Concerns about the operation or management of The Oread hotel’s special taxing district are expected to come to light soon, I’ve learned.

If you remember, City Hall reporter Nikki Wentling reported last month that the city had hired an auditor to review the special taxing district, which has generated more than $2 million thus far for the local development group that built the hotel.

The audit by the Wichita-based firm Allen, Gibbs & Houlik has now been completed, and city officials are promising to release its results. The city hasn’t yet provided any details on the audit, but there are certainly indications that there are some significant findings.

“The position we are in now is that we are contacting all parties that were involved in the audit, and we want them to hear everything we have found and what we intend to tell the public, so that there won’t be any surprises,” Commissioner Matthew Herbert told me.

Commissioners thus far haven’t said whether concerns center on how the private businesses have used the special taxing district or whether they are related to how the city has managed the district, or whether they are some other set of concerns. They have been tight-lipped about the audit, and, in fact, the audit only came to light due to an anonymous tip that the Journal-World received about its existence.

One issue the J-W’s article last month pointed out is an oddity with one business that is listed as having a home in the district. Records from the state indicate a business called Oread Wholesale L.C. is located at 1200 Oread Ave., the address of the hotel. Information from web listings and other sources indicate Oread Wholesale L.C. is a wholesale supplier of construction materials.

But, there are no signs of a wholesale construction material supplier operating at the upscale Oread. When the J-W went to the hotel last month seeking information about Oread Wholesale, a clerk at the hotel told our reporter that Oread Wholesale was listed as the address “just to get stuff shipped in.” The clerk said there was no warehouse on site.

What makes this element interesting is that the latest annual report on file with the state of Kansas for Oread Wholesale lists Thomas Fritzel as the primary owner of the company. Fritzel is also the leader of the development group that benefits from the special taxing district at The Oread.

The way that special taxing district works is that the development group gets a rebate on a large percentage of every sales tax dollar generated at the 1200 Oread address. When you buy a meal at The Oread, a large percentage of the sales tax gets rebated back to the development group, which then is supposed to use the money to pay for infrastructure projects and the private parking garage that were built as part of the project. If a wholesale construction supplier is selling materials at that address, then Fritzel’s development group would get a rebate on the sales taxes charged on that material as well.

A couple of questions come to mind:

1. Are construction material sales actually happening at 1200 Oread, or is the address just being used to take advantage of the benefits of the special taxing district?

2. If construction materials are being sold at 1200 Oread, is that the type of business that city officials intended to provide an incentive to? It certainly wasn’t the type of business ever mentioned publicly when Fritzel was lobbying commissioners to approve the incentive. That lobbying effort was all about providing an incentive for an upscale hotel that would help the city attract more visitor dollars. We previously have tried to talk with Fritzel about this issue, but with no luck.

It is important to remember that I don’t know what the audit’s findings are. Oread Wholesale may or may not be a part of the report. Either way, it is an interesting issue.

Another interesting issue may be brewing on this front. As we previously reported, this audit began in April. City commissioners in October approved a tax break for The Eldridge Hotel. The Eldridge Hotel and the Oread development group have a lot of cross ownership. Fritzel is the leader of both groups. I confirmed with interim City Manager Diane Stoddard that commissioners were aware of the Oread audit that was underway at the time the commission was voting on The Eldridge tax break. Commissioners approved The Eldridge tax break — valued at about $460,000 — on a 3-2 vote with Commissioners Leslie Soden and Lisa Larsen voting against it.

So, to summarize: The commission knew there was an audit underway regarding questions about the use of The Oread special taxing district, but it approved a new incentive that will benefit many of the same people who are involved in the audit at The Oread. If the audit comes back and finds that Fritzel and his development group have done no wrong in the Oread taxing district, then I suppose no harm, no foul. But if the audit does raise concerns about Fritzel and that development group, I suspect the public is going to have questions about why the City Commission didn’t wait to act on the Eldridge request until the Oread audit was completed.

I asked some commissioners whether they thought about waiting. Herbert told me he did but ultimately decided against it.

“I have thought about that quite a bit,” Herbert said. “Even though there are certainly some elements of cross ownership, they are two separate entities, and I think they ought to be treated as separate on that matter.”

I asked Commissioner Stuart Boley the same question, and his answer was more confusing. When I asked him whether he had given any thought to delaying that vote, he referred me to Toni Wheeler, the city’s attorney. I told him I didn’t think Wheeler was in a good position to comment on why Boley did or didn’t vote on a particular matter. Boley said he just wasn’t in a position to answer questions about the subject. I asked him if he could explain why he wasn’t in a position to answer questions about his thought process regarding a vote he had taken, and he told me he wasn’t in a position to answer that question either.

Mayor Mike Amyx was the third vote to approve The Eldridge incentive. We’ve traded messages, and we’re scheduled to talk on Monday. I’ll report back on his thoughts.

Again, it is tough to know what is next because it is unclear what the audit has found. But I think the findings could be significant, and they could represent quite a test for the City Commission. From my view, the greatest challenge facing the City Commission currently is regaining the trust of the public. The process used to build Rock Chalk Park damaged the trust level with some residents. The resignation of Mayor Jeremy Farmer from the commission also hurt. If this audit does create questions about how this special taxing district has been used or managed, it will be a key moment for the commission as it relates to building trust with the public.

Herbert told me that the city plans to be straightforward in its findings.

“We have every intention of going public with every piece of it,” he said.

There will be some considerations the city has to take into account as it releases the information. It is against state law to release some types of private business sales tax data.

Herbert also said he thinks the information will be coming forward sooner rather than later.

“Based on the information I’ve seen, we have a very vested interest in dealing with this pretty quickly,” Herbert said.

Stoddard, the interim city manager, also told me her plan is for the city to provide a full briefing to the public on the matter.

“I would anticipate something will be forthcoming,” Stoddard said. “The city is trying to be as transparent as we can at the appropriate points in the process.”

In other news and notes from around town:

• A project that is going much smoother at City Hall is the public incentive request for Menard Inc. to build a new production and distribution plant at Lawrence VenturePark. As we’ve reported, the project has won a positive recommendation from the city’s Public Incentives Review Committee, and has won the necessary approvals from the Douglas County Commission. City Commissioners are scheduled to vote on the project’s incentive package — valued at about $2.3 million — at their Jan. 5 meeting.

Folks in the business community are looking ahead toward when the plant may be built and in operation. Officials with the Lawrence chamber of commerce and the Economic Development Corporation of Lawrence and Douglas County, have begun reaching out to local contractors on behalf of Menard Inc.

Brady Pollington, vice president of the EDC, said he’s looking to hear from any Lawrence area firms who have an interest in working with Menards on their project. That could include building contractors, earth movers, landscapers, engineers, equipment suppliers, staffing agencies, and a whole host of other businesses that may be needed to operate the facility.

Pollington said he’s gathering the names of the firms and presenting them to Menards.

“I’ve had those conversations with Menards and told them that we want to get this information out to our members and our community,” Pollington said. “Menards told me they wanted to use as much local as they can.”

Any business interested in working on the project should send its information to Pollington at bpollington@lawrencechamber.com.