In the wake of a state audit, a criminal probe, a whistleblower lawsuit and an investigation by private citizens, the former mayor of Texarkana has concluded that he and other city directors were rooked.
Now Wayne Smith, who as a member of the city board of directors voted for one of the transactions, says City Manager Harold Boldt should be fired — again.
At issue is the Crossroads Business Park development fronting Interstate 30 on the Arkansas side of Texarkana. Between 2009 and 2012, Boldt persuaded city directors to approve a series of deals to develop a convention center and water park.
In the end, the developer, Dr. Hiren Patel of Texarkana, Texas, invested a total of about $148,500 and owns more than 11 acres of the project, while the city spent $1.92 million to add less than six acres to land it already owned.
“Unfortunately the city of Texarkana, Arkansas, was the one that came out with the short end of the stick. And to be represented by our city manager … I would just question who he’s looking out for. It wasn’t the city, I believe,” Smith told Arkansas Business in a recent interview.
The city has also paid Patel more than $2 million from Advertising & Promotion Commission taxes collected since 2010, a contractual arrangement that the city’s new mayor is ready to halt.
“I’m a former business person, and I don’t think that investing and giving money to an individual is appropriate ever,” said Ruth Penney Bell, who was sworn in as mayor on Jan. 5. “That’s not what the A&P [commission] was set up to do. And I’m hoping that we will have learned a valuable lesson.”
An agreement between the city of Texarkana and Patel set the development of the Crossroads Business Park in motion in November 2009: The city would purchase 4.189 acres of land for nearly $1.4 million to be used for a new convention center and hotel.
The doctor, meanwhile, planned to purchase 4.5 acres of land from the same seller for $100,000.
Then in May 2012, Patel purchased 8.95 acres of adjacent land for $585,000 to construct a water park. The city stepped in four months later to grant him easements and pay $536,019 to buy 3.51 acres from Patel’s company — still to be used for the water park.
Both purchases were negotiated by Boldt and approved, along with a list of incentives for the projects, by the city board of directors. Boldt has previously said the Crossroads Business Park was the result of the board’s request in 2007 for him to aggressively pursue economic development. He agreed to resign in March 2013 with a $162,000 severance payment and was rehired later the same year.
The deals with Patel have been the target of additional research by two residents of the city, Tom Cabaniss and Dennis Young, whose previous research into the development led in part to a review by the Arkansas Division of Legislative Audit.
Legislative Audit flagged several violations of state law in the city’s handling of the project, and the prosecutor who took over the investigation into the audit said it is continuing.
Land Deals
As the potential for criminal charges looms, a review of land purchases and contracts between the city and Patel shows a relationship in which the city manager was quick to arrange favorable treatment and raises questions about who had control over the city’s investments. The project that was intended to spur economic development in the city has also failed to lift its revenue enough to outpace expenditures.
Smith, who served one term as mayor, is now calling for the city manager to leave office, arguing he misled the board into a bad investment.
And the current mayor, Bell, said that “abuses” occurred.
“We have to rely on our city manager to be forthcoming on everything, and I don’t know if it was the zeal to get construction in that Crossroads Park that led to these abuses. I do not know what led to these abuses,” Bell said. “Obviously, there were some egregious errors made by our city staff and by us as a board, because we were working off of information that was not fully disclosed or was disclosed in a way that would appear one way when in reality it was totally different.”
Boldt did not return repeated attempts to reach him by phone or email for this story aside from complying with a Freedom of Information Act request for documents related to the land deals.
Patel and his attorney also did not return phone messages last week.
Boldt eventually crafted the plan to bring the convention center and hotel — and later the Holiday Springs Water Park — to the land just off Interstate 30.
In a presentation to the board Nov. 2, 2009, he made the details of the project public. Boldt asked the board to approve an agreement for Patel’s company, Texarkana Hotels LLC, to build the hotel and convention center and for the city to purchase the 4.19 acres of land to be used in the project.
“He said this was probably the best opportunity the City could ever hope for in today’s economy,” the meeting’s minutes read.
After a brief discussion, the resolution passed unanimously. But it’s unclear whether the board was aware that Patel would spend $100,000 to purchase more land than the city got for its $1.4 million.
According to county records, the seller, Aven Williamson, bought the plot two years earlier, in 2007, as part of a 26.754-acre purchase for $692,000. Williamson did not return a phone call seeking comment.
The second major land purchase by the city came in September 2012.
Boldt again addressed the board, explaining that the water park had added complexity to the development that required some replatting. He said the city needed to swap land with Patel’s water park company, Holiday Springs Water Park LLC, grant easements and reimburse him for purchasing some of the property on his own.
“In his agenda summary, Mr. Boldt put in a price of $2.95 per square foot of land, which was his understanding. Apparently, he put in the wrong number and it should be $3.50 per square foot,” the meeting minutes read. “Mr. Boldt said he had a new name for this replat, ‘the replat from hell,’ but said the outcome would be fantastic,”
A single-sentence agreement, dated eight days before Patel purchased the land, states that the city “will buy up to 5 acres of land at 2.95$/ft from Hiren Patel.” The purchase amount increased to $3.50 in a commercial contract signed by Boldt and Patel a month later.
Smith, who became mayor at the beginning of 2011, surmised at the meeting that “things happened” during land negotiations, including the price increasing by nearly 20 percent, and the resolution again passed unanimously.
It’s unclear if the board members understood that they were voting to pay Patel 90 percent of his purchase price in exchange for less than half the land.
Jay Wommack, owner of the Wommack 6 Corp., which sold the water park property to Patel, did not return a phone message.
Cabaniss and Young have studied the land deals and say that the city’s investment in the business park was a bad deal. The two men compiled a report on the transactions and delivered them to more than a dozen law enforcement agencies and officeholders.
Smith posted the findings on Facebook soon after receiving a packet, accompanied by this message: “The citizens of Texarkana Arkansas have been the victim of inappropriate Crossroads Land Deals!”
Smith said in an interview with Arkansas Business that the board was not given the full picture when it was presented with the resolutions. While Smith supported some proposals Boldt presented, he said he wasn’t always provided with all of the details about Boldt’s interactions with Patel.
Audits and Litigation
A February 2014 report released by the Division of Legislative Audit, which found several cases of inadequate documentation for expenses, among other violations, also noted “several other unusual transactions authorized by the City Manager.”
“These included the City paying significantly more per square foot than the investor paid for real estate, the City committing to make annual contributions and refund all A&P taxes to the hotel and water park for several years, the City waiving building permit fees, and the City reducing water rates for the water park and committing to negotiate for reduced rates in the future. However, there was no indication that the City Manager benefitted personally from these transactions, which were approved by the Board and/or A&P Commission,” the report states.
The report was forwarded to the prosecuting attorney for the 8th Judicial District-South, and Legislative Audit declined to release the working papers from the audit, citing an exemption from the Freedom of Information Act for documents related to an ongoing criminal investigation.
Carlton Jones, the former prosecutor for the judicial district and now a circuit judge, said the investigation into the audit was continuing and that he had passed it on to the new prosecutor, Stephanie Potter Black. He said there were “other facets” that he believed were still being investigated.
“There are some other things that are being looked at in regard to that whole audit and the resulting findings therefrom,” Jones said.
Black, who became prosecutor last month after Jones became a circuit judge, said she has met with the head investigator and that she planned to wrap up the investigation in the coming weeks. She said her office plans to interview one other person, but declined to identify that person or say if charges would be filed.
Boldt is also the subject of a federal whistleblower lawsuit in which he is accused of firing an employee who tried to report wrongdoing. A week after Boldt was rehired in 2013, he “began the process of terminating” the city clerk, Patti Grey, according to the lawsuit.
In the complaint she filed in April, Grey said Boldt accused her of telling city directors that he had stolen a stamp that included her signature and Boldt’s. She claims she was asked about certain checks that had the stamp during the legislative audit, but only provided a list of checks “where her stamp was used without her knowledge.”
Grey is seeking back pay, compensation for damages and reinstatement.
Boldt denied the allegations in a response filed in December.
Incentives and Liens
According to the city finance department, Patel’s companies have received more than $2 million in payments through the Advertising & Promotion Commission since 2010 as part of the agreements to develop the business park.
The agreements require the city to pay Patel’s hotel company $150,000 per year for 15 years from A&P funds and the water park company $250,000 per year. The city also agreed to refund all A&P taxes collected at the hotel for 15 years and at the water park for 20 years.
In 2014 alone, finance department records show, $47,703 in taxes was refunded to Patel.
The city has budgeted to pay Patel’s companies another $484,286 in 2015.
Bell, who served for six years on the city board before becoming mayor, said she wanted to see an end to the payments.
According to county records, three liens totaling almost $135,800 have been filed on the hotel and convention center.
Those liens were filed by Xtreme Steam Carpet Cleaning in December 2013 for $53,686, ADS Erectors the same month for $31,702 and Tatum Excavating in November 2013 for $50,394.
A review of county records did not indicate that the liens had been released.
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