Oread Wholesale submits report about city-ordered audit; record not released
The wholesale company at the center of a $500,000 tax dispute between the city and developers of The Oread hotel sent its anticipated report about a city-ordered audit that accused it of filing incorrect sales tax returns, city officials said Wednesday, but both the city and an attorney for the company declined to release it.
The city was told in late December that Oread Wholesale LC, a wholesale company within a special taxing district at 1200 Oread Ave., had retained experts to analyze the findings of the audit and respond when a review was complete. In response to a records request, Interim City Manager Diane Stoddard said Wednesday the report and a letter had been delivered to the city, but the city wouldn’t release it because it contained sales tax data.
Though the city could redact the sales tax information, City Attorney Toni Wheeler said, the remaining portions of the report were also deemed by the city to be exemptions to the Kansas Open Records Act. The city cited two statutes, one exempting records that, if released, would interfere in the process of detecting or investigating violations of civil law or administrative rules and regulations. The other allows the exemption of records in which opinions are expressed or actions are proposed.
“They did submit to us a letter and report to the city … but we are declining to provide the report because it contains sales tax data,” Stoddard said. “I don’t have any further updates I can share.”
The city-ordered audit accused developers of the hotel of using Oread Wholesale to inflate sales in a special taxing district at 1200 Oread Ave. in order to increase its total reimbursed by the city. Under a redevelopment agreement, a large percentage of local sales tax dollars collected in the special taxing district is rebated back to the hotel development group. Lawrence businessman Thomas Fritzel leads Both Oread Inn and Oread Wholesale.
Incorrect sales tax returns filed by Oread Wholesale were used by Oread Inn to receive $429,914.85 in “improper” rebates, according to the audit’s findings.
Attorneys for both Oread Inn and Oread Wholesale have contested demands made by the city, including handing over financial documents Oread Wholesale used to complete its sales tax returns. Attorneys for both entities have said in letters that the city lacks the authority under the redevelopment agreement to make such demands.
The group did repay nearly $500,000 demanded by the city by a Dec. 31 deadline, but it did so “under protest.”
Oread Inn’s attorney, Roger Walter, has called the audit “one-sided,” “inflammatory” and “inaccurate.” Walter further contended in a Jan. 18 letter that the city violated Kansas law by using money from a tax increment financing fund to pay for the city’s audit of Oread Wholesale.
When asked Wednesday for details about Oread Wholesale’s most recent letter and report to the city, an attorney for Oread Wholesale, Edward “Trip” Frizell, sent a statement saying that Oread Inn and Oread Wholesale were working with the city and were “hopeful a resolution can be found in the near term.”
The full statement reads:
“The Oread companies remain committed to working with the City of Lawrence. The companies are in communication with the City of Lawrence and have provided information to the City regarding pertinent issues and relevant matters.
“The companies look forward to continuing to cooperate with the City of Lawrence and are hopeful a resolution can be found in the near term. The Oread companies have acted reasonably and within their rights under Kansas law.”
Frizell cited ongoing discussions with the city, as well as the “confidential aspects of the material, discussions and information” as reasons he did not want to share more at this time.
One concern raised in the city-ordered audit was that Oread Wholesale was listed as having an address at the hotel, even though there appeared to be no signs the construction wholesale company actually operated there.
According to city records, Oread Wholesale has been present since 2010 on a list of tenants in the special taxing district given annually from Oread Inn to the city. The list is an obligation under the group’s redevelopment agreement and has been sent to the city every year since 2010.
Stoddard said Oread Wholesale’s presence on the list was not previously seen as a sign of a problem.
“With the types of reports that we get, it’s very difficult to flag issues,” Stoddard explained.