Oread developers agree to comply with city demands

The Oread Hotel, 1200 Oread Ave.

Developers of The Oread hotel are now ready to settle an approximately $500,000 tax dispute with the city of Lawrence, and City Hall leaders are expressing optimism that the developers will fully comply with the city’s demands.

In a written statement Tuesday, Interim City Manager Diane Stoddard said Roger Walter, an attorney for Oread Inn, notified the city last week that developers would “fully comply” with a list of City Hall demands to end the dispute that centers on whether the Oread group inflated sales tax totals in order to collect a city subsidy. No formal settlement has been reached, and, for now, the city will continue withholding sales and property tax reimbursements from the group, Stoddard said.

Walter confirmed his group is seeking to settle. Walter said Tuesday that Oread Inn is taking steps to remedy “any alleged default” in the group’s redevelopment agreement with the city. He said the group “looks forward to continued cooperation with the city of Lawrence under that agreement.”

But he stopped short of saying that the Oread group had agreed to repay the approximately $500,000 in taxpayer funds that the city alleges the development group improperly received. A report commissioned by the Oread group contends the development group was overpaid only about $90,000 in taxpayer funds, not $500,000 as alleged by the city.

Walter said in a written statement Tuesday that, although developers are complying with other demands, “Oread Inn will continue to assert its right to contest repayment of a portion of those funds.”

Findings of a city-ordered audit alleged last year that Oread Wholesale, a tenant of The Oread hotel, manipulated sales tax data to inflate sales within a special taxing district at the hotel.

Monday was the deadline Stoddard set for Oread Inn to address a list of demands that developers have previously protested.

The city sent a letter to developers Feb. 11 saying Oread Inn had defaulted on the redevelopment agreement, and that the city would have grounds to terminate the agreement if the demands weren’t met in 30 days. If the city terminated the agreement, developers would lose up to $8 million in future subsidies from the special taxing district, which has since 2008 generated $3 million in sales and property tax reimbursements for the group.

News of Oread Inn’s compliance comes weeks after developers said they’d be willing to compromise with the city in an attempt to end the dispute without litigation. At the time, it was unclear whether the city would agree to settlement talks. Oread Inn followed up on that request with a host of documents denouncing findings of the city-ordered audit.

The demands developers have now said they’ll meet are:

• Reimbursing the city for the cost of hiring an auditing firm, Allen, Gibbs & Houlik, to look into the special taxing district.

• Delivering tax records and other financial documents from Oread Wholesale — the tenant of The Oread hotel that’s at the center of the tax dispute — to Allen, Gibbs & Houlik.

• Agreeing, in writing, to amend the redevelopment agreement, allowing the city to audit Oread Inn and any tenant of the special taxing district without notice.

• Giving the city assurance, in writing, that Oread Inn will fully cooperate with the city in any future audits or reviews.

Walter confirmed Oread Inn would agree to those demands, including amending the redevelopment agreement.

Walter also said Oread Inn received consent from Oread Wholesale to provide the wholesale company’s tax documents. Both Oread Inn and Oread Wholesale are led by Lawrence businessman Thomas Fritzel. Stoddard said developers were in the process of handing those documents over to Allen, Gibbs & Houlik.

But there are still questions about the amount of money Oread Inn owes the city. The city has demanded Oread Inn pay $492,914.86 — the amount the city says it overpaid Oread Inn, plus interest. Oread Inn paid that amount “under protest” by a Dec. 31 deadline.

Walter said the group would reserve its right to contest payment of that amount, but he did not provide details about whether his clients would seek to have a portion of the money they paid returned.

The Oread Inn previously alleged that the city had defaulted on the redevelopment agreement by withholding sales and property tax reimbursements. The city suspended its reimbursements to the group June 9 during its investigation into the special taxing district.

Neither Stoddard nor Walter made mention of that default notice Tuesday. Stoddard said the city is continuing to withhold reimbursements.

“Provided the developer remedies the default to the city’s satisfaction, reimbursements would resume in the future,” she said.