Thomas Fritzel, the key private partner in Kansas University’s proposed $50 million Rock Chalk Park athletics complex, is part of an investment group that owes more than $3 million in back taxes and fees stemming from a troubled real estate project in Junction City.
Records provided by the Geary County Treasurer’s Office show that a development company of which Fritzel is an owner has $3.42 million in unpaid property taxes and special assessments dating to 2009. The unpaid taxes and fees stem from Fritzel’s involvement in Fort Development LLC, a company that in 2008 built the now-struggling Olivia Farms housing development near the Fort Riley military base in Junction City, about 90 miles west of Lawrence.
Fritzel served as resident agent for the project, which made him the key point of contact for the partnership under state law. Fort Development is owned by multiple Lawrence residents, including other members of Fritzel’s family.
Junction City officials are not happy about the stalled project and unpaid debts, which have contributed to major financial problems for the city.
“I hope that group is proud of itself, because it has caused the taxes of a lot of working people — a lot of them soldiers who have done two or three tours — to go up,” said Scott Johnson, a Junction City commissioner. “It looks to me like they have the money. They just refuse to pay it.”
“Some of us feel like we were overcharged,” said Jack Taylor, a Junction City commissioner who also is a real estate agent. “We feel like we weren’t treated fairly.”
Fritzel declined to be interviewed for this article but provided a lengthy written statement in which he said Fort Development has attempted to revive the largely unbuilt project but has been stymied by Junction City policies that prohibit the issuance of building permits to property owners with delinquent taxes.
“The problems in Junction City are the result of a perfect storm of unrealized expectations and predictions by many people, ourselves included,” Fritzel wrote. “The city’s present ‘no-build’ policy makes it impossible for developers with delinquent taxes to catch up.”
Fritzel has been at the center of the proposed Rock Chalk Park development in northwest Lawrence. Rock Chalk would include a new track and field stadium, soccer field, softball facilities and other amenities for KU on property just north of Sixth Street and the South Lawrence Trafficway. Fritzel is in the process of finalizing agreements that will commit his company, Bliss Sports, to finance the approximately $50 million worth of sports facilities.
Fritzel also is connected to a proposal to build a $25 million city recreation center on property adjacent to the KU facilities. Fritzel’s Bliss Sports and the Kansas University Endowment Association propose to partner to build the necessary infrastructure to serve both the KU facilities and the city’s recreation center.
Until this week, Fritzel and Bliss were on track to serve as the builders of the 181,000-square-foot city recreation center through a bidding process that guaranteed Fritzel a chance to match the low bid of any competitor. But on Thursday, city officials said they were walking away from that bidding process and would make the contract to build the facility available through the city’s standard open bidding process.
Lawrence officials said they were not aware of Fritzel’s involvement in the Junction City project. But Mayor Bob Schumm said he thinks the city’s recent decision to go to a true open bidding process increases the city’s financial protection in any deal.
Dale Seuferling, president of the Kansas University Endowment Association, said he also wasn’t aware of Fritzel’s involvement with the Junction City development. After reviewing the matter, Seuferling said the association was still comfortable with its partnership with Fritzel and Bliss Sports.
“It is a different arrangement completely than what was in place in Junction City,” Seuferling said.
A no-bid process
Only a small portion of the Olivia Farms project was ever built. The Geary County Treasurer’s Office shows that Fort Development still has about 220 vacant lots with unpaid property taxes and special assessments. Many of the lots carry special assessments of more than $24,000 apiece. The assessments were placed on the property by the city to recoup its costs to build streets, sidewalks, sewers and other infrastructure.
Junction City financed the construction of the infrastructure, but a development agreement allowed Fort Development to build the infrastructure for the city without going through a competitive bid process. The city paid Fort Development for the infrastructure work, with the expectation it would be repaid through special assessments over the next 20 to 30 years.
An independent investigation conducted for Junction City officials in 2010 by the audit firm BKD LLP raised questions about the cost of the infrastructure. The report noted that the infrastructure costs appeared to be higher at Olivia Farms than at other Junction City developments constructed during the same time period. The report said the lack of a competitive bidding process “may have caused an increase in construction cost.”
Fritzel, in his statement, said the prices charged for the infrastructure were fair. He said costs were higher than other developments because Olivia Farms was built with upgraded infrastructure such as all-concrete streets, a three-mile walking trail and common areas with in-ground sprinkler systems.
“Please recognize the distinctions, and do not compare apples and oranges,” Fritzel said. “Olivia Farms is intended to be a higher-quality subdivision than the competition.”
Fritzel said the initial infrastructure budget for the project was $16 million, but Fort Development ended up reducing the expenses to $11 million.
‘Everyone’s predictions were wrong’
Fritzel said the Olivia Farms project was dealt a major setback in 2007 when the Geary County Commission vetoed an incentive package that would have allowed the new property taxes generated by the housing development to be used to pay for the infrastructure.
According to documents from the Kansas Secretary of State’s office, Thomas Fritzel is the resident agent for Fort Development LLC, making him the primary point of contact for the partnership under Kansas law.
According to the company’s 2011 annual report — the latest on file with Secretary of State’s office — members who own 5 percent or more of Fort Development are:
• Evergreen Holdings LC, Lawrence
• Todd Sutherland 2005 Rev Trust, Lawrence
• Fortis Land & Development LC, Lansing
• Van LLC, Lawrence
• Perry H. Sutherland 2005 Rev Trust, Kansas City Mo.
• Norma H. Sutherland Qtip Marital Trust, Kansas City, Mo.
According to documents on file at the Kansas Secretary of State, the ownership of Evergreen Holdings includes Thomas Fritzel, Andy Fritzel, Gene Fritzel Construction Co. and Evergreen Investors.
The ownership of Fortis Land & Development includes banker Brent Padgett, while the ownership of Van LLC includes Lawrence construction material supplier William Penny, according to records from the Kansas Secretary of State. Todd Sutherland is a Lawrence banker.
The Junction City real estate market also took an unexpected turn. The thousands of soldiers transferred to Fort Riley showed little interest in buying homes but rather were looking for affordable rental units. Multiple housing projects by multiple developers failed during the time period, and Junction City has been left with the highest levels of public debt per capita in the state. The city has had to raise taxes, cut personnel and receive special legislation from the state that allows Junction City to carry extraordinary amounts of public debt.
“In hindsight, everyone’s predictions were wrong,” Fritzel said in his statement.
Fritzel said that as late as 2010, Fort Development proposed building rental projects on the property. But he said Junction City’s new policy of denying building permits to owners who had any unpaid back taxes or assessments “closed the last window” on a comeback for the project.
“Given those realities, Fort may be unable to make any reasonable progress toward developing Olivia Farms, which is extremely unfortunate because Fort has invested millions of dollars of its own capital in Junction City,” Fritzel said.
Words of warning
Officials in Junction City have little sympathy for the plight of Fritzel and the other Olivia Farms developers.
“It really is not the citizens’ fault that their lots aren’t selling,” said Johnson, who in addition to serving on the City Commission is a housing developer.
Taylor had not heard that Fritzel was involved in the Rock Chalk Park project, which is proposed to include Fritzel making a philanthropic gift to the university by offering below-market-rate financing.
“If he is so much on giving, I wish he would give us our tax money and take some of the burden off of Junction City residents,” Taylor said.
Taylor said university and city officials should “oversee everything” that Fritzel is involved with in the Rock Chalk Park project.
“I hope he doesn’t do anything to hurt that school, because I actually think highly of KU,” Taylor said.
Rock Chalk partners confident
Seuferling said KU Endowment remains confident in the soundness of the partnership with Fritzel and Bliss Sports. KU’s agreement with Fritzel is entirely different from what was done in Junction City, he said.
“This is not a speculative development project,” Seuferling said.
In the Rock Chalk Park project, no KU entity is providing any financing to Fritzel or Bliss, and therefore KU isn’t relying on Fritzel to make any payments to the university.
Indeed, the opposite is true: Fritzel is providing financing and construction services to KU. Fritzel is relying on 30 years of lease payments from Kansas Athletics to repay the approximately $40 million worth of financing he is providing the project.
Schumm, the Lawrence mayor, said that if a Fritzel company ultimately is the low bidder for the city recreation center project, the city would have adequate contracts to protect its interests.
Johnson, the Junction City commissioner, said he wouldn’t be comfortable if he were in Lawrence or KU’s shoes.
“They need to come to Junction City and see if they think they can trust him,” Johnson said.