Thursday, June 10, 2004


Vineyard Creek Stiffs the Tax Man--$600,000 for two years of business

The City of Santa Rosa owns the property, and has put $14 million of the taxpayers' money into the new $35.6 million Vineyard Creek Hotel, Spa and Conference Center on Railroad Street. That's almost 40% of the project's value.

Norm Rosenblatt of Innkeeper Associates Development Co., and the Rim Corporation of Modesto (it bought Innkeeper Associates in 1999) developed and operate the hotel. According to the Press Democrat, after two years in business they owe Sonoma County $600,000 in property taxes. They plan to ask the Assessor, through the City's Redevelopment Agency, to reduce the overdue bills.

It looks like they stiffed the tax man because they knew they could get away with it. The PD reported 6/9,

"Vineyard Creek officials said they paid what they consider the most pressing taxes and costs first, such as wages and vendors, and wanted to show a full year's worth of business experience before seeking a property tax cut."

And they were right about the tax man:

"County Assessor Tom Ford said he is not alarmed by Vineyard Creek's failure to pay because the flagging economy has affected many businesses and prompted many requests for reassessments. Normally, he said, the county does not initiate steps to take over a property until taxes are delinquent for five years.

'We look at the building and see plenty of value in a multimillion-dollar structure,' Ford said. 'They are experiencing a cash flow problem right now and we will consider any request.' Ford said the Vineyard Creek owners owe about $209,000 for 2002 and about $389,000 for 2003."

They haven't paid the City any rent either. They don't have to pay some token rent until 2006, unless they start to make serious money:

"At this point, Vineyard Creek does not owe rent to Santa Rosa. The agreement reached with the city's Redevelopment Agency calls for the hotel to pay $100,000 in rent each year that revenues top $10 million, with the provision kicking in no later than 2006. In 2003, the hotel reported about $9 million in revenues."

A follow-up story today (6/10) said Rim and Innkeeper are looking for a major partner to help bail them out. Local gossip points to the Hyatt chain:

"Ben Stone, coordinator of the Sonoma County Economic Development Board, said a Hyatt affiliation was the only hotel group being bandied about in business circles. 'When I first heard it, I thought it was unlikely because Hyatt does not typically go into secondary markets. But then, we do have a Sheraton and a Hilton and it might make sense to the Hyatt to have a presence in Wine Country,' Stone said."

The City's ED manager was also uncertain but hopeful:

"'All the rumors center on Hyatt, but we've received nothing in writing yet,' said Jocelyn Lundgren, Santa Rosa's economic development manager."

"Lundgren said city officials are waiting for 'good news' from Rosenblatt. 'Assuming it is indeed the Hyatt, it would be quite a coup because they only take on properties that represent their company well, and they don't take on properties that are troubled financially,' Lundgren said."

The Press Democrat is as unconcerned about the debt as the tax man. A 6/14 PD editorial ("Hotel realities") said,

"The three-year slump in the travel business also makes it reasonable for Vineyard Creek to ask for a reappraisal of value for property tax purposes.

That being said, both the redevelopment agency and the county need to build protections into the reappraisal deal that ensure Vineyard Creek pays its fair share of property tax when its business improves."
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