibited from going after operators for uncollected taxes. While the city may go after a transient directly under section four one one, it is not required to do so and it is empowered to go after the operator that failed to collect TOC under Section four twenty five.

Adopting the appellate's interpretation would ignore the plain meaning of the Ojai Municipal Code, would make the audit findings unenforceable, and would overlook the city's duty to enforce its own laws. Furthermore, the city is not held to statements of previous employees regarding unofficial city policies. Lastly, the appellant's arguments alleging the audit methodology challenging the audit methodology are irrelevant on this appeal as the appellant argues that fees are not taxable, not that he did not pay the fees. The audit did not need to be based entirely on transaction level records. HDL received folios for months in which there were discrepancies between rent received and the TOT paid.

As noted in the 12/05/2023 audit report and the email from HDL to the appellant in attachment C and not having raised this issue at all until this appeal hearing, the appellant has had ample opportunity to object to the audit methodology used and provide the transaction level records he now argues were required for this audit. The appellant is not arguing that he paid TOT on cleaning pet, crib, and rollaway bed fees and has not provided evidence that the audit should have found that he paid these fees or paid the TOT on these fees. Appellant's argument that the audit required transaction level records or that he can now provide those records cannot stand. At this time, city staff request city council make a determination after independent review, consideration analysis of the report, the information presented, oral and written testimony by all parties and their witnesses, and the record to uphold the tax collector's determination dated 04/08/2025, which held the TOT and penalties from the audit findings dated 12/05/2023 were properly assessed against the appellant. Thank you.

Thank you. Mister Larn, please. Rebuttal? Yes, please go. Okay.

Alright. So.

Thank you.

I am not asking council to render the ordinance or measure C invalid. That's not what I was saying. That's not my point. I'm saying that as written, it can't support a tax interpretation for fees tied to occupancy and still be true to the main tax taxable substance, which is occupancy, not fees tied to occupancy. I submit that any interpretation that would include the fees to occupied to occupancy as appended to the definition of rent is an incoherent, inconsistent reading of the fundamental principles in instantiated in the ordinance itself.

Now, to uncollected taxes. This would be helpful if you brought up this little page which I think is diagram 10 which refers to uncollected taxes. So, a central issue before the council is whether the OMC permits the city to impose tax liability and related penalties on a hotel operator for taxes that were never collected from the transient. Four twenty five allows the city to determine and assess tax. But it's procedural tool.

Oh but it's a procedural tool to measure tax. Not redefine liability. That section may say assess and create a report but it doesn't say transfer the debt of the tax to the operator. The ordinance consistently ties operator remittance applications to the tax collected. This council must uphold the actual plain language of the ordinance.

The fact that the city believes that adhering to such plain language conformity would jeopardize the city's ability to enforce tax collection or to receive taxes is unfounded and there is no evidence to support it. I, myself, have already remitted, you know, 99 whatever percent of all revenue that we've collected as tax. So, this is a even though I'm not collecting on these on the particular items that I felt as the operator did not meet the definition of occupancy in the ordinance. There is really no evidence or merit to the idea that operators would stop collecting tax if you upheld this decision and actually upheld the plain language of the ordinance with respect to the debt of uncollected tax versus tax collected. Let's look at the sections you know, one by one.

So, four ten says, taxes imposed on the transient. Four eleven says, transient pays the operator. City may pursue the transient. So, four eleven says, the debt is not extinguished by the transient. I mean, from the transient until it pays the operator. That's what it says. I didn't write it. You have to uphold it, not the city. Just because they have some outside reason for converting this debt to the operator does not give them the justification under the ordinance. Operator for, I mean, section four twelve.

Operator must collect the tax, not absorb the tax. Number four seventeen, op the report requires under four seventeen, the report requires tax collected. So, in other words, it doesn't say report on tax owed or revenue. It says, report your tax collected. On four eighteen, it says, remittance is limited to tax collected.

So, if the ordinance is telling me to remit my return as tax collected, why would I be penalized for doing what the what what the ordinance says. 04/19 says, collected taxes held in trust. Four twenty through through four twenty three say penalties tied to remittance delinquency. I was not delinquent in my remittances. I remitted tax collected as or as demanded by the ordinance.

Four thirty eight, operator is liable only for tax collected but not remitted. So if that's what it says, how can you possibly rule otherwise? I just if you are the council, then I would hope and expect that you would uphold the actual language in the ordinance. Four twenty five says, the city has assessment authority but it's not clear that that translates to debt transfer. It's an it's a measurement, not a liability.

You can have enforcement through reporting. You can say, hey, operator, you didn't collect something that we think you should collect. So, you know, deal with that and most likely, an operator will turn around and start collecting on it, right? This is and this could be avoided if there were published guidelines that would prevent this from happening. At the very least, you have seven or eight sections that make this very clear that uncollected tax is not the operator's liability, nor can it be.