Liens, Looming Audit Put Texarkana Business Park Under More Scrutiny

by Luke Jones  on Monday, Jan. 20, 2014 12:00 am  

Since Texarkana rehired its controversial city manager, the financial problems dogging Harold Boldt’s economic development projects have only deepened.

The issues surround the Crossroads Business Park, a development intended to be a magic bullet for the Arkansas city’s economy that often struggles to compete with its oversized Texas twin.

The park includes numerous private business entities, but two in particular, a Holiday Inn with an attached convention center and the Holiday Springs Water Park, have received millions of dollars of public money, most of it funneled to Dr. Hiren Patel, a physician and private investor from the Texas side of the state line.

Patel, recently honored by the city Board of Directors as a bringer of commerce, is facing a growing list of contractor liens, and Boldt is facing a state audit that will scrutinize his handling of city funds.

Boldt, who declined to comment for this story, granted Patel about $6 million to develop the convention center and water park.

Patel got a pretty good deal out of it: He’d receive $150,000 each year for 15 years to maintain the convention center and $250,000 each year for 20 years to operate the water park. He is also to be refunded the city’s 3 percent A&P tax on hotel receipts and its 2 percent A&P tax on prepared foods.

All told, Patel’s company would receive about $9 million over 20 years.

But Wayne Smith, the city director designated as mayor, wasn’t satisfied with how Boldt communicated with both him and the city’s board of directors about the project, resulting in Boldt’s firing in March 2013. Boldt received a $162,000 settlement, representing about a year’s pay plus accrued and unused paid leave.

Liens and a Lawsuit

Following Boldt’s firing, the convention center and water park opened for business.

In November, Texarkana’s Ward 2 director, Laney Harris, presented Patel with a state proclamation recognizing Patel for his contributions to the city.

Later that month, the Texarkana Gazette reported that several liens had been filed against Patel’s company, Texarkana Hotels LLC. The liens claimed he owed around $1 million to contractors.

The liens were filed by EBCO General Contractors Ltd. of Cameron, Texas, and seven of its subcontractors on the convention center project. (See chart in slideshow above.)

On Dec. 9, EBCO took its claims of nonpayment a step further by filing a civil suit against Patel in Miller County Circuit Court.

According to the suit, Patel was required to pay the balance of the $9.7 million contract cost within 20 days of the project being completed, and that hadn’t happened for the work outlined in the liens.

On Jan. 9, Patel’s lawyer, J. Don Overton, filed a motion to dismiss the suit.

The response argues that the contract for the jobs expressly calls for the parties to settle disputes out of court, so the court “lacks jurisdiction until such mediation has completed.”

But more important, the response alleges that EBCO breached the project’s contract.

It says that EBCO didn’t complete some of the work — in particular, it ordered its subcontractors to stop work — outlined in the contract, abandoning it and leaving Patel’s company to complete it.

“Some have continued to perform warranty repairs in an attempt to extort money from the owner for uncompleted work,” the response says. “Subsequently the plaintiff instructed subcontractors to file fraudulent liens against the property … in spite of the plaintiff having been paid by the owner for the work.”

It also argues that some of EBCO’s work was falsified, that it hasn’t provided supporting documentation to justify its claims of unpaid work, and that it didn’t issue two-party checks to subcontractors despite repeated requests to do so.

In the weeks since the lawsuit was filed, two more liens have appeared. On Dec. 30, Xtreme Steam Carpet Cleaning of Texarkana, Texas, claimed that $53,686 of work on the convention center remained unpaid. On Dec. 19, Ernest Spencer Metals Inc. of Meriden, Kan., claimed a $17,682 bill from work on the water park, the first lien on that project.

City officials have remained fairly distant from these proceedings.

“There’s only been one side of it heard on the lawsuit,” Mayor Smith said. “I would hold my answer to see how that lawsuit comes out. I want to give everyone a fair opportunity. I don’t want to characterize someone based on allegations.”

Harris, who showed public support of Patel in November, said of the liens: “Let the court decide,” adding that the whole story isn’t being told, but also that he doesn’t know the whole story yet.

“Let Dr. Patel have his due process in court,” he said.

Smith added that part of the issue falls outside of his jurisdiction because it “involves private business.”

“It’s unfortunate that we have four of our local businesses that performed work anywhere in this town and not getting paid for it,” he said. “That is very unfortunate.”

Patel did not respond to repeated requests for comment.

Boldt Comes Back

While Hiren Patel is dealing with liens from his contractor, the city of Texarkana is dealing with drama surrounding the rehiring of City Manager Harold Boldt.

Here’s how it went: After Boldt’s firing in March 2013, the city began searching for a new manager, and Boldt’s name appeared on the list of applicants.

Despite vocal opposition from Mayor Smith and others, Boldt became a candidate for city manager and, in September, the board voted 4-3 to give him back his old job. According to Smith and other sources, before that vote, the board was 4-3 in favor of Boldt’s firing.

How did this happen? One director, Laney Harris, changed his mind.

Harris, who was reluctant to refer to his choice as a “swing vote,” told Arkansas Business that his decision boiled down to one word: “Redemption.”

In a letter to the Gazette, the four directors who voted to rehire Boldt reported insults and threats being hurled during the executive session that preceded the public vote.

“Some comments cannot be printed due to the fact this letter may be read by small children,” the directors wrote.

Shortly after Boldt’s rehiring, three Texarkana officials requested an investigation of Boldt’s financial dealings by the state Division of Legislative Audit in Little Rock. The letter — signed by Miller County Prosecuting Attorney Carlton Jones, Arkansas Rep. Prissy Hickerson, R-Texarkana, and Arkansas Sen. Jimmy Hickey, R-Texarkana — specifically asks for an investigation into Texarkana’s spending, contracting and accounting related to incentives put into Crossroads Business Park.

“These financial incentives were paid directly to the developer of the local convention center and Holiday Springs Water Park,” the letter said. “These funds are pledged from the A&P account and various other general revenue accounts.”

Some of the specific issues included:

• Transfer of $584,500 in May 2012 from Texarkana's Water Utilities fund into the city's general fund and then to Patel, all on the same day.

• Contracts and invoices paid without supporting documentation.

• Lack of a clear record of ownership of the parts of development. Some of the property is owned by Patel, and some is owned by the city.

Boldt told the Texarkana Gazette at the time that he “had no problem” with the audit. Two days later, Smith announced that Legislative Audit had accepted the request.

Its findings are expected to be heard later this month.

In October, Smith wrote a letter, co-signed by the same three officials who signed the audit letter, requesting an opinion from the Arkansas Attorney General on Boldt’s use of Advertising & Promotion Commission funds. No opinion had been issued as of last week.

Meanwhile, the water park and convention center have been rumbling along while the city waits for the liens, lawsuit, legislative audit and AG’s opinion all to work through the system.

Smith said there’s not enough data yet to determine how successful the city-assisted elements of Crossroads have been.

The water park was open only for a partial season, and the convention center hasn’t been operational for very long either.

“I’ve always been for the convention center and water park,” he said. “I’ve been for the incentive packages. It’s just a matter of the way it was managed.”

And despite the drama, Smith expressed optimism about the future of his town.

“Texarkana continues to grow regardless of the controversy surrounding it these past few months,” Smith said. “We continue to grow, and we anticipate that we’ll continue [to grow over] the next three to five years.”

Boldt, for his part, has in the past told Arkansas Business that his only goal was to grow the city.

“There wasn’t any development until the board asked me in 2007 to aggressively pursue economic development,” he said in July. “That’s exactly what I’ve been doing. There has been more development down there in maybe 30, 40, 50 years, and I’m very proud of that accomplishment.”



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