Spokane Mars Limited Partnership contends it has paid nearly all of a gambling-tax debt that has led the city of Spokane to try to convert Spokane Mars U.S. Bankruptcy Court case here from a reorganization to a liquidation.


Rob Saucier, Spokane Mars general manager, asserts that the company, which owns the Mars Hotel & Casino at the northwest corner of Sprague Avenue and Bernard Street, has paid $91,000 of the nearly $99,000 in gambling taxes it owed for the first quarter of 1998, which were due April 30. He expected that Spokane Mars would pay the remainder of that debt this week.


However, Michael Piccolo, an assistant city attorney, says Spokane Mars would still owe the city about $11,000 in penalties and interest even if it paid off the $99,000 yet this week.


In a motion dated May 22, the city sought to convert the bankruptcy case from a Chapter 11 reorganization filing to a Chapter 7 liquidation. It alleged that Spokane Mars violated state law by failing, after it filed for protection from creditors last year, to pay some of the gambling taxes it owed to the city.


When Spokane Mars failed to pay the $99,000 by the end of April, the city slapped on the additional $11,000 in penalties and interest. Piccolo said that as of last Monday, Spokane Mars had paid $91,000 toward the debt.


The city will continue to pursue its motion until the entire $110,000 bill is paid, Piccolo says. It would have no choice but to withdraw the motion if the entire amount is paid, he adds.


Spokane Mars sought protection from creditors in November, listing assets of $3.5 million and liabilities of $3 million. Saucier says the businesss performance has been improving steadily, and that he expects it to return to profitability in June following a break-even May. Business at the casino is strong, but the restaurant continues to struggle some, he says.


Things have turned around great for us, Saucier says. We are getting caught up on stuff.


Meanwhile, though, the Washington state Liquor Control Board is continuing to seek suspension of Spokane Mars liquor license. A hearing is scheduled for June 10 in U.S. Bankruptcy Court here on the boards attempt to get around an automatic stay that the Bankruptcy Code provides for debtors who have filed for protection from creditors.


The board contends that the stay doesnt apply to its attempt to suspend the Mars liquor license because the liquor boards actions are a police function and because the board isnt a creditor of Spokane Mars. Spokane Mars contends that the stay prohibits the liquor board from going ahead with any action to take away its liquor license.


Saucier points out that the incidents on which the board is basing its action are about two years old now.