Liening Tower : National City Calls Hotel’s Developers on the Carpet

National City officials summoned the president and the principal investor of a troubled construction company to appear before the City Council and explain why no work has been done in two months on an eagerly-awaited hotel that is under construction in the South Bay community.

Although months away from completion, the 12-story, $18-million hotel, being built at the corner of 8th Street and National City Boulevard by the Serj Corp., has been hit with about $900,000 in liens, said Councilman Jess E. Van De Venter, owner of a construction company.

Serj Corp. president Jack Scull and William Barkett, the main investor in the unfinished hotel, are expected to appear before the City Council Tuesday night to explain why no work has been done in eight weeks. Scull did not return phone calls to his office and Barkett could not be reached for comment.

The hotel’s completion is key to the success of National City’s plan for redevelopment of the downtown into a commercial center drawing tourists and out-of-town businessmen.

The city sold the land to Serj at a favorable price--millions less than the city itself had paid--in exchange for the company’s agreement to complete the hotel to the city’s satisfaction. Hanging in the balance is hundreds of thousands of dollars a year in municipal tax revenue from the hotel, plus expected benefits to surrounding businesses.

A hotel across the street, the $12-million Radisson Inn--10 stories high and 180 rooms--was also built by Serj and opened last year. According to Van De Venter, the Radisson Inn has about $3.5 million in liens filed by subcontractors.

Serj owns both hotels, which the city estimated will generate more than $915,000 in room taxes and up to $150,000 in property taxes from 1990 to 1995. After 1996, the city expects to get about $375,000 annually in room and property taxes from the hotels.

Several other projects built by Serj and its subsidiaries in National City, San Diego and Imperial Beach have been hit with millions of dollars in liens by subcontractors who said they were not paid for the work they did, according to lien notices appearing in two legal newspapers .

Other Serj subsidiaries include Concrete Dynamics, which built the Imperial Beach Pier, and FF&E; Pacific Rim. Concrete Dynamics is also a subcontractor at the unfinished National City hotel.

The unfinished hotel is on 3.7 acres of redevelopment land

that the city sold to Serj for $1.3 million, after paying $7 million for the land and businesses.

Arnold (Pete) Peterson, executive director of National City’s redevelopment agency, said Serj paid $464,000 for the lot where the unfinished hotel is being built and for a parking area across the street.

Serj still owes the city $500,000 for the lot where the Radisson Inn was constructed. According to Peterson, the note for the $500,000 is payable at 10% interest and is due in November, 1992.

“They don’t have the money to pay anybody. I have subcontractor friends of mine who have worked for them and haven’t been paid,” said Van De Venter. “There’s so many liens, loads of liens against the company and its smaller companies. Somewhere, they’ve got a serious money problem.”

Van De Venter, a long time South Bay builder, quoted several subcontractors as saying they will not return to the job site of the unfinished hotel until they are paid and satisfied that Serj’s financial problems are straightened out.

Some National City officials said they became aware of Serj’s financial difficulties about eight weeks ago, when the company did not pick up city-approved permits for the plumbing and electrical work scheduled for the yet unnamed hotel.

The cost of the permits was $177,000, and Serj could not pay for them, said Councilman Ralph Inzunza in a recent telephone interview. Other city officials also told The Times that it was their understanding that Serj could not pay for the permits.

However, Mayor George Waters, who has consistently told the project’s critics that work would resume in a week, claimed that Serj is not facing financial problems.

“No, the company doesn’t have any money problems. It will be another two or three weeks before work will resume,” said Waters in a telephone interview. “I don’t believe that they couldn’t pay for the permits. There was no work done on the project because they were reorganizing. That’s all. Big business is like that.”

Waters, who has attempted to make the best of the situation, said construction on the hotel is actually ahead of schedule.

“They weren’t supposed to break ground until May 1, so they’re way ahead of schedule. . . . They’ve already spent about $6 million to put up what’s there. They’re going to finish it. No problem,” Waters said.

As for the millions of dollars in liens against the two Serj-owned hotels in National City and its projects in other cities, Waters said, “It’s all part of doing business.

“That only means there’s a difference of opinion among contractors. . . . That’s settled in court,” he added.

However, Van De Venter said that Serj violated its contract with the city because of the liens filed against both hotels.

“There are conditions in the contract that they have to finish the project to our satisfaction and with no liens against the hotels. . . . Basically, they have ignored the agreement,” said Van De Venter.

Robert Klusman, owner of Carl’s Glass in San Diego, said he is owed $24,000 by FF&E; Pacific Rim, a Serj company, for work his company did at the Radisson Inn in National City and the Radisson Hotel Harborview on Front Street in San Diego. Klusman filed liens against both hotels and hired an attorney.

“Their answer was that they ran out of money and they kept telling me months ago that the money was coming in any day. Then you’d call them, and they would say it would be another week or two. Some people are going to go belly up because they haven’t been paid. I’m holding on, barely. You know, $24,000 is a lot of money for a small business like mine. I’ve got 10 employees to think about,” said Klusman.

George Eiser, city attorney for National City, said delays in the new hotel project could have been avoided if Serj had put up a $200,000 performance bond, which is basically an insurance policy commonly purchased by contractors to insure that the job will be completed.

“The issue of making them buy a bond was raised, but they objected because they said the cost would be too great. The alternative was that the project would not be done,” said Eiser.

In an earlier interview, Peterson said that Serj was the only bidder for the hotel projects.

In a telephone interview Wednesday, Waters at first insisted that Serj had purchased a bond. But, when told that Eiser and Peterson said no bond was purchased, Waters said the city was “covered in other ways.”

“Even without a bond, who’s ahead? We are. We can still take the property back and the (unfinished) hotel. We don’t lose out. . . . There are other things that can be used instead of a bond, like letters of credit. We’re pretty well covered,” said Waters.

Redevelopment agency director Peterson said the city did not pressure Serj to purchase a performance bond because the hotel is not a public project.