January 30, 2010 --LEWISTON -- The state Department of Taxation and Finance plans to seize the Niagara at Barton Hill Hotel on Tuesday because of unpaid sales taxes, unless a judge agrees to the hotel's request to block the seizure.

Edward and Diane Finkbeiner, owners of the 72-room hotel overlooking the lower Niagara River, filed a lawsuit Friday seeking to stop the state's move.

Brad Maione, spokesman for Taxation and Finance, confirmed that the department filed a warrant Jan. 4 demanding payment of $35,842 in sales taxes that were due between November 2008 and last August.

The hotel actually owes almost $23,000 more than that, but those bills, covering withholding taxes due last September and sales taxes from November, aren't old enough to be part of the collection process.

In their lawsuit, filed Friday in the Lockport offices of State Supreme Court Justice Richard C. Kloch Sr., the Finkbeiners assert they paid $10,000 on the debt Monday and proposed to pay off the rest at $1,000 a week.

The lawsuit said that Taxation and Finance insisted on payments of $10,000 per week to clear the debt, a figure the Finkbeiners said they can't afford.

Maione said he couldn't comment on any of that. Diane Finkbeiner did not return a call seeking comment.

The lawsuit, filed by the Hogan Willig law firm, argued that the state's position on the installment plan is "arbitrary and capricious."

Maione said it's not unusual for Taxation and Finance to seize properties because of delinquent taxes. "Generally we do it pretty regularly in regions across the state," he said.

The $58,344 in unpaid taxes are merely the most recent threat to the survival of the hotel. Its mortgage holder, CIT Lending Services Corp., went to court in December to seek foreclosure on a delinquent $8 million mortgage.

In Friday's lawsuit against Taxation and Finance, the Finkbeiners said they are negotiating a refinancing of the mortgage through a new investor's buyout of their existing note.

Diane Finkbeiner told The Buffalo News last month that the new investor, "an international hospitality industry leader of distinction," would provide capital to expand the business. She wouldn't name the investor then, and Friday's lawsuit refers to the newcomer's identity as "confidential."

CIT, which said in its lawsuit it was owed more than $9 million, counting interest, sought to foreclose on two other Finkbeinerowned properties that were pledged as collateral when the Finkbeiners signed an agreement last March to prevent CIT from foreclosing on them.

But one of them, a North Tonawanda apartment building, already was the subject of a foreclosure action filed in November by First Niagara Bank. The other is a group of 11 vacant lots in Youngstown which were supposed to be the site of a townhouse project.

Other lenders have filed foreclosures against the Finkbeiners' home, two other residential properties they own in Lewiston and a former bar now used as an auxiliary building for the hotel. One of the residential properties is on the Niagara County tax foreclosure list for this year.

The foreclosures and a total, as of last month, of more than $55,000 in unpaid property taxes and in-lieu-of-tax payments also have endangered the hotel's tax break from the Niagara County Industrial Development Agency.

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