Posts tagged with Oread
More questions about Oread special taxing district; commissioner says city working to make sure ‘everyone pays their fair share of taxes’
I think we are getting closer to figuring out what the concerns are with the special taxing district at The Oread hotel. But I don’t think that means we are near the end of the questions about this project.
If you remember, we reported in November that the city had hired a Wichita accounting firm to complete a report on how the special taxing district — which has generated more than $2 million and counting for the development group that built the hotel — is operating. Then, last week we reported there were signs from City Hall that the auditing firm had found some concerning information, but no details have been publicly released.
If I’m reading the tea leaves correctly, city commissioners are going to again discuss the issue behind closed doors tonight. They have an executive session planned for their meeting this evening, and the general description of the session leads me to believe it is about The Oread issue. That session, I believe, should clear the way for the city to release the findings of the report in the coming days.
Since I last wrote about the topic last week, I have had a chance to talk with some more commissioners about the subject, and also to come up with some more questions.
Mayor Mike Amyx and I chatted Monday, and he stood by his decision to have a vote in October for an approximately $500,000 public incentive for The Eldridge Hotel expansion project. The Eldridge project and The Oread project have become linked because the two properties have a lot of cross ownership, and both are led by Lawrence businessman Thomas Fritzel. My theory is this: If the auditors find problems at The Oread taxing district that point back to Fritzel and his group, the public is going to be mad that the City Commission gave Fritzel and his group another round of public incentives just weeks before the results of this audit came out.
On Monday, Amyx said he felt allowing The Eldridge incentive request to proceed was the right thing to do.
“I didn’t give a lot of thought to that,” Amyx said of delaying The Eldridge vote. “They are completely different projects. I know there is a lot of cross ownership, but they are technically different owners.”
Not all commissioners are of that opinion. Commissioner Leslie Soden said she wishes the city would have waited until after the auditing firm had completed its work. Soden ended up voting against The Eldridge request.
“If delaying the vote was something I could have accomplished, I would have,” Soden said. “But it is the mayor’s prerogative of what to put on the agenda.”
Amyx noted that when The Eldridge vote came up in October there was a lot of discussion about how the City Commission needed to follow through on a promise that the previous commission had made to The Eldridge project. The previous commission had passed a resolution of intent to grant the approximately $500,000 sales tax exemption for the project. But because of the April elections, it fell to the new commission to actually approve the final paperwork on the incentive.
“We were receiving a lot of recommendations that we had to stand up to the commitments that were made,” Amyx said. “That decision was one of honoring a commitment made by the commission.”
The commission certainly did receive some comment from the public urging the city to approve the incentive on those grounds. But it is worth remembering an important fact: The public didn't know there was an audit underway.
I think that is one of the questions to be answered here: Why wasn’t the public made aware that an auditing firm had been hired to look into the issue?
Normally, when the city engages a contractor, the City Commission approves of it through an agenda item. That would cause us to see the agenda item, write about it and inform the public. But the city manager’s office has confirmed to me that the hiring of this audit firm was not the subject of an agenda item. The city manager has the authority to hire some firms to do work for the city, as long as the amount is below certain levels. The estimated cost of this audit is $15,000, which I think falls within the city manager’s purview to do without formal City Commission approval.
In talking with interim City Manager Diane Stoddard, she noted there are a lot of state-imposed confidentially requirements involved with examining sales tax reports of private businesses. But those confidentiality requirements don’t prevent the city from acknowledging that it has hired an auditor to review the district. The city did acknowledge that an auditor had been hired when the Journal-World asked the city about it in November. But the only reason we knew to ask was because we received an anonymous tip alerting us to the audit’s existence.
Perhaps the city handled this the way it did out of an abundance of caution. I can understand that the city wouldn’t want to embarrass a company by announcing it was conducting an audit without knowing whether the audit was actually going to find anything.
But, the issue of tax incentives has been a very important one to the public. It was a hot-button issue during the elections. I’m certain that there are members of the public who would have liked to have had that information when they gave public comment to commissioners on The Eldridge tax incentive request in October.
That brings me to my second question: How much information should the public be entitled to receive about businesses that are benefiting from a public tax incentive?
Here’s some background on this Oread issue: I called the city many months ago — before the audit was ordered — telling them that I had received a tip that a company called Oread Wholesale LC was using a business address of 1200 Oread Ave., which is the address for the hotel. I found that odd because Oread Wholesale appears to be a construction material wholesale company owned by Thomas Fritzel, and there doesn’t appear to be an active construction material wholesale company operating at 1200 Oread. But understanding special taxing districts, I knew it could be advantageous to list all the sales of Oread Wholesale as being made at 1200 Oread. That’s because Fritzel’s development group gets a large percentage of any sales taxes generated at 1200 Oread rebated back to it as part of the special taxing district. That could be problematic on a couple of fronts. Is that really the type of business the city intended to provide an incentive to? And, unless construction materials actually were changing hands at 1200 Oread, there probably would be some questions of whether the state’s sales tax laws are being followed. Normally, construction materials are delivered to a job site, which means sales tax should be charged at the location of the job site, not the location of the wholesale company.
So, I wanted to find out if there was anything to this tip I had received. I knew state law wasn’t going to let me see the actual sales tax reports filed by an individual business. That would give me access to private business information, such as how much the company is doing in sales. But I thought I might be able to see a list of all companies that are filing sales tax reports from that address. The city checked for me, and told me state law wouldn’t allow them to release that information either.
That creates an interesting situation. The public is providing an incentive worth millions of dollars to this project, but the public faces considerable difficulty in determining what businesses benefit from that public incentive. What harm would be created by the state releasing information about whether a business is filing a sales tax report from a specific location, particularly if the public has invested in that location through a public incentive?
The issue is more directly tied to state law than anything the city controls, but some city commissioners said they did think that businesses seeking incentives need to be ready to share more information with the public than they would otherwise.
“If you don’t want us in your business, don’t come asking for anything,” Commissioner Matthew Herbert said. “If you don’t ask for incentives, we will basically stay out of your hair. I think a company that asks for taxpayer subsidy needs to be prepared to be more transparent than an ordinary private company.”
Soden said she’s interested in exploring whether the city could create a requirement that any project receiving a public incentive is regularly required to file information listing what businesses are operating within the project. That way, the city would not find itself in a situation of thinking it was providing an incentive to benefit Business A, when in fact it was providing an incentive to benefit Business A, B and C.
“I’ve been frustrated by this issue for awhile,” Soden said.
If the city starts adding more requirements related to public incentives, that likely will create debate. There will be arguments that too many requirements will decrease the effectiveness of an incentive. If someone receives an incentive for a multitenant office building, for example, how much information are tenants of that building reasonably going to want to provide to City Hall?
Of course, the biggest question in all of this is: What did the auditing firm find? Amyx didn’t provide a specific timeline for the city to release the information, but said it will come out in a “timely fashion.” He said he's committed to making the findings public.
I don’t have any good insight into what the firm has found, other than sources have told me there are some significant findings. Whether those findings involve the development group, the city or something else, I don’t know. But Soden did make one comment that I found interesting.
“I want people to understand that the city has been working on this for awhile, and we are not trying to keep this hidden for any ugly reasons,” Soden said. “The city has always been on top of the issue, and has been working to make sure everybody pays their fair share of taxes.”
I don't know that he wears a cowboy hat, but there is a new fellow in town who plans to grab one of Lawrence's more famous bulls by the horns.
We're talking about Bullwinkles, the longtime Oread neighborhood bar near 14th and Tennessee streets. The establishment has new owners, and anybody who has driven by the building recently knows it is getting a complete renovation as well.
And the place is getting fancy . . . well, by Bullwinkles standards anyway. The bar now will have separate restrooms for both men and women. It didn't previously, and I've known a few people who have said an actual bull ride was more comfortable than those facilities.
But that and other items are changing at one of Lawrence's more longstanding college hang outs.
Joe Sorrentino and his wife, Jane, have bought the building, the business, and an adjacent apartment house. They've hired Lawrence-based Paul Werner Architects to revamp the properties.
"We don't want this corner looking like a run down dump," said Joe Sorrentino.
The renovations include the bathrooms, a new concrete patio, new landscaping, and a wrought iron-style fence to enclose the outdoor areas. The work also includes lifting the roof off the building to address a host of structural issues.
"The building is just so old," Sorrentino said. "There was quite a bit we needed to do to shore it up. We're doing this so it will last for another 100 years."
Sorrentino, an Overland Park businessman, is still boning up on the history of the location, but he thinks its use as a bar dates back to around 1918 or 1919. The Douglas County Appraiser's office lists the approximate construction of the building as 1900. There are also rumors that the site occasionally served as a speakeasy during the Prohibition era, but that may just be B.S. — which, as you might guess, is a common commodity in a place that goes by the moniker The Bull.
One thing that is certain is that Sorrentino plans to keep the Bullwinkles name. In fact, he's going old school with it. He found a man in Mission who has what is believed to be the original Bullwinkles sign. Sorrentino hasn't yet acquired the sign, but he's been able to copy the original logo from it — complete with the big set of moose horns. The site of that old bull moose may bring back memories for some KU alumni. (Well, they're probably foggy memories, at best.)
Sorrentino said he hopes the bar becomes more of an alumni hangout on game days and during other events. For years it almost exclusively has been a student hangout, and Sorrentino acknowledges it also has gained a reputation as an underage drinking spot. He said that likely will be the biggest change to the establishment.
He said he is doing away with the practice of hiring KU students to serve as doormen for the establishment, which he thinks will lead to stricter checking of I.D.s.
"The guys working the doors will be in their 30s and will have no relationship with KU at all," Sorrentino said. "I just don't want that type of business."
Sorrentino said plans call for the bar to be back in operation by the week of Aug. 22.