The city said Tuesday it is prohibited from entering into a new lease agreement on the empty lot The Hotel Hot Springs & Spa is renting at 349 Malvern Ave. until the hotel pays outstanding hospitality and real estate taxes.
The Hot Springs Board of Directors tabled consideration of a new 50-year lease on the half-acre lot adjacent to the hotel, telling a representative of the hotel's parent company March, April, May and June collections of the 3-percent sales tax the Hot Springs Advertising and Promotion Commission is suing the hotel for have to be paid before a new lease agreement can be adopted.
A lease was executed in August 2014, but the city said the hotel has been renting the vacant lot that was the former site of the municipal utilities building on a month-to-month basis since February 2017. That's when the 30-month period for the hotel to build an expansion on the lot ended.
The code section cited in support of the board's action prohibits the city from issuing permits or licenses to entities that are 90 days or more in arrears to the city or any of its political subdivisions. City Attorney Brian Albright told the board the provision also applies to the hotel's lease.
Payment of the 2.6 mills the city levied during the 2016 and 2017 tax years for a new public safety communication system is also a condition for adoption of a new lease, the board said. The hotel owes the city more than $10,000 in real estate taxes for those two years, according to county property records. The unpaid obligation is part of the more than $200,000 the hotel owes in real estate taxes, the county tax collector's office said.
It is unclear how much the hotel owes on the 3-percent sales tax the ad commission levies on prepared food and lodging inside the city, as ad commission tax information is exempt from the Arkansas Freedom of Information Act. The commission won a $77,279 default judgment against the hotel in December for unpaid taxes.
Food and restaurant supply wholesaler Sysco Arkansas LLC won a more than $30,000 judgment against the hotel last week in Pulaski County for unpaid invoices from November through January.
Additional conditions the board required include securing financing for an expansion on the vacant lot and the payment of $4,375 in July and August rent balances. The $2,000 a month rent would increase to $2,500 under the new lease agreement.
Jeff Simmons, construction manager for Coastal Phoenix Investments, the hotel's parent company, presented information to the board Monday that said a $1.12 million loan had been secured to build a new indoor pool, fitness center and spa from Summit Investment Management, but he told the board Tuesday that financing, along with a franchise agreement with Wyndham Hotel Group, are contingent on securing a lease agreement.
Summit Investment Management is the Denver private equity firm that purchased the hotel's mortgage at an auction last year. The Federal Deposit Insurance Corp. put the previous mortgage holder, First NBC Bank of New Orleans, into receivership.
The hotel requested 60 months to complete the expansion, but the new lease provides for a 36-month construction term.
Simmons said the hotel hopes to meet the conditions before the board's Sept. 18 business meeting. Albright said if the conditions are unmet, a letter of intent may meet the lender's requirements while allowing the city to rent the property without granting a leasehold interest until past-due taxes and rents are paid.
"I could communicate with his attorney to see whether or not a letter of intent would be sufficient to satisfy the lender," he told the board. "We won't be giving anything up in doing such. It would just set forth what our intentions are if funding is available."
Local on 08/23/2018