Taxpayer cries foul in convention center hotel deal

by Cole Dittmer
Wednesday, March 5, 2014

One of the original plaintiffs in a 2005 lawsuit against the City of Wilmington regarding the development of an Embassy Suites adjoining the Wilmington Convention Center has again called the city’s plans for the hotel into question. 

On Thursday, Feb. 27, Raleigh-based attorney E.D. Gaskins Jr. filed a show cause order on behalf of Glenn Wells after Wilmington City Council unanimously approved the sale of the 0.76-acre Cape Fear Riverfront property to Harmony Hospitality, Inc. on Feb. 4. 

The sale price was $578,820, $741,180 less than the appraised fair market value of the property. 

Ingram and Company, Inc. appraised the property at $1.32 million in September 2013. The value of the land listed on the New Hanover County property tax website is $875,500.

During city council’s Feb. 4 meeting, city manager Sterling Cheatham said the sale price was based on a 2007 appraisal and the results of a request for proposals the city submitted in 2011 for the development of a hotel on the property. In determining the property value, Cheatham also said the city was able to take into consideration the projected tax and parking revenues the city would collect as a result of the hotel’s development based on North Carolina General Statute 158-7.1. That figure is estimated to be $6.4 million during the course of the next 10 years. 

The 2005 lawsuit resulted in a consent order from North Carolina Superior Court Judge Paul Jones, which in part stipulated, “No public funds of any nature shall be used to acquire, build, equip, operate or otherwise underwrite or subsidize the Hotel or its operation.” 

The city contests that the difference between the sale price and the 2013 appraised property value is greatly outweighed by the prospective revenue that would come to the city from the hotel. 

Representing Hilton Wilmington Riverside owner Sotherly Hotels at city council’s Feb. 4 meeting, Wilmington attorney Matthew Davis said the city’s rationale in using NCGS 158-7.1 to justify the lower sale price was contrary to the language of the consent order. While the statute does allow local municipalities to determine a sale price considering prospective tax revenues from the development of the property, Davis said the consent order’s prohibition of any subsidies blocks that. 

On Tuesday, March 4, Gaskins said his client wanted to bring the sale price difference to Judge Jones’ attention. Being a taxpaying citizen of New Hanover County is Wells’ concern in the matter, Gaskins said. 

“All he is doing is asking that the city conform to the consent order and asking Judge Jones to confirm whether it does or doesn’t,” Gaskins said. “A show cause order is a proceeding where you ask the judge to determine whether there was some either past or prospective violation of the court order, and then what the consequences are of that is really the judge’s determination.”

On Friday, Feb. 28, the city released a statement about the show cause order, which stated, “The City believes very strongly that we are in full compliance with all state laws and the 2006 consent decree and we are confident that the court will rule in our favor.”

Councilman Kevin O’Grady alluded to the prospective revenue generation for the city in supporting the city’s stance. 

“I think that the resolution we passed pretty much states our case,” O’Grady said on Tuesday, March 4. “We think the property, according to North Carolina law, will produce value far in excess of its value. Other than that, we have nothing to say.” 

The city will pursue the sale of the land to Harmony Hospitality, said city public information officer Malissa Talbert, adding that the city would address any judicial rulings if and when they arise. 


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