CDC - Item 4B - The Glendon Hotel UpdateROSEMEAD COMMUNITY
DEVELOPMENT COMMISSION
STAFF REPORT
TO: THE HONORABLE CHAIRMAN AND COMMISSION MEMBERS
FROM: JEFF ALLRED, EXECUTIVE DIRECTOR
DATE: JUNE 8, 2010
SUBJECT: THE GLENDON HOTEL UPDATE
SUMMARY
At the May 25, 2010 Commission meeting, it was requested that the complete file on the
Glendon Hotel (8832 Glendon Way) be placed on the next regular Commission
meeting. Also, as directed by the Commission, negotiations have commenced on the
sale of the property to a private firm; and, measures have been taken to recover
$55,384 owed to the Commission by the former Hotel Operator.
Staff Recommendation
It is recommended that the Commission receive and file this report.
BACKGROUND/ANALYSIS
On July 2, 2008, the Commission acquired the Glendon Hotel (formerly known as the
Rosemead Inn) located at 8832 Glendon Way for $4,336,243.84 using non-restricted
tax increment dollars to fund the transaction. The original purchase price was
$4,407,616.15. However, during the final walk-thru of the property it was discovered
that numerous furnishings that were to be included in the sale were missing. As a
result, the Commission received a $71,372.31 credit.
Immediately following the purchase of the property, proposals were solicited from
companies specializing in hotel operations to continue the operation of the hotel. The
Commission selected Rosemead Inn Hotel Partners, LLC as the Operator for the hotel.
On August 26, 2008, the Commission selected Rosemead Inn Hotel Partners, LLC as
the Operator for the Commission owned Glendon Hotel. The Operator is required under
the Operating Agreement (see Attachment "A") to provide the Commission with a
monthly written income and expense report that shows a summary of all funds and
revenues received and a summary of all operating expenses incurred. Unfortunately,
the Operator has not been providing this information on a timely basis. After repeated
requests, the Operator submitted an incomplete report based on what appears to be a
poor record retention system (see Attachment "B").
ITEM NO. LWf
APPROVED FOR CITY COUNCIL AGENDA:
Community Development Commission
June 8, 2010
Paoe 2 of 3
In addition, as part of the Operating Agreement, the Operator committed to complete
certain renovations to the hotel. The Commission committed to contribute $100,000
towards the renovations with the Operator contributing the remaining balance (see
Attachment "C"). A detailed accounting was requested showing the expenditures for
which the Commission's $100,000 contribution was used, together with supporting
invoices, bills or other evidences of payment, and the unexpended balance. Again, the
Operator submitted an incomplete report based on poor record retention (see
Attachment "D").
Based on the lack of record keeping, on March 9, 2010, the Commission directed staff
to engage the Commission's auditors, Mayer Hoffman McCann, P.C., to examine the
financial records of the hotel operations and prepare an Independent Accountant's
Report on Applying Agreed-Upon Procedures (Report). An Independent Account's
Report on Applying Agreed-Upon Procedures is not an audit but is a review of
compliance with requirements of the Agreement and the financial impact of any non-
compliance that may be discovered. The report has found that the Operator was non-
compliant with several requirements of the Operating Agreement resulting in non-
payment to the Commission of $55,384. On May 26, 2010, the Operator was sent the
final copy of the Report along with a letter requesting payment to the Commission of
$55,384 within 30-days (see Attachment "E").
The Hotel Operator ceased operations of the hotel on May 31, 2010 and the Operating
Agreement will be terminated on June 10, 2010 by mutual consent of the parties. At
that time, control of the hotel will revert back to the Commission and it will be secured
through a variety of means including the boarding of all windows on the bottom floor
from the inside and outside of the building, installing a 6-foot high fence with a green
mesh along the perimeter, '/2 hour security checks from 7:00 a.m. to 11:00 p.m. Monday
- Saturday and 7:00 a.m. to 3:0 p.m. on Sundays, and an on-site camera system will be
linked into the Public Safety Center for monitoring of the exterior of the building and
interior hallways. The site will remain closed and secured while the Commission
negotiates its sale to Qiao Garden Group Real Estate Company, Ltd.
PUBLIC NOTICE PROCESS
This item has been noticed according to the California Health and Safety Code Section
33490.
Prepared by:
~l~.t.~.l~.~,(.(.r a.
Michelle G. Ramirez
Economic Development Administrator
Community Development Commission
June 8, 2010
Page 3 of 3
Submitted by:
Stan Wong
Community Development Director
Attachment A - Operating Agreement
Attachment B - Profit & Los Statement
Attachment C - Renovation Budget
Attachment D - Renovation Experiditures
Attachment E - Payment Request and Independent Accountant's Report
ATTACHMENT A
MANAGEMENT AGREEMENT FOR THE OPERATION
OF HOTEL ROSEMEAD
This MANAGEMENT AGREEMENT FOR THE OPERATION OF HOTEL
ROSEMEAD (the "Agreement") is entered into as of October 14, 2008 by and between
the ROSEMEAD COMMUNITY DEVELOPMENT COMMISSION, a California
redevelopment agency (the "Commission"), and ROSEMEAD INN HOTEL
PARTNERS, LLC, a California limited liability company (the "Operator"), who agree
as set forth in this Agreement. The Commission and the Operator are sometimes referred
to in this Agreement, individually, as a "Party", and collectively as the "Parties".
1. Recitals. This Agreement is made with reference to the following facts and
circumstances:
(a) The Commission is the owner of certain hotel, facilities and related
improvements, including appurtenant parking areas, currently known as the Rosemead
Inn (collectively, the "Facilities"), and which Facilities are located at 8832 Glendon Way
in the City of Rosemead, California. The Facilities are not currently in operation.
(b) The Commission desires to engage the services of the Operator for the
purpose of renovating, equipping, rebranding and operating the Facilities on and subject
to the terms and conditions of this Agreement.
(c) The Operator represents that it is well qualified through its experience to
renovate, equip, rebrand, and operate the Facilities and is willing to do so on and subject
to the terms and conditions of this Agreement.
2. Appointment of The Operator; Acceptance. The Commission hereby appoints the
Operator, as an independent contractor, for the purpose of renovating, equipping,
rebranding and operating the Facilities in accordance with the terms and conditions of
this Agreement. The Operator represents that it has inspected the Facilities and is
familiar with them and the Operator hereby accepts its appointment by the Commission,
as an independent contractor, for the purpose of renovating, equipping, rebranding and
operating the Facilities in accordance with the terms and conditions of this Agreement.
3. Term; Extension. The term of this Agreement (the "Term") commences on the
Commencement Date (as defined in Section 4(c) below) and, unless extended or sooner
terminated as provided herein, expires on the second anniversary of the Commencement
Date. The Term of this Agreement is subject to extension for such additional period of
time and on the same or such other terms and conditions as may be mutually agreed upon
by the Commission and the Operator, each in its sole discretion.
(a) Termination Option. This Agreement may be terminated without just
cause and without penalty at any time at the option of the Commission upon the giving of
not less than sixty (60) days prior written notice of termination.
` LA #48144325-0179 v3
4. Renovation of Facilities. Following the execution of this Agreement by the
Parties, the Operator agrees to renovate and equip the Facilities for operation as a three
star-class hotel, and agrees to open the Facilities to the public, in accordance with the
following:
(a) Scope of Renovation. The Operator agrees to perform all renovation work
and to provide and install all fixtures, equipment, furnishings and supplies necessary for
the operation of the Facilities as a three star class hotel, including, without limitation,
performing the renovation work and providing and installing the fixtures, equipment,
furnishings and supplies as set forth on Exhibit A attached to this Agreement
(collectively, the "Renovation"). The Renovation is to be performed by duly licensed
and reputable contractors experienced in performing work of the nature involved in the
Renovation and is to be performed in a professional and workmanlike manner, using new
and used materials of good quality, and in compliance with all applicable laws,
ordinances, building permits, rules and regulations. Without limiting the foregoing, the
Operator acknowledges that prevailing wages must be paid in connection with the
Renovation and the Operator agrees to comply with all applicable provisions of the
California Labor Code in that regard, including, but not limited to, sections 1720 et seq.
and 1770 et seq.
(b) Approval of Plans. Prior to the commencement of the Renovation, the
Operator will provide to the Commission, for approval, plans and specifications for the
Renovation in such detail as the Commission may reasonably require. Approval of the
plans and specifications by the Commission will not be unreasonably withheld. The
Operator agrees to perform the Renovation in accordance with the plans and
specifications as so approved, except to the extent changes to the plans and specifications
are required in order to obtain necessary building permits and approvals.
(c) Completion of Renovation: Rebranding. The Operator agrees to perform
and to complete the Renovation, and to open the Facilities for business to the public, by
no later than ninety (90) days from contract execution subject only to delays due to Force
Majeure Events as described in Section 20 (such date, as so extended, being the
"Commencement Date").
\yG (d) Costs of Renovation. Except for the Commission's Contribution (as
7 defined in Section 4(e) below), all costs and expenses of the Renovation, including,
without limitatio architectural and engineering fees, insurance costs, permit fees, and
low dZMS l'A costs of a or, materials, fixtures, equipment, furnishings and supplies, shall be solely
cki~t 4 ptd borne by the Operator and the Commission shall have no liability whatever in connection
4 OCr f U1(Yd therewith. In performing the Renovation, the Operator agrees that it will expend not less
1 than the amounts set forth on Exhibit A for each of the items of work, fixtures,
uk' 40151 equipment, famishing and supplies set forth on Exhibit A; provided that, notwithstanding
the foregoing, if the Operator is able to perform an item of work or obtain items of
fixtures, equipment, furnishings or supplies for less than the corresponding amounts set
for on Exhibit A, then the Operator shall be entitled to expend such savings on other
LA #4814-4325-0179 v3 2
items set for on Exhibit A. The Operator agrees that it will keep accurate and complete
books and records reflecting all amounts expended in connection with the Renovation,
including the Commission's Contribution.
(e) Commission Contribution. The Commission agrees to contribute the
amount of One Hundred Thousand Dollars ($100,000) towards payment of the costs and
expenses of the Renovation (the "Commission's Contribution"), and except as provided
below in this Section, the Commission's Contribution shall only be used for such
purpose. The Commission's Contribution shall be disbursed to the Operator as follows:
Fifty Thousand Dollars ($50,000) within seven (7) days following the execution of this
Agreement by the Parties; and, Fifty Thousand Dollars ($50,000) upon the issuance by
the City of Rosemead of necessary building permits and approvals for the Renovation.
Within fifteen (15) days following the completion of the Renovation, the Operator agrees
to provide to the Commission a detailed accounting showing the expenditures for which
the Commission's Contribution was used, together with supporting invoices, bills or
other evidences of payment, and the unexpended balance, if any, of the Commission's
Contribution. Upon request by the Commission, the Operator will permit duly authorized
representatives of the Commission to review and inspect the Operator's books and
records required to be maintained under Section 4(d). If there is an unexpended balance
of the Commission's Contribution, such balance is to be deposited into the Operating
Account (as defined in Section 8(a), below) and used toward the payment of the expenses
of managing and operating the Facilities.
5. Rebranding. The Facilities are to be opened to the public and operated under the
name "Hotel Rosemead", and the Operator agrees to take all such actions as may be
necessary to enable the Facilities to be opened and operated under that name. The Parties
acknowledge that proper signage for the Facilities is critical in order to take advantage of
the location of the Facilities and their income generation potential. Subject to applicable
laws, ordinances, rules and regulations, the Commission agrees to use its good faith .
efforts to assist the Operator in securing freeway signage for the Facilities facing
Interstate 10 and parking lot signage on the adjacent Levitz's property.
6. Operational Duties. During the Term of this Agreement, the Operator agrees to
undertake and perform to the best of its abilities the day to day operation and
management of the Facilities as a three star - class hotel and for the purpose of
maximizing the public's use of the Facilities and the profits received by the Commission
and the Operator therefrom. The Operator agrees to operate and manage the Facilities in
an efficient, cost-effective and professional manner and in accordance with procedures
and practices followed by other three star -class hotel the Operators in Los Angeles
County, California and the terms of this Agreement. Without limiting the foregoing, the
Operator's duties in this regard will include, without limitation:
(a) Management. Administrative services, including, without limitation,
operational management and oversight, human resources management (including,
without limitation, employee supervision, hiring, discharge and discipline), and the
provision of necessary and appropriate security services.
LA #48144325-0179 v3 3
(b) Maintenance. Maintenance and repair (including the making of necessary
replacements) of the Facilities in a first-class, clean and safe condition acceptable to the
Commission, in its reasonable discretion, at all times.
(c) Services and Utilities. Arranging for the provision of all services and
utilities necessary for the efficient operation and maintenance of the Facilities and the
comfort and convenience of guests, including, without limitation, water, electricity, gas,
telephone, internet access, cable or satellite television, laundry facilities, pool cleaning,
window cleaning and rubbish removal.
(d) Taxes. The timely filing of all applicable tax returns and reports,
including, without limitation, income, franchise, sales tax and transient occupancy tax
returns and reports, and the timely payment and remittance of all taxes which are due and
owing.
(e) Accounting. Accounting and bookkeeping services, including, without
limitation, payroll, accounts receivable and accounts payable services and the preparation
of financial statements, revenue forecasts and budgets as required by this Agreement.
(f) Marketing. The promotion and marketing to the public of the Facilities as
a convenient and desirable lodging location and for the purpose of attempting to insure
the financial and operating success of the Facilities.
7. Operating Budget. Except as otherwise provided in this Agreement, the Operator
will not be required to expend its own funds in performing its duties under this
Agreement. Rather, all expenses of operating and managing the Facilities are intended to
be paid for from the revenues generated from the operation of the Facilities. Within sixty
(60) days following the execution of this Agreement by the parties, the Operator will
provide to the Commission for the Commission's approval a reasonably detailed
proposed operating budget (the "Proposed Operating Budget") for the Facilities. The
Proposed Operating Budget will show projected revenues and expenses on a monthly
basis, together with proposed room rates, for the first year of the Term. Upon approval
by the Commission, which approval will not be unreasonably withheld, the Proposed
Operating Budget will constitute the "Approved Operating Budget" for the first year of
the Term. Thereafter, not less than thirty (30) days prior to the end of each succeeding
year of the Term, the Operator will provide the Commission for the Commission's
approval a Proposed Operating Budget for the next ensuring year of the Term showing
projected revenues and expenses on a monthly basis, together with proposed room rates,
for such year. Upon approval by the Commission, which approval will not be
unreasonably withheld, such Proposed Operating Budget will constitute the Approved
Operating Budget for such next ensuing year of the Term.
8. Receipts and Disbursements. The Operator's receipt and disbursement of funds
and revenues relating to the Facilities will be in accordance with the following:
LA #4814-4325-0179 A 4
(a) Operating Account. All funds and revenues collected or received in
connection with or attributable to the operation of the Facilities are to be promptly
deposited into a separate bank account established and maintained with a bank mutually
acceptable to the Parties and whose deposits are insured by the Federal Deposit Insurance
Corporation (the "Operating Account"). All funds in the Operating Account are the
property of the Commission and are held in trust and managed for the Commission by the
Operator. No payments from the Operating Account are to be made unless made in
accordance with this Agreement.
(b) Disbursements. The Operator is only authorized to disburse the funds and
revenues deposited in the Operating Account for the payment of the expenses of
managing and operating the Facilities as provided in this Agreement and in accordance
with the Approved Operating Budget, and for no other purpose.
(c) Accountings. On or before the fifteenth (15th) day of each month, the
Operator agrees to provide the Commission with a written income and expense report for
the immediately preceding month that shows a summary of all funds and revenues
received and a summary of all operating expenses incurred. The report shall also include
a comparison of actual revenues and expenses to date with the Approved Operating
Budget, and shall be accompanied by a reconciliation between the bank account and the
check register. After review of this information; the Commission may request, and the
Operator shall promptly provide, reasonable additional reports which detail previous
transactions.
(d) Shortfalls. If at any time the amounts on deposit in the Operating Account
are insufficient to cover the expenses of operating the Facilities, the Operator shall
advance its own funds to pay for such deficiency. The Operator shall also notify the
Commission of the existence and amount of the deficiency and shall promptly provide
any and all financial and accounting information reasonably requested by the
Commission to document the deficiency. In addition, the Parties shall promptly meet and
confer regarding the reason(s) for the deficiency and the expected duration thereof. Any
amounts advanced by the Operator under this Section 8(d) will be treated as expenses of
operating and managing the Facilities and will be reimbursable to the Operator from
excess revenues, if any, in the Operating Account prior to the payment of the
Commission Share and the Operator Share pursuant to Section 11.
9. Books and Records. The Operator agrees to keep accurate and complete books
and records of account of all receipts and disbursements respecting the operating and
management of the Facilities in accordance with generally accepted accounting
principles. These books and records are to show all income and expenditures, accounts
payable, accounts receivable, payroll expense, available cash, and other assets and
liabilities pertaining to the Facilities. These books and records are to be kept throughout
the Term of this Agreement and for a period of 2 years following its expiration or
termination. The Commission may, at any time during the Operator's normal business
hours and either in person or through a representative, inspect all records and supporting
and related documentation kept by the Operator relating to the management and operation
LA #4814-4325-0119 v3 5
of the Facilities, including, without limitation, checks, bills, vouchers, statements, cash
receipts, bank account records, and correspondence. The Commission may, at its own
expense, have an audit made of all account books and records connected with the
management and operation of the Facilities.
10. Meetings. Representatives of the Commission and the Operator shall meet once
in each calendar quarter and at such other times as may be reasonably necessary for the
purpose of reviewing the monthly financial reports submitted by the Operator, reviewing
the Operator's performance under this Agreement, and discussing any other matters
relating to the operation of the Facilities.
11. Management Fee. If the operation of the Facilities results in the actual receipt of
revenues during a given calendar quarter (or portion thereof, if any, at the beginning or
end of the Term of this Agreement) in excess of expenses incurred for that calendar
quarter (or portion thereof), the Operator will provide the Commission with a report
detailing such excess (which report may be a part of the report provided for in Section
8(c) above). Within fifteen (15) days following receipt of such report, and unless the
Commission in good faith questions the accuracy of such report, the Operator shall pay
sixty percent (60%) of the amount of such excess to the Commission (the "Commission
Share") and forty percent (40%) of the amount of such excess to the Operator (the
"Operator Share") by means of disbursements from the Operating Account. The
Operator acknowledges and agrees that payment to the Operator of the Operator Share, if
any, constitutes, and will be accepted by the Operator as, the sole and total compensation
to the Operator for its services under this Agreement.
12. Independent Contractor: Operator Employees. The Commission and the Operator
acknowledge and agree that this Agreement establishes and constitutes only a
management agreement between the Parties, that the Parties are not joint venturers or
partners, and that the Operator is not and is not to be deemed to be an employee of.the
Commission. The Operator shall at all times be an independent contractor. The Operator
shall hire, discharge, supervise and pay all personnel necessary for the management and
operation of the Facilities and all such personnel shall be the servants or employees of the
Operator and not of the Commission. Except to the extent provided for in the Approved
Operating Budget, the Operator shall pay from its own funds without reimbursement
from the Commission all salaries, wages and fringe benefits and all local, state and
federal taxes (including, without limitation, Social Security taxes, unemployment
insurance and withholding taxes) applicable to such servants and employees. The
Operator shall have sole responsibility for the preparation and filing of all tax and other
returns required under applicable federal, state or local laws, regulations and ordinances
governing employment and for otherwise complying with the applicable requirements of
such laws, regulations and ordinances.
13. Compliance With Law: Covenant Against Liens. The Operator will keep and
maintain all licenses and permits necessary for the operation and management of the
Facilities and the performance of its duties under this Agreement and will operate and
manage the Facilities in compliance with all applicable laws, ordinances, rules and
LA #48144325-0179 v3 6
regulations, including, without limitation, health and safety laws and the Americans with
Disabilities Act. The Operator shall at all times keep the Facilities and the Commission's
title thereto free and clear of all liens and claims, including for labor or materials supplied
or claimed to have been supplied to the Facilities in connection with the Renovation or
later work. In the event of the filing of any such lien, the Operator shall give the
Commission prompt notice thereof and shall secure in a prompt and diligent manner (and
in any event within ten (10) days after becoming aware of the filing of any lien) the
release of the same by bonding or other appropriate means. If the Operator shall desire to
contest any claim of lien, it shall furnish the Commission, at the Commission's election,
adequate security of the value or in the amount of the claim, plus estimated costs, or a
bond of a responsible corporate surety in such amount conditioned on the discharge of the
lien, and shall thereafter prosecute such contest with due diligence and in good faith. If a
final judgment establishing the validity or existence of a lien for any amount is entered,
the Operator shall pay and satisfy the same.
14. Insurance. As a part of the expenses provided for in the Approved Operating
Budget, the Operator will keep and maintain the following types of insurance:
(a) A policy of comprehensive general liability insurance respecting the
Facilities in the amount of not less than $5,000,000 per occurrence insuring against
claims of bodily injury, death and property damage, and a policy of all-risk extended
coverage insurance covering all risks of physical loss or damage to the Facilities, with
liability limits of not less than ninety percent (90%) of the replacement cost of the same
and including coverage for fire, sprinkler damage, vandalism and malicious mischief .
The Commission will be named as an additional insured on each such policy. Each such
policy shall be written by an insurer admitted in the State of California and reasonably
acceptable to the Commission and shall contain a waiver of subrogation provision and
other terms and provision reasonably acceptable to the Commission.
(b) A policy of worker's compensation insurance as required by law.
(c) A fidelity bond in the principal sum of $1,000,000, and otherwise in form
and substance and written by a surety reasonably satisfactory to the Commission, to
protect the Commission against the misapplication of funds by the Operator and its
employees, agents and servants.
(d) Such other types of insurance as the Commission may reasonably require.
15. General Indemnity. The Operator agrees to indemnify, protect, defend (by
counsel reasonably satisfactory to the Commission) and hold the Commission and its
officials, officers, agents and employees (the "Indemnified Parties") harmless from and
against all claims, losses, liabilities, damages, actions, judgment, costs and expenses
(including reasonable attorneys' fees and expenses) arising out of (a) the negligence or
willful misconduct of the Operator, its officers, agents, contractors, servants and
employees in or about the Facilities or in managing and operating the Facilities, or (b) the
LA W14-4325-0179 v3
default by the Operator in the performance of its obligations under this Agreement. This
provisions of this Section shall survive the expiration or termination of this Agreement.
16. Hazardous Materials: Hazardous Materials Indemnity.
(a) No Representations. The Commission makes no representations or
warranties of any kind or nature respecting the presence or absence of any Hazardous
Materials (as defined in Section 16(b) below) in, on, under or about the Facilities, and in
performing the Renovation, the Operator accepts the Facilities in their "AS-IS, WITH
ALL FAULTS" condition and assumes all responsibility and obligation for any required
remediation or abatement of Hazardous Materials required as a result of the Renovation.
In performing the Renovation and its other obligations under this Agreement, the
Operator agrees that it will not use, store on the Facilities, or bring or release onto the
Facilities, any Hazardous Materials, except is strict accordance with all applicable laws,
ordinances, rules and regulations.
(b) Hazardous Material Indemnity. Without limiting the Operator's
obligations of indemnity under Section 15, the Operator agrees to indemnify, protect,
defend (by counsel reasonably satisfactory to the Commission) and hold harmless the
Indemnified Parties from and against any and all claims, actions, damages, losses, liabilities,
judgments, costs and expenses (including reasonable attorneys' fees and costs), and
including, without limitation, all foreseeable and unforeseeable consequential damages,
which the Indemnified Parties, or any of them, may suffer or incur directly or indirectly
arising out of or connected with (a) the use, generation, storage, disposal, release or
threatened release of Hazardous Materials in, on, under or about the Facilities due to the acts
or omissions of the Operator, its employees, servants, contractors or agents, (b) any required
or necessary repair, cleanup or detoxification and the preparation of any closure or other
required plans, whether such action is required or necessary prior to or following the
Commencement Date of the term of this Lease, to the full extent that such action is
attributable, directly or indirectly, to the presence, use, generation, storage, disposal, release
or threatened release of Hazardous Materials in, on, under or about the Facilities due to the
acts or omissions of the Operator, its employees, servants, contractors or agents. As used
herein, "Hazardous Materials" means (1) any flammable explosives, radioactive materials,
asbestos, PCB's, hazardous wastes, toxic substances or related materials, including, without
limitation, all substances, wastes, pollutants and contaminants now or hereafter included
within such (or any similar) term under any federal, state or local statute, ordinance, code,
rule or regulation now existing or hereafter enacted or amended. The provisions of this
Section shall survive the expiration or termination of this Agreement.
17. Termination. Without limiting the right of the Commission to terminate this
Agreement pursuant to Section 3(a), this Agreement may be terminated as follows:
(a) For Cause. If either Party to this Agreement defaults in the performance
of it obligations under this Agreement, the other Party may give written notice of such
default to the defaulting party. If the defaulting Party fails to cure such default within
five (5) days following receipt of such notice in the case of a monetary default, or fails to
LA 448144325-0179 v3
cure such default within a reasonable time (not to exceed thirty (30) days) after receipt of
such notice in the case of a non-monetary default, then the non-defaulting Party may
terminate th s Agreement upon the giving of written notice of termination. The non-
defaulting Party's right to terminate this Agreement as provided in this Section 17(a)
shall be in addition to any other right or remedies available to the non-defaulting Party.
(b) Without Cause. The Commission shall have the right to terminate this
Agreement at any time and without cause or penalty if. (i) the Commission Share (as
defined in Section 11 above, on an annualized basis, does not equal or exceed six
Thousand Dollars ($6,000) per month during the first year of the Term of this Agreement
or Ten Thousand Dollars ($10,000) per month during the second year of the Term of this
Agreement, or (ii) the Board of the Commission finds and determines that the purposes
for which the Commission was formed are more appropriately furthered by utilization of
the Facilities, or the property on which the Facilities are located, for a purpose other than
that contemplated by this Agreement, or (iii) there is a deficiency in the Operating
Account as provided in Section 8(d). Termination pursuant to clause (i) or (ii) of this
Section 17(b) shall be effective upon the giving of not less than thirty (30) days prior
written notice by the Commission to the Operator, and termination pursuant to clause (iii)
of this Section 17(b) shall be effective on the date specified in a written notice of
termination given by the Commission to the Operator. If this Agreement is terminated
pursuant to this Section 17(b), the Parties shall cooperate with one another in promptly
shutting down the operation of the Facilities, in transferring to the Commission the
records, or copies thereof, relating to the operation and management of the Facilities, in
settling any financial obligations between the Parties, and in otherwise winding up the
business which was being conducted at the Facilities.
18. Notices. All notices, requests, demands and other communications required or
permitted to be given under the terms of this Agreement by one Party to the other shall be
in writing addressed to the recipient Party's Notice Address set forth below and shall be
deemed to have been duly given or made (a) if delivered personally (including by
commercial. courier or delivery service) to the Party's Notice Address, then as of the date
delivered (or if delivery is refused, on presentation), or (b) if mailed by certified mail to
the Party's Notice Address, postage prepaid and return receipt requested, then at the time
received at the Party's Notice Address as evidenced by the return receipt, or (c) if mailed
by first class mail to the Party's Notice address, postage prepaid, then on the third (3rd)
business day following deposit in the United States Mail. Any Party may change its
Notice Address by a notice given in the foregoing form and manner. The Notice
Addresses of the Parties are:
LA #4814-0325-0179 v3
If to the Commission: Rosemead Community Development Commission
8838 East Valley Boulevard
Rosemead, California 91770
Attention: Executive Director
With copy to: Joseph M. Montes, Esq.
Burke, Williams & Sorensen, LLP
444 South Flower Street, Suite 2400
Los Angeles, California 90071
If to the Operator: Rosemead Inn Hotel Partners LLC
16388 East Colima Road, Suite 206
Hacienda Heights, California 91745
Attention: Ahmed M. Seirafi
19. Commission Representative. The Commission's representative with respect to
this Agreement is the City Manager of the City of Rosemead or his authorized designee
(the "Commission Representative"). Whenever this Agreement requires the consent of
the Commission to a matter, the Commission Representative is authorized to give such
consent and the Operator shall be entitled to rely thereon. The Commission may by
written notice given to the Operator at any time designate another City or Commission
official or officials as the Commission Representative(s).
20. Force Majeure. Any prevention, delay or stoppage due to strike, lockouts, labor
disputes, acts of God, inability to obtain labor or materials or reasonable substitutes
therefor, failure of power, governmental restrictions, judicial orders, riots, insurrection,
enemy or hostile governmental action, civil commotion, terrorism, fire or other casualty,
and other reason of a similar or dissimilar nature beyond the reasonable control of the
Party obligated to perform, shall excuse the performance by such Party for a period equal
to any such prevention, delay or stoppage and the period for the performance of any act
shall be extended for the period of the delay. The provisions of this Section shall not,
however, operate to extend the Term. Delays or failure to perform resulting from lack or
insufficiency of funds shall not be deemed delays beyond the reasonable control of a
Party.
21. Other Terms
(a) This Agreement is to be governed by and construed in accordance with the
internal laws of the State of California, without regard to principles of conflicts of laws.
(b) No,term or provision of this Agreement may be amended, altered, modified
or waived orally or by a course of conduct, but only by an instrument in writing signed by a
duly authorized officer or representative of the Party against which enforcement of such
amendment, alteration, modification or waiver is sought. Any amendment, alteration,
modification or waiver shall be for such period and subject to such conditions as shall be
LA #4814-0325-0179 v3 10
specified in the written instrument effecting the same. Any waiver shall be effective only in
the specific instance and for the specific purpose for which given.
(c) The section headings in this Agreement are for convenience of reference
only and are not to be referred to in construing or interpreting this Agreement. The
recitals to this Agreement, and all exhibits referred to in this Agreement, are a part of this
Agreement.
(d) The invalidity or unenforceability of any term or provision of this
Agreement shall not affect the validity or enforceability of any other tern or provision of
this Agreement all of which shall remain in full force and effect.
(e) This Agreement may be executed in counterparts, each of which is an
original but all of which together constitute but one and the same instrument. Any
signature page of this Agreement may be detached from any counterpart and re-attached
to any other counterpart of this Agreement which is identical in form hereto but having
attached to it one or more additional signature pages. .
(f) The Operator understands and agrees that this Agreement and all
information provided to or obtained by the Commission under it may be or become
subject to public inspection and/or reproduction as public records.
The Parties have caused this Agreement to be duly executed by their respective
duly authorized officers or agents as of the date first set forth above.
ROSEMEAD COMMUNITY
DEVELOPMENT COMMISSION,
a California redevelopment agency
By
d liner Ch I
Print Name
Its Executive Director
ROSEMEAD INN HOTEL PARTNERS
LLC,
a California limited liability company
By
1"~1WW'[ro SF~Rdi-i ~~F hrr-t8FlL
Print Name & Title
ATTEST:
JacC4- &
J
Commission Secretary
LA #4814-4325-0179 0 11
APPROVED AS TO FORM:
seph M. Mon s,
Commission C unsel
LA 84814A325-0179 v3 12
EXHIBIT "A"
Exterior
WORK, FIXTURES, EQUPMENT, FURNISHINGS AND SUPPLIES
AND RELATED COSTS FORMING A PART OF THE RENOVATION
Description
Landscape
Power Wash and Paint
Sinage
Patch/Repair/Misc/
Pool/new deck
Parking Lot
Front door focus pt.
Misc.
Remove/trash Canopy
Relocate entrance
Patio / Pool Furniture
Budget Length
$
2,000.00 150
$
15,000.00
$
8,000.00
$
3,500.00
$
5,500.00
$
2,000.00
$
5,000.00
$
580.00
$
3,000.00
$
1,200.00
80.00
Subtotal 45,7
Interior Description
Budget
LOBBY Furninshing
$
3,000.00
Focus pt. lighting
$
1,500.00
Paint and theme for reception an
$
4,000.00
Misc.
$
1,500.00
Elevator
$
700.00
Sound/speaker
$
800.00
Subtotal 11'500.00
Hallway
Carpet $ -
Paint $ 4,500.00
Lighting $ 2,400.00
Width
100
length width
150 5
Subtotal $ 6,9
00.00
Rooms unit 53
Sand and paint Doors $ 75.00 $ 3,975.00
Paint $ 320.00 $ 16,960.00
Carpeting $ 600.00 200 sq.ft $ 31,800.00
A-1
Restroom
Light and exhaust fans
$
175.00
$
9,275.00
Faucets
$
200.00
$
10,600.00
A/C service
$
50.00
$
2,650.00
Refinish Curtains
$
80.00
$
4,240.00
Sand popcorn ceiling.
$
50.00
$
2,650.00
Subtotal: $ 1,550.00
Furnishing
subtotal
Operations
Marketing
T.Vs
Liens/towels
$
200.00
Pillows
$
300.00
Lamps
$
100.00
Desk
$
150.00
Bed Frame (250 single, 400 dou
$
375.00
Mattress (500 s, 800 double)
$
625.00
Drawers
$
150.00
Nightstands
$
80.00
Rug
$
100.00
Duvet/comforter 300s, 500 d
$
450.00
Mirror
$
40.00
Decor / Misc.
$
145.00
Uniforms
$
1,000.00
Robe for Rooms
$
800.00
Slippers
$
400.00
POS System / Computer
$
1,250.00
Cameras
$
1,500.00
Bell Cart
$
250.00
Hotel misc, shampoo, etc.
$
1,500.00
Name Tags
$
500.00
Wifi Service
$
1,500.00
Website 1 $ 1,000.00
$ 82,150.00
$ 5,300.00
$ 10,600.00
$ 15,900.00
$ 5,300.00
$ 7,950.00
$ 19,875.00
$ 33,125.00
$ 7,950.00
$ 4,240.00
$ 5,300.00
$ 23,850.00
$ 2,120.00
$ 7,685.00
$ 149,195.00
A-2
Ext.
Lobby
Hallway
Rooms
Furnishing
Operations & marketing
$ 11,500.00
$ 6,900.00
$ 82,150.00
$ 149,195.00
$ 9,700.00
A-3
ATTACHMENT B
03/02/10 Rosemead Inn Hotel Partners LLC
Accrual Basis
Profit & Loss
December 2009
March 2009 Ap
ril 2009 May 2009 June 09
July 09
Aug 09
Ordinary Income/Expense
Income
Lodging Sales
13,565
16,636.99
24.387.90
22.233 23
Total Income
13.565 00
- - 16,636.99
24,387 90
22,233.23
Cost of Goods Sold
Total COGS
Gross Profit
13,565
0.00 0.00 16,636.99
24,387.90
22,233.23
Expense
Bank Service Charges
Insurance Expense
General Liability Insurance
Total Insurance Expense
Office Supplies
Payroll Expense
Manager
Professional Fees
Misc. Fees & Exp
Reinbursments & Daily Exp
Remodeling Expenses
Repairs and Maintenance
Linens and Lodging Supplies
Small Tools and Equipment
Pest/Elevator/Scent
Telephone Expense
Landscaping
Pool
Webalte
Marketing
Utilities
Cable
Gas & Electric
Water
Internet
Trash
Total Utilities
Total Expense
Net Ordinary Income
Other Income/Expense
Other Expense
Ask My Accountant
Total Other Expense
Net Other Income
Net Income
250.25
152.55
61.52
1,645.53
392.51
780.00
780.00
673.90
679.90
679.90
1,030.25
932 55
735 42
2.325.43
1,072.41
5,760.00
6.243-00
5.896.87
6,180.13
5,952.00
1,663.70
2,438.79
2,223.32
1,080.80
822.00
1,742.16
1,583.28
2,028.48
1.535.91
854.93
2.465.84
1,779.17
700.00
272.00
2,710.00
641.00
993.60
1,129.44
848.50
912.86
1.161.76
288.57
221.06
357.99
1,322.07
915.36
250.00
140 48
140.48
157.79
196.34
155.00
264.99
264.99
79.49
103.05
540.87
589.81
551.11
161.81 165.98 4184 87.82 83.83
1,062.41 1,113.47 1,193.97 1,990.78 2,455.86
344.92 344.99 468.49 468.49 792.80
1,569.14
1,62444
1,70430
254709
333249
19,297.00 13,195.55
12.126.81
14,166.81
23,480 77
20,062 57
-13,195.55
-12,126.81
2,47018
907.13
2.170.66
0.00 0.00 0 00 0.00 0.00
0.00 0 00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00
(5,732.00) -13,195.55 42,126.81 2,470.18 907.13 2,170.66
Due to City Due to City Due to City
1,482.11 544.28 1,302.40
Page 1 of 3
03/02/10 Rosemead Inn Hotel Partners LLC
Accrual Basis
Profit & Loss
December 2009
Sept 09
Oct 09
Nov 09
Dec 09
Jan 2010
Feb 2010
Ordinary Income/Expense
I
ncome
Lodging Sales
24,204 74
15,281.40
10,046.59
16.250.92
10.816.86
15,509.38
Total Income
24,204.74
15.281.40
10.046.59
16.250.92
10,816.86
15,509.38
Cost of Goods Sold
Total COGS
Gross Profit
24,204.74
15,281.40
10,046.59
16,250.92
10,816.86
15,509 38
Expense
Bank Service Charges
417.98
239.27
153 91
179.80
252.12
316.24
Insurance Expense
704.90
General Liability Insurance
689.40
689 40
68940
676.90
676.90
Total Insurance Expense
1,122.88
928 67
843 31
869.20
929.02
993.14
Office Supplies
144.61
Payroll Expense
5,760.00
5.952.00
5,952.00
5,952.00
5,952.00
5,376.00
Manager
2,000.00
1,000.00
0.00
1.500.00
Professional Fees
2,420.47
1,528.14
538.00
1,081.68
1,550.94
Misc. Fees & Exp
3,813.44
2.684.16
2,785.27
1,670.64
1,818.00
2,597.00
Reinbursments & Daily Exp
1,608.33
1,061.39
588.52
4,231.19
2,562.00
2,487.70
Remodeling Expenses
1,000.00
335.00
375.00
910.00
Repairs and Maintenance
1,684.00
463.60
100.00
100.00
624.56
524.00
Linens and Lodging Supplies
900,30
855.49
197 40
797.13
276.90
356.85
Small Tools and Equipment
500.00
PesUElevator/Scent
264.99
264.99
264.99
264.99
2,640.01
261.01
Telephone Expense
567.87
484.44
546.36
582.65
520.83
555.96
Landscaping
Pool
0.00
0.00
Website
0.00
0.00
4.99
Marketing
239 97
0.00
Utilities
Cable
96.88
97.97
216.89
242 92
151.00
151.00
Gas & Electric
2,618.05
2.246.86
933.73
1,081.61
1,233.43
1.236.33
Water
792.80
593.38
593.38
442 69
442 76
Internet
Trash
Total Utilities
3,50773
2,938.21
1,744.00
1.76722
1,827 i'S
Total Expense
22,650 01
19.496 09
14,636.82
18,327 63
18.232 19
17,594.92
Net Ordinary Income
1,55473
-4.214.69
4,590.23
-2.076 71
-7,41533
-2,085.54
Other Income/Expense
Other Expense
Ask My Accountant
0.00
0 00
0.00
0.00
0.00
0.00
Total Other Expense
0.00
0.00
0 00
0.00
0.00
0.00
Net Other Income
0.00
0.00
0 00
0 00
0.00
0.00
Net Income
1,554.73
-4,214.69
-4,590.23
-2,076.71
-7,415.33
-2,085.54
Due to City
932.84
Page 2 of 3
03102/10 Rosemead Inn Hotel Partners LLC
Accrual Basis
Profit & Loss
December 2009
Ordinary Income/Expense
Income
Lodging Sales
Total Income
Cost of Goods Sold
Total COGS
Gross Profit
Expense
Bank Service Charges
Insurance Expense
General Liability Insurance
Total Insurance Expense
Office Supplies
Payroll Expense
Manager
Professional Fees
Misc. Fees 8 Exp
Reinbursments & Daily Exp
Remodeling Expenses
Repairs and Maintenance
Linens and Lodging Supplies
Small Tools and Equipment
Pest/Elevator/Scent
Telephone Expense
Landscaping
Pool
Website
Marketing
Utilities
Cable
Gas & Electric
Water
Internet
Trash
Total Utilities
Total Expense
Net Ordinary Income
Other Income/Expense
Other Expense
Ask My Accountant
Total Other Expense
Net Other Income
Net Income
Total Budget
168,933.01
168,933.01
168,933.01
4,061.68
0.00
5,455.70 6,000.00
9,517.38 6,000.00
144.
61
1,800
.00
64,976.
00
134,880
.00
4,500.
00
65,280
.00
13,445.
04
22,625.
23
14,400
.00
19,174.
98
6,943.
00
8,542.
32
6,489.
12
15,300
.00
1,030.
96
5,000.
09
3,600
.00
5,122.
44
3,360
.00
4,200
.00
0.
00
1,800
.00
4.
99
1,800
.00
239.
97
18,000
.00
1,497.94
3,480
.00
17,166.50
31,800
.00
5,284.70
6,600
.00
2,280
.00
3,600
.00
23.949.14
47.760
.00
191,705.27 318,180.00
-38,602.16 -318,180.00
0.00 0.00
0.00
0.00 0.00
-22,772.26 -318,180.00
4,261.62
Page 3 of 3
ATTACHMENT C
WORK, FIXTURES, EQUPMENT, FURNISHINGS AND SUPPLIES
AND RELATED COSTS FORMING A PART OF THE RENOVATION
Exterior
Description
Landscape
Power Wash and Paint
Sinage
Patch/Repair/Mist/
Pool/new deck
Parking Lot
Front door focus pt.
Misc.
Remove/trash Canopy
Relocate entrance
Patio / Pool Furniture
Budget Length
$
2,000.00 150
$
15,000.00
$
8,000.00 .
$
3,500.00
$
5,500.00
$
2,000.00
$
5,000.00
$
580.00
$
3,000.00
$
1,200.00
Subtotal 45 780.00
Interior Description Budget
LOBBY Furninshing
$
3,000.00
Focus pt. lighting
$
1,500.00
Paint and theme for reception an
$
4,000.00
Misc.
$
1,500.00
Elevator
$
700.00
Sound/speaker
$
800.00
Subtotal 11'500.00
Hallway
Carpet $ -
Paint $ 4,500.00
Lighting $ 2,400.00
Subtotal $ 6,9
00.00
150
100
5
Rooms
unit
53
Sand and paint Doors
$ 75.00
$
3,975.00
Paint
$ 320.00
$
16,960.00
Carpeting
$ 600.00 200 sq.ft
$
31,800.00
Width
length width
A-1
Restroom
Light and exhaust fans $ 175.00
Faucets $ 200.00
A/C service $ 50.00
Refinish Curtains $ 80.00
Sand popcorn ceiling. $ 50.00
Subtotal: $ 1,550.00
Furnishing
T.Vs
$ 100.00
Liens/towels
$
200.00
Pillows
$
300.00
Lamps
$
100.00
Desk
$
150.00
Bed Frame (250 single, 400 dou
$
375.00
Mattress (500 s, 800 double)
$
625.00
Drawers
$
150.00
Nightstands
$
80.00
Rug
$
100.00
Duvet/comforter 300s, 500 d
$
450.00
Mirror
$
40.00
Decor/ Misc.
$
145.00
subtotal $ 2,815.00
Operations
Uniforms
$
1,000.00
Robe for Rooms
$
800.00
Slippers
$
400.00
POS System / Computer
$
1,250.00
Cameras
$
1,500.00
Bell Cart
$
250.00
Hotel misc, shampoo, etc.
$
1,500.00
Name Tags
$
500.00
Wifi Service
$
1,500.00
Marketing
Website
$
1,000.00
$ 9,275.00
$ 10,600.00
$ 2,650.00
$ 4,240.00
$ 2,650.00
$ 82,150.00
5,300.00 1
$
10,600.00
$
15,900.00
$
5,300.00
$
7,950.00
$
19,875.00
$
33,125.00
$
7,950.00
$
4,240.00
$
5,300.00
$
23,850.00
$
2,120.00
$
7,685.00
A-2
FJd.
$
45,780.00
Lobby
$
11,500.00
Hallway
$
6,900.00
Rooms
$
82,150.00
Furnishing
$
149,195.00
Operations & marketing
$
9,700.00
Grand total
$
305,225.00
A-3
ATTACHMENT D
PARTIAL HOTEL REMODEL & REPOSITION EXPENSES
The Glendon Hotel - 2008/2009
Exterior
Interior
Jaime Silva - Landscape
250
Powerwash & Paint
See Below
Signage
1412
Evergreen Trash
400
Boom Lift
744.55
Bently Prince - Carpet
14750
Philip Yu - Carpet Install
4000
Dunn Edwards Paint
4705.7
Sand & paint
5850
Furniture
16780
International Trading - Linens
2430.44
Han Wing Plumbing & Repir
3224.06
J-Box Electrical & Repair
760
Master Sofa - Lobby Furniture
785
Lobby Paint & Tile
350
CCTV & Sound
1871.87
Room TV's
380
West Coast Liq. - Beds
5615
West Coast Liq. - Room Sets
2500
Pac. Lodging / Room Supplies
369.39
Cleaning Supplies
Furniture Trucking
952
Curtains & Delivery
Misc Materials
Appliances
150
Crystal Promotion Room Kettels
456
Hotel Software
1511.98
Ramon Martin - General Labor
6752
Hiram Medrano - General Labor
5277.16
Han Win - Plumbing
3122
Jackson Tile - Lobby
518.72
Philip Yu - Tile Install
350
Bullet Proof Roofing - Jesus Cabn
275
Arttech Building Supplies
117
Air Control AC Service
380
Melina Medrano -Accounting
110.59
West Coast Telephone
100
AMCO Glass
300
Hassan Kaussaurni - Parts
25
Goldenstar Linen
178.39
Delong Home
1728
Hicks Plumbing/Rooter
500
Dragon Fire Ext.
171.68
Martin Guzman - Framing
765.19
American Tex - Remote Control
148.5
Cementum Const.
2264.26
Mattress & Furn. Removal
1795
2100+1080+470+2200
672 + 2552.06
1781.90 + 89.97
Looking for reciept
798.99+
2450+672
95126.48
ATTACHMENT E
GARY TAYLOR a `C' ~p O W ~4~f A ~vvy~acvawaa
.,y3\'p[q\ I tea/
MAYOR PRO TEM:
STEVEN LY
6838 E. VALLEY BOULEVARD • P.O. BOX 399
COUNCIL MEMBERS:
A ROSEMEAD, CALIFORNIA 91770
MARGARET CLARGARET MEN TA
MK TELEPHONE (626) 569-2100
POLLY LOW'
ow "~urow..~o'm9 FAX (626) 307-9218
May 26, 2010
Ahmed M. Seirafi
Cross Meridian Group of Companies
16388 E. Colima Road, Suite 206
Hacienda Heights, CA 91745
Dear Mr. Seirafi:
Attached please find the Independent Accountant's Report on Applying Agreed-Upon
Procedures (Report) for your reference. Thank you for your cooperation with the
accountant when he performed his field work.
Based on the findings in the Report, $55,384 is due to the Rosemead Community
Development Commission. Please forward a check in the amount of $55,384 to the
Rosemead Community Development Commission within the next 30 days.
If I may be of any further assistance please contact me by phone at (626) 569-2120 or by
email at sbriscc)@5bcglobal.net.
Respectfully yours,
Steve Brisco
Finance Director
C: Mohamed Seirafi
Michelle Ramirez
An Independent CPA Firm
2301 Dupont Drive, Suite 200
Irvine, California 92612
949-474-2020 ph
949 263 5520 fx
www.mhnrpc.com
Rosemead Community Development Commission
8838 East Valley Boulevard
Rosemead, California
INDEPENDENT ACCOUNTANT'S REPORT
ON APPLYING AGREED-UPON PROCEDURES
We have performed the procedures enumerated below, which were agreed to by the management'of the
Rosemead Community Development Commission ("Commission"), solely to assist the Commission in
reviewing the Rosemead Lm Partner's ("Hotel") compliance with the Rosemead Inn Hotel Operating
Agreement as well as the Hotel's compliance with the Rosemead Community Development
Commission's Municipal Code 3.16 for Transient Occupancy Tax ("Ordinance") for the period of
January f, 2009 through March 31, 2010. The Hotel's management is responsible for maintaining the
Hotel's accounting records and other documentation- This agreed-upon procedures engagement was
conducted in accordance with attestation standards established by the American Institute of Certified
Public Accountants. The sufficiency of these procedures is solely the responsibility of the management
of the Commission. Consequently, we male no representation regarding the sufficiency of the
procedures described below either for the purpose for which this report has been requested or for any
other purpose.
The procedures performed and the results of those procedures are as follows:
1) We obtained the agreement between the Commission and the Rosemead Inn Hotel's Partners, LLC,
in effect for the period January I, 2009 through March 31, 2010 for the purpose of obtaining an
understanding of the terms of the agreement.
2) We obtained a schedule of invoices supporting the $100,000 advance payment from the Commission
for the for the renovations to the hotel and tested for the following:
a) 'The schedule was mathematically accurate
b) The vendor invoices supporting the amounts were sufficiently detailed and were for renovation
expenses
c) The related checks cleared the bank sta.lement
Results: The hotel provided a schedule of claimed renovation expenses that totaled $109,993. We
were not provided any documentation for $24,878 of expenses reported on the schedule. For in
additional $32,037 of questioned expenses, we were provided invoice detail but were not able to
verify that a check had been written to pay the invoice because the check number indicated on the
invoice did not clear per the bank statement. There was an additional $1,478 of expenses that did not
appear to be related to the renovation. In many cases, checks were not written to vendors directly,
but instead written to "Cash". As a result, we were only able to verify that the Hotel spent $61,335
on the renovation, resulting in $38;665 payable back to the Commission of the original $100,000
advance. See additional details at EYI-IIB1T A.
Rosemead Community Development Commission
Page 2 of 3
3) We obtained each of the monthly financial reports submitted to the Commission to ensure the
reports included the batik reconciliation, income statement, and budget to actual comparison
report, as required by the agreement.
Results: The Hotel did not provide total revenues for January, April, or May of 1-009 and did not
provide a detail of expenditures for January' through March of 2009. Additionally the Hotel dill
not provide any bank reconciliations or budget to actual comparisons for the entire period under
review.
4) We traced gross receipts reported on each monthly report to deposits recorded in the Hotel's
bank account.'
Results: Total deposits reflected in bate, statements exceeded that which was reported to the
Commission by $36,522. See EXHIBIT B for variance by north.
5) We traced disbursements reported on each monthly report to disbursements recorded in the
Hotel's bank account.
Results: Total disbursements reflected in the bank statements exceeded that which was reported
to the Commission by $1,858. See EXHIBIT B for variances by month.
6) We reviewed the type of expenses reported oil the monthly report to see if they appeared to be
allowable per the agreement.
Results: We noted that the Hotel had included management fees as an expense in the monthly
report. Management fees are only allowed per the agreement in months where the hotel has a
profit. The management fees should not be included in the calculation of profit. As such, $4,500
has been removed from expenses in EXHBIT B.
7) We attempted to obtain supposing documentation for a sample of expenses reported on the
monthly reports.
Results: We were not provided any invoice detail for expenses reported on the monthly repots.
The Hotel's management explained that Pgnroll Expenses reported on the monthly reports are
only an estimate based on an estimated howl worked. Actual amounts paid for payroll expenses
could not be verified. Au}yroll Expenses reported on the monthly reports totaled $61,976.
8) We attempted to obtain federal or state tax returns for the calendar year to compare total
revenues per the tax return(s) to the total revenue reported to the Commission.
Results: Per hotel management, the 2009 Federal and State tax returns have not been filed. No
support for tax filing extension was provided.
9) We reviewed the Rosemead Community Development Commission's Transient Occupancy Tax
("TOT") Ordinance and performed the following procedures:
Rosemead Community Development Commission
Page 3 of 3
a) We obtained the TOT Returns tiled from January 1, 2009 through February 28, 2010, and
tested for mathematical accuracy.
b) We traced revenues repotted on the TOT Returns to revenues reported on the monthly
financial reports or other documentation to support revenue numbers.
Results: The hotel did not file TOT returns for the first and third quarter of 2009. For the second
and fourth quarters, the TOT returns were mathematically accurate.
TOT returns did not agree with monthly revenue reports. Management informed the auditor that
the system generated reports were incorrect and did not provide those reports to the auditors.
Additionally, the Hotel did not provide any daily room revenue reports or room folios to
substantiate room revenue. To determine room revenue, we calculated the amount using the
deposits reflected in the bank statements. We were unable to determine if additional revenue had
been collected but not deposited into the bank account.
The Llotel under-reported $11,282 of revenues to the Commission, resulting in a payment due to
the Commission of $1,382. Additionally, the pavment for the fourth quarter of 2009 was not
received until February 10, 2010, and therefore should have included a 10% penalty which was
never paid. This results in an additional payment due to the Commission of $416.See EXHIBIT
C for details.
Summary of Amounts Owed
Refimd of renovation advance - due to Commission $ 33,665
Underpayment of Commission share of profits - due to Commission 14,650
Underpayment of Transient Occupancy Taxes - due to Commission 1069
"Total Due to Rosemead Community Development Commission i-i5_184
We were not engaged to, and did not, conduct an audit, the objective of which would be the expression
of an opinion on the accounting records. Accordingly, we do not express such an opinion. Had we
perlornted additional procedures, other matters might have come to our attention that would have been
reported to you.
This report is intended solely for the information and use of the management of the Rosemead
C'omntunity Development Commission and the Rosemead Inn Partners and is not intended to be and
should not be used by anyone other than those specified parties.
/10
(vine, California
A,-lay 6, 2010
Glendon Inn Hotel
S Jt,1,1 mt nnvarion EspenSCs
EXHIBIT A
lumen' 1, 2009 thr
ough March 31, 2010
U1 No check
13) Suppol
Reponed to
(1) No
cleared
did nol contour
Supported
City
Dose mmnmlion
the baud
n ffirient detail
Expenditures
Extel'Itr
laime Silva - laallw
S 250
250
-
-
-
Signage
1A12
37_
-
-
1040
Evergreen' rrash
400
-
-
4091
Boron Lill
745
-
-
745
Inferior
13enlly Prince - Carpet
14.750
-
-
-
Id750
Philip Yu Curfff Install
4150
-
?.350
-
20100
Dunn f:Jw;vJs Paint
MOO
-
-
-
4.70fi
Sand & paint
I 700
5642
-
-
6.058
Funtinue
16,7811
-
-
16,790
Iomnmlinnal'I'falling - Linens
2,430
-
447
-
1483
I- Inn Wing Plumbing&Ream,
12692
-
10242
2.450
J-Noe Elecuicnl& Repuil'
760
-
-
7,0
Mnsler soul - Lohhv FUminue
795
-
375
-
410
Lobby Point&Tile
35U
350
-
-
-
C'CI'V & Sound
3.744
3.744
Ream TV,
380
-
-
-
330
West Coast I-ty. - Berk l Rural Sds
R,1 15
-
5.130
-
22,965
Pae. Lodging I Rrwm Supplies
369
-
-
369
Furniture Trucking
952
-
-
952
"
Klisc Mhnedals
799
799
-
-
'
Appliances
15U
150
-
-
-
Cnsurl Pnunotinu Room Kettles
456
-
-
456
Hotel Suftwure
1.512
1,512
-
-
-
Rumun Martin -General Labor
b.M
6.752
-
-
-
IliramMcalmoo - G'awml Labor
5,277
5,277
-
-
-
JacksonTile - Lobby
519
-
-
-
519
Belief Proof Roofng - Jesus Caba
275
-
-
-
27'
.Arucch building Sopplins
117
-
-
-
117
An Control AC Scrvicc
390
-
-
H,
265
Molina Median - Acrouutmg
III
-
-
III
-
West Coast 'feleptuae
IOU
-
-
-
100
.AMCO Glass
300
300
-
-
-
HassellKaussmuni - Parts
25
25
-
-
-
Goldclurar Linen
178
178
-
-
-
DelongHome
1.728
-
704
-
1,024
Hicks Plumbing:Rnolct
Soo
-
-
-
500
Diego,, Pue Gst.
172
-
-
-
17,
Marlin Guzlnnu - Forming
765
-
311(1
-
465
Amel'ican'res - Rename Control
149
149
-
-
-
UenKnttlnlcoast .
2.264
-
7264
-
Mnrress & Plan. Rcmovul
1.79.1
1,705
Sub-loud
P>,993
24,879
21,832
1.175
50,302
14) Additional espen4, claimed
Ahlned Saint! Renohorsentenl 0 l
1,707
-
-
95
tell
Ahmed Sairlr keimbnrsemem 42
6313
-
-
208
421
B & K Electric
182
-
182
-
-
H & K F.Iect is
23
-
23
-
-
Sub-cowl 2.541 2205 303 2})33
Total $ II2.535 24,879 22.037 1,47.1 61735
ill The hotel could net p educeany support in the hunter invoices. receipu, or rinu'shects
(2) An invoice wns provided as soppore huwete r, there tra.v 010 evidence IInd a check had been written because the eloeck had not cleared the
bank uccount.
13) Invoicedononentaron maenotdetriled enmlgh todowrmine ifthecxpense was related to themnoyntimrnr the espense tune till office
supplies or othcl costs clearly not relaed 10 the I'cnovation.
(4) During the audit the hotel provided the auditors an ulxfated schedule of renovation expense,', Ouse costs represent ilra's fill
included on Ore previously provided schedule.
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