Center purchase is facing snags
Tax benefit agreements, personal tax standing disputes slowing deal
Texarkana foot doctor and businessman James Naples said he plans to develop an indoor sportsplex and baseball park in the area near the Arkansas Convention Center in Texarkana, Ark.
Naples is currently awaiting approval from a Texas federal bankruptcy judge to buy the Arkansas Convention Center. Texarkana Hotels LLC, which is owned by Hiren Patel, a medical doctor who used to practice in Texarkana, filed a motion Feb. 10 seeking authorization from a bankruptcy judge to sell the property to Naples for $6,550,000 in cash. Texarkana Hotels filed for bankruptcy last year in the wake of MidSouth Bank’s efforts to foreclose on the property to recoup millions in unpaid debt. Hoiday Springs Waterpark, adjacent to the convention center and constructed at the same time, is not in bankruptcy.
Naples said he has hired an experienced hotel management team that has already been approved by Holiday Hospitality Franchising, the company that licenses the Holiday Inn brand. To continue to operate the convention center as a Holiday Inn hotel, Naples had to negotiate a new franchising agreement. Holiday Hospitality filed a motion in the case recently asking that the sale closing date be no earlier than May 1 so that there is a smooth transition from the existing franchise agreement with Texarkana Hotels and a new one
with Naples with no franchise lapse.
Naples said plans for an indoor sportsplex and baseball park tied to the hotel are in development.
“We can really get that area going,”
Naples said.
But a few hurdles exist. Tax Benefit Agreements
The motion filed in February on Texarkana Hotels’ behalf by Dallas lawyer Bill Payne, seeks to convey tax benefit agreements from the city of Texarkana, Ark., and the city’s Advertising and Promotion Commission, along with the hotel property. The tax benefits, negotiated at the time of construction of the convention center and adjacent water park, could be worth millions over a period of years.
The City of Texarkana, Ark., and the A&P Commission filed objections to conveying the tax benefits in January and again in early March that complain that the original agreements negotiated with Patel and Texarkana Hotels in 2009 contained language stating that the tax benefits can’t be conveyed without the approval of the city. The objections also point to a legislative audit performed by state officials which found in 2014 that at least some of the tax benefits, including a dramatically reduced price for water, violate Arkansas law.
Naples’ lawyer, Kyle Davis of Texarkana, filed a response to the objections that argues the tax benefits can be conveyed according to bankruptcy law, that the description of the tax benefits agreements is not vague, as the objections allege, and that the agreements do comply with the law.
“In fact, the city and the A&P have continued to perform and make payments under the tax benefits agreement since the issuance of the legislative audit in 2014,” Davis’ response states.
The response contends that by continuing to honor the agreements through January 2017, the city and commission have waived any argument that the agreements don’t comport with the law. Davis’ response also addresses the 2014 audit more specifically and points to an Arkansas Attorney General opinion that the response alleges supports a finding that the tax benefits are legal under Arkansas law.
On Friday, the Arkansas Economic Development Commission joined the city and the A&P with the filing of an objection in the case. The AEDC’s objection complains that it only received notice of the hotel’s pending bankruptcy this month. The AEDC’s filing questions whether a Texas bankruptcy court is the proper forum. According to its motion, AEDC has an agreement with Texarkana Hotels concerning the tax benefits that states they cannot be transferred without AEDC’s consent.
“It is important to note that the rights and obligations involved in this matter concern tourism in the State of Arkansas, a matter of substantial public policy for the State, and should be determined by the State’s own procedures,” the AEDC’s objection states.
“In determining what persons or entities may take advantage of the tax credits and incentives granted by the State of Arkansas for the purpose of developing tourism, the Court should defer to the State of Arkansas and to the AEDC as a matter of comity, public policy and the importance of such matters to the State of Arkansas and its residents,” a separate AEDC filing in the bankruptcy states. “As set forth above, the State of Texas has practically no nexus to this matter other than the fact the debtor chose to file this case not in Arkansas but in Texas. That choice does not in any way abrogate or lessen the importance with which the State of Arkansas gives to these matters.”
Texarkana real estate developer Richard Reynolds said he is hopeful Naples’ plans will come to fruition.
“This kind of development is good for our city,” Reynolds said. “He’s more of a
solution than a problem.”
A hearing to address the proposed sale is scheduled April 5 before a bankruptcy judge in Plano, Texas. Local personal property and real estate tax delinquency dispute
The Miller County Tax Collector’s office currently shows Naples is more than $86,000 delinquent in personal property and real estate taxes, the largest of any single person or business in the county. The bulk of the alleged delinquency, more than $55,000, concerns personal property tax the collector’s office claims is owed on an airplane Naples no longer owns. Tax Collector Cathy Hardin Harrison said her records show Naples owes roughly $6,000 per year for the years 1994 to 2002 on the plane. But Naples claims the plane may have visited Texarkana, but was registered in Colorado with the Federal Aviation Administration and disputes that he owes the county personal property tax for the plane.
Naples said he thought the issue with his former plane had been resolved with Tax Assessor Mary Stuart about 15 years ago. Stuart said she doesn’t specifically recall a discussion about the plane but said she believes the collector’s office’s records tat show a delinquency in personal property tax are accurate.
Harrison said Arkansas law makes it a crime for her office to accept payments for real estate taxes from someone with delinquent personal property taxes. The statute states that real estate taxes cannot be accepted without full payment of personal property taxes if they are shown to be due.
Harrison said her office has refused to accept approximately $30,000 for payment of various real estate property tax bills from Naples because of the allegedly delinquent personal property tax. That means Naples now shows delinquencies in real estate taxes for 2014 and 2015 on various properties.
Naples said he believes the collector’s office is wrong and that he has documentation to support his position.