A city of Corpus Christi board has voted to terminate a tax incentive agreement with Elevate QOF LLC, developers of the controversial new Homewood Suites downtown, and offer a $1.5 million settlement.
The Aug. 10 vote by the city’s Type B board, which had approved the contract for as much as $2 million in tax incentives more than two years ago, is driven by mediation underway in a lawsuit related to the agreement, documents state.
A cover page signed by board Chair Diana Summers requests that the city’s director of finance and procurement wire $1.5 million in settlement funds to the office of attorneys representing Elevate.
Board members in the letter make the request that it is done in “all due haste.”
“The effect of this agreement is intended to spur the lawsuit’s resolution, at the mediation that started this morning, making its funding request urgent,” it states.
The contract is shown as signed by Summers; Deven Bhakta, among Homewood Suites’ developers; the city’s outside attorney, hired to represent the city in the litigation; and one of Elevate’s attorneys.
The Type B board oversees the award of incentives, supported by revenue of a portion of sales taxes, for economic development.
The legality of what the board is requesting is a question that requires vetting through attorneys, said City Manager Peter Zanoni on Aug. 10.
It’s not clear, either, whether the request — if legal — would require a vote by the City Council, he said.
In the meantime, the city won’t wire funds as described in the documents, Zanoni said.
The board’s majority vote falls on the heels of Mayor Paulette Guajardo’s removal hearing, which had largely focused on the agreement and whether it had been approved under false pretenses.
That event, in which a council tribunal ultimately ordered that Guajardo be suspended for 30 days, is not referenced in documents approved by the board Aug. 10.
Developers have asserted the discrepancy was inadvertent and not with intent to deceive.
The board’s resolution
The board had lawfully entered into the agreement with Elevate, and subsequent votes by the City Council also complied with the law, a resolution attached to the letter asserts.
It references a lawsuit against the city of Corpus Christi and Guajardo, filed nearly two years ago by competing hotelier Ajit David, who has sought the contract be declared invalid.
The board doesn’t believe those findings appear “imminent or likely,” the document states.
Although the agreement is between the Type B board and Elevate, the majority of the City Council had voted in May to issue the company a default letter, asserting that Elevate had made “misleading material representations made to the Type B Corporation.”
It is a reference to allegations that developers had falsely stated the purpose of the requested funding and had used an altered screenshot in a PowerPoint presentation to support the pitch.
The board last month rejected statements made in the council’s default letter.
Despite the board’s contention that the council is not permitted by law to interfere with its contracts, the resolution adds that “the protracted and indirect challenge to the agreement via its funding ordinance places uncertainty in the minds of economic development prospects.”
Elevate’s investment into the property “exceeds $28 million, with well over $2M of the investment, reimbursement eligible project costs,” according to a board resolution.
The hotel is in “substantial compliance” with the agreement, the documents state, asserting that it has been constructed “in a manner to provide new employment in the type and amounts agreed to.”
That includes “street level retail, public space, and outdoor dining area activation,” as well as “gray box and finish out, including floodwall and dry flood proofing to allow for consistent street level access,” according to the resolution.
Mediation
The majority of the City Council had voted to pursue mediation in David’s lawsuit. It was expected mediation would begin Aug. 10.
Summers wrote in a message to the Caller-Times that the board hadn’t received “an express invitation to participate in the ongoing mediation,” but that representatives “proactively explored whether, as an interested stakeholder, they could help facilitate a resolution that would support a conclusion in a manner consistent with the direction adopted by the City Council when it voted to proceed with mediation.”
“At the direction of the Board, its legal counsel explored whether a solution could be found, without exposing the City and the B Corporation to further litigation,” she wrote in the Aug. 10 message. “Weeks of work paid off by securing this agreement. The agreement eliminates 25% of the prior agreement’s financial incentives [$500,000], redirecting those funds to protect the B Corporation from being drawn into the court room, reimburse city legal expenses.”
After the 6-0 vote earlier in the day, Summers addressed the audience in the board’s special meeting, stating that the board was “hopeful that by bringing this chapter to a close for the Type B corporation, this will support the ongoing efforts of the parties in litigation to reach a resolution that will bring this matter to a conclusion.”
“It is our sincerest hope that doing so will allow all involved to move forward in the best interests of the citizens of Corpus Christi and restore the community’s full attention to the priorities and issues that matter most to the residents,” she said.
(This story was updated to clarify a headline.)
Kirsten Crow covers city government and water news. Have a story idea? Contact her at kirsten.crow@caller.com.
This article originally appeared on Corpus Christi Caller Times: City board seeks settlement to end incentive contract with hotel developers
Reporting by Kirsten Crow, Corpus Christi Caller Times / Corpus Christi Caller Times
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By Kirsten Crow, Corpus Christi Caller Times | USA TODAY Network
