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Foreclosure Costs City $51,000

POSTED February 16, 2011 1:05 a.m.

The City of Oakdale is out over $50,000 in unpaid taxes from the bank foreclosure of the Quality Inn located at 825 East F Street.

City Manager Steve Hallam, in a budget report to the city council on Feb. 7, revealed that the city did not collect or receive $51,000 in tourism taxes for a one-year period in 2009-2010 resulting in the shortfall.

In June of 2010, Wells Fargo Bank sought to enforce the loan agreement in Stanislaus Superior Court and foreclosed on the out-of-business property.

City business records show that Quality Inn was a franchise operated by Shree Balaji Hospitality LP of San Francisco.

Corporation records from the Secretary of State’s Office show Shree Balaji Hospitality LP listed as a private company established in 2007 and incorporated in California. Its last filing showed the company had an annual revenue of $87,000 and employed a staff of two.

An LP is known as a “Limited Partnership.” A limited partnership is a form of partnership filing similar to a general partnership, except that in addition to a general partner there are limited partners. It is a partnership in which only one partner is required to be the general partner. The general partner listed for Shree Balaji Hospitality is Balwantsinh Dolatsinh Thakor.

LPs have limited liability, meaning they are only liable on debts incurred by the firm. In most cases, individuals are not personally liable for the debts or taxes acquired.

According to Oakdale Finance Director Albert Avila, the city tourism tax, also known as a transient occupancy tax, is 7 percent on each room rented. Typically, the tax is collected quarterly from the business. When the Quality Inn’s tax was a year delinquent, the city filed a lien on the property.

“When the first mortgage foreclosed, the property was taken back by the bank,” Avila said. “Unfortunately, when the first deed of trust was taken to satisfy the loan, all debt is wiped clean.”

The $50,000 shortage affects the city’s general fund with little or no recourse to collect the overdue funds.

Avila said the company had “no other assets,” leaving the city out cold.

“If the property was sold by the owner, we would have gotten paid,” Avila explained.

He said that unlike state and federal taxes, there is not much leverage a city has to collect taxes other than property liens.

“I’ve directed City Attorney Tom Hallinan to look into valid legal recourse,” City Manager Steve Hallam said.

Prior to becoming a Quality Inn, the property was operated as a Ramada Inn until 2007. Just this past week, a new sign was erected and the property opened as a Motel 6.

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