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City files liens against Holbrooke Hotel

The City of Grass Valley has filed two liens against the historic Holbrooke Hotel.

Wednesday’s action is the latest development for the hotel owners, who are attempting to sell the property. Last week they fielded an offer to buy the downtown landmark, delaying an Aug. 23 bank auction until Thursday, Sept. 9.

Owners owe the city more than $41,000 in back taxes and overdue sewer and water charges, according to a letter from Mayor Lisa Swarthout last week.



As a result, city staff filed two liens against the property at the Nevada County Clerk-Recorder’s office Wednesday morning.

The city entered into a contract with the hotel’s owners in early March to repay the outstanding transient occupancy tax and sewer and water charges, according to the letter.




The Holbrooke’s ownership group did not return messages for comment on this story.

The lien is taken out against the building’s deed in an attempt to ensure payment of the outstanding tax and utility bills, Swarthout said.

Ownership of the Holbrooke failed to adhere to the payment plan, leaving an outstanding sewer and water balance of $4,878.71 owed to the city, and an outstanding transient occupancy tax of $36,7575.55.

The local landmark, built in 1851 is for sale as its owners are in default of their $1.2 million mortgage from Citizen’s Bank. It is set to be sold at auction at 12:30 p.m. on Thursday, Sept. 9, on the steps of the Nevada County Superior Court in Nevada City.

An auction planned for Monday, Aug. 23, was postponed by Citizen’s to give the owners time to work out a sale for the property. The owners were reviewing an offer on the property at that time and bank officials wanted to see if it would go through to escrow, owner Jim O’Brien said last month.

“For the city this is a position of last resort,” said Mayor Lisa Swarthout. “We’ve given them every opportunity to make this right. The big issue is that other ratepayers are subsidizing water and sewer for people at the hotel.”

Transient occupancy tax is a 10 percent bed tax for every hotel in the city, said city Community Planning Director Joe Heckel. That money is sent to the city’s general fund and is generally paid monthly, he added. As part of the Holbrooke’s payment plan, the owners were to pay the tax weekly, which they did until August, Heckel said.

Sewer and water is billed monthly for all city businesses and residents, Heckel said.

“The city has a responsibility to collect the TOT money,” said Grass Valley Downtown Association Executive Director Howard Levine, who owned the Holbrooke in the 1990s. “That money isn’t hotel money, you don’t put that into business accounts. It belongs to the city.”

The Holbrooke acts as a pass-through for the tax, Swarthout said.

“The reality is they’ve been collecting the money and not paying the city,” she said.

Criminal charges have been levied against hotel owners in other instances regionally for failing to pay the tax.

In April, the former managing partner of two South Lake Tahoe hotels pleaded no contest to a felony count of grand theft by embezzlement for not paying about $200,000 in city transient occupancy tax. Eneliko Smith, owner of The Block and Cedar Lodge hotels, was charged with the crime.

Billed as the “home of the oldest (almost) continuously operating saloon west of the Mississippi,” Grass Valley leaders and merchants repeatedly expressed their desire to keep the hotel open.

“The Holbrooke is an incredibly important part of downtown,” Levine said. “It was devastating when the hotel shut down in the late 1980s.”

Its neighbors reap benefits from the Holbrooke’s guests, said Susan Purdy, co-owner of Tofanelli’s Gold Country Bistro, next door to the landmark.

“None of us want to see it boarded up,” Purdy said. “It’s too fabulous, too old to let it close. I think the city should maybe help out. It’s an artifact of Grass Valley.”

Suitors may line up to buy the hotel if Citizen’s is forced to take it over, Levine said.

“I’m sure someone will come along in short order,” he said. “But it would be a lot tougher to buy if it is closed down.”

Hotel ownership has changed hands three times in the last 20 years. Levine bought the property in 1991, and in 2002 sold to the Weaver family.

In 2005, the current group of owners purchased the property from the Weavers for about $2.35 million. The current owners asked $4.4 million for the hotel in 2008, but scaled their price back to $1.4 million this year.

To view Swarthout’s letter to the hotel’s ownership, or the city’s two liens, visit TheUnion.com and click on this story.

To contact Staff Writer Kyle Magin, e-mail kmagin@theunion.com or call (530) 477-4239.


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