Arkansas Blog: Wheeling and dealing at LR Port UPDATE

^{SLACK: LR Port's slackwater harbor.}

A reader, Downtowner, last night posted a comment on the open line about the collapse of a promised new industry at the Little Rock Port and taxpayers' friendly subsidy to the Indian pipemaking company that left us high and dry. Some good questions were raised, including about the reported repurchase price, and the absence of public notice of the taxpayers' welfare handout. Plus, Downtowner noted that to say Port money was used is a trick to mask use of taxpayer money.

The Democrat-Gazette followed up today with a good article on the amount spent to develop the site for the industry that isn't coming.

The key details, according to the daily newspaper's reporting so far:

* Indian company, Man Industries, bought the land in August 2008 for a total of ~~$1.1~~ $2.1 million. The City Board, with no meaningful public notice and without a peep of discussion, bought the land back Tuesday for $2.3 million. A profit in a year in the worst economic climate since the Great Depression? Was a legitimate appraisal done? Might the mayor explain this windfall for our friends in India? Might he explain why the Board saw it unworthy of discussion Tuesday night? Might he explain how the news popped up only a few hours before the action and why there was a need for such a rush? Profit or no profit for sellers, why did the city have to buy the land? It didn't own it before and apparently had no interest in owning it before.

IMPORTANT UPDATE: Arkansas Business sends along its information on the original land purchase. Its records show that Man Industries acquired the land, not for $1.1 million as the D-G has reported, but for about $2.1 million, or near the amount the city paid to repurchase the property. (The assessor's records, on which the D-G relied, apparently carried an inaccurate sale price listing, so cut the newspaper some slack.) That lessens the outrage, but it still doesn't explain why the city had to buy the land in the first place or whether it did any negotiating with the company as to the broker fees, recapture of other infrastructure expenditures, etc. I'll put the original AB report on the land acquisition on the jump. Also there is a comment from Mayor Stodola, who notes D-G error on land purchase price, and subsequently answers further questions. Also a comment from a real estate developer. Here's a city of LR release on the matter. The business comunity pitch (in which no amount of money spent by government on development is wrong) is that this is a canny investment for the future. Let's hope so. Why wasn't it cannily made years ago at a cheaper price? And what about all the other vacant land out there? Buy it, too? It costs money to warehouse property without return revenue, in lost earnings potential if nothing else.

* Pulaski County has spent almost $100,000 on redesigning a road for the plant. Will the expensive project go forward in some fashion anyway? Sounds like it might. Central Arkansas Water will spend more than $100,000 to extend water service. The Little Rock sewer utility will spend some amount on new sewer service in the area, whether directly related to this project or not is unclear, though it seems likely some cost was involved. Did local officials attempt to claw back a dime of this outlay from the departed industrialists?

Someday, we're assured, this $2.5 million or so public investment in land and infrastructure will pay off with another development at the port. Promises, promises. I hope the return comes sooner than what we experienced on the vaunted slackwater harbor built by taxpayers. And don't forget, port reserves accrue from a publicly supported operation.

It was another undiscussed hurryup done-deal financed by taxpayers, who had no meaningful opportunity to give opinions. . They might have howled. The same-old, same-old gets tiresome.

UPDATED COMMENT: Clearly, lack of oversight by media contributed to this deal going through on a moment's public notice. The deal is not as bad as the daily newspaper reporting made it appear. Questions linger with me, still, why those who so vigorously defend the purchase today hadn't sought to purchase the land long ago if it's so vital to be in public ownership. Also, in today's market, I question whether the city negotiated hard enough with the seller. If the land is worth more today because of TAXPAYERS' investment, that benefit shouldn't accrue to the seller, but to TAXPAYERS.

FROM ARKANSAS BUSINESS:

Industrial Assembly
About 155 acres in east Little Rock were assembled for a pipe plant in deals totaling more than $2.1 million.

Man USA Inc., an arm of Man Industries (India) Ltd., acquired the property along Zeuber Road on the south side of the Little Rock Port Industrial Park.

The sellers were Jane M. Baugus Ltd., led by Perry McKimmey, $1.14 million for 83 acres, and Butterfield Investments Inc., led by Frank Whitbeck, $1.03 million for 72 acres.

FROM MAYOR MARK STODOLA

-----it may not be a surprise to you that unfortunately, the DG got it wrong this morning in their article on this subject. The Port Authority is only willing to pay to Man Industries what they paid for the property which was purchased in April of '08, plus the costs of some engineering, environmental, soil study and survey work all of which will become the property of the Port. The property was surveyed at the time of purchase according to what I have been told. The $1.1 million price calculated is totally wrong. There were several purchases with different members of the Baugus family.

I have repeated to the mayor my various questions, including: 1) why should Indian firm be held harmless, including out-of-pocket expenses, for a bad acquisition that has cost taxpayers additonal dollars? 2) what about real estate commissions? 3) why buy land now that wasn't sought previously? 4) what was the hurry? 5) why no discussion? 6) why a lack of constructive notice? 7) was there a report on all the related investments by public in deal before board voted to make the Indian firm whole?

FURTHER RESPONSES, BY BLACKBERRY, FROM MAYOR STODOLA WHO'S AWAY:

First, I understand a follow up press release is being prepared which should give your more details. I have not seen it, but I understand the Port and LR Metro Alliance are preparing it .

As to your questions:

Port Authority in best position to answer, but I would observe that Man put the property on the market for sale at the price they paid plus the additional costs incurred. Since Port and City have no eminent domain authority for economic development , thus severely limiting future possibilities for acquisition by the Port Authorit at some speculative future price.

As an autonomous board of the city which does not depend on taxpayer $$ for their activities, the PA deliberated and voted to use their revenues, for this intended purchase at a meeting which I believe was held in April.

There is VERY little property left in the Port which is available for development and industrial recruitment . As I recollect, there is only one small 40 acre tract left which the Port owns. Property on riverside of Slackwater harbor needs to be substantially raised per Corps requirements before it can be used. Even so, it is also a very small piece of property.

The huge successes we have had over the last 2 yrs in industrial recruitment has largely occurred on Port Authority land. I believe they would tell you, it is important for the Port to own the land rather than speculate on whether it might be available in the future.

There was no fait de accompli. The matter was referred to us by the PA; we receive info from them and City Manager in our agenda books; this info was provided to us and our review at the Agenda meeting the previous week which is also covered by the press. Each member has the opportunity to have an item separately discussed at the following Board meeting. There was no secrecy concerning this item; maybe the press missed reporting on this, but there was certainly no secrecy. Usually, the press does not often cover PA meetings.

The economic team of the City, LR Metro Alliance and AEDC are actively pursing new industrials prospects. I hope this provides you with a little more information on this subject.

Thank you. Mark

FROM A LOCAL COMMERCIAL REAL ESTATE DEVELOPER

The D-G didn't blow the price of Man USA land. Assessor had the sell from Baugus to Man at $114,600, as the newspaper reported. But as for the comments from readers about scarcity of land, please see that teh Port Authority advertises having 700 acres available out of 1,500. All this land may not be Port owned.

All taxpayers are asking is for the Port Authority to aggressively negotiate a price. Was a lower offer ever submitted? I am sure if the property sat awhile, in this environment, the Port could of gotten a lower price.You would think most sellers are desperate, especially one based in India

Comments

Who were the agents representing the port & MAnn?

Posted by: Jerry | June 18, 2009 09:12 AM

Out-freakin'-rageous.

Heads should roll.

Posted by: hugh mann | June 18, 2009 10:05 AM

Wait until word of Little Rock's loose pocket gets around Mumbai. They will be lined up to make deals with L.R.

Posted by: eLwood | June 18, 2009 10:20 AM

http://arkansasnews.com/2009/06/16/man-industries-pulling-out-of-100m-lr-project/

By Zack Stovall
Arkansas News Bureau

The Little Rock Port Authority scheduled a meeting Tuesday night to discuss repurchasing the land it sold to Man Industries for the same price it originally sold.

"Arkansas taxpayers aren't out anything," said Matt DeCample, spokesman for Gov. Mike Beebe.

???

Posted by: 45 | June 18, 2009 10:26 AM

Yesterday either on the radio or in the paper it was specifically stated that no incentives had been actgivated so there were none to recoup.

I took it this morning when I say all the costs in the ArDemGaz that someone was mistaken, OR LYING!

Posted by: Citizen1 | June 18, 2009 11:12 AM

Whatever surplus money remains in the hands of the Port people should be seized immediately.

All that time, energy, and money for a bunch of 9.00 per hour jobs. Was a debacle from the get go.

If these things don't convince you "the criminals are still in charge!" and that we are heading in a one-way direction towards third world status.. I don't know what will.

Posted by: Eureka Springs, AR | June 18, 2009 11:12 AM

Meanwhile, Lake Maumelle remains unprotected because there's not enough money. Perhaps we should find a company that would buy it so we could buy it back from them.

Wait, that's already happening.

Posted by: Country Boy | June 18, 2009 11:16 AM

Maybe we should import some of the Iranian protesters once they're done. Lord knows we won't take to the streets.

Posted by: Quapaw | June 18, 2009 11:20 AM

We need to install the stockades in front of city hall for things like this. Drag all involved parties outside and lock them up in scorching sun. Piss on them if they get thirsty or hot. They deserve it.

Usually this kind of insider trading and quick cash is reserved for friends and patrons of good ole boys who grew up in tar paper shacks. What gives on letting them "furiners" steal our cash?

Posted by: calmwriter | June 18, 2009 11:28 AM

Jerry got that right off. It is not the furiners that are behind this, it is the local real estates boys taking the big payoff. Of course they spread the money around. What is the answer to Jerry's question? Do we really need to guess?

Posted by: GeorgeRastasPeabodyIII | June 18, 2009 12:08 PM

Let me take a guess, Moses-Tucker probably respresented both sides of the deal

Posted by: EasyB | June 18, 2009 12:11 PM

As rotten as this is, do any of us really believe there will be one ounce of political cost for deals like this come election time? It's not a D or R thing, it's a confusion nationwide of the role of government. I, for one, don't expect this issue to be much more than a fly on the back of water buffalo at the ballot box -- although I'd love for stuff like this to cause an informed electorate to respond and reward/punish accordingly. 'Not holding my breath.

Posted by: AandAsDad | June 18, 2009 12:29 PM

What part of "bought the land back for the same price it was sold" do you guys not understand??

There is no grand conspiracy here, you all sound bizarre. The only travesty is that the DemGaz totally blew the story, creating a big fervor for no reason. Check your facts, that's the lesson of the day.

ARK. BLOG: Except, 1) the city didn't buy the land "back." It didn't sell the land. Private owners did. 2) It didn't buy it back for purchase prices, it also covered the Indian company's other expenses. 3) It also got no consideration for the city's own out of pocket expenditures. It never wanted to own the land before. Now it owns it. It might be a good deal. Might not. We'll know someday. But it merited more discussion than it got. None.

Also, the port's own website, presuming it's up to date, indicates there's 700 acres available in the industrial park.

http://www.littlerockport.com/business/indpark.html

Posted by: TonyThom | June 18, 2009 12:32 PM

Nice try Tony. You must have a response for Max. Please.

Posted by: GeorgeRastasPeabodyIII | June 18, 2009 01:10 PM

Now, we own land that we can give away as an incentive for bringing new jobs.

Yeah, all of this outrage is truly unbelievable. Unbelievable that we don't care, that is.

Anyone remember the parking deck they tried to give away before the investor left town, bills unpaid.

Posted by: GeorgeRastasPeabodyIII | June 18, 2009 01:15 PM

At the risk of disappointing all of you, let me point out a few minor things:

1. The $200,000 "profit" accruing to Man Industries could easily be accounted for by expenditures Man has made toward property improvements between the original time of the purchase and now.

2. The need for buying the property "back," or in the first place? Well, it works like this. This piece of property that was worth $2.1 million last whenever now has a water line, the engineering and right-of-way in place for a sewer line, the engineering and right-of-way for a road improvements and perhaps some of those improvements made. IT AIN'T UNIMPROVED PROPERTY ANY MORE, FOLKS. It's worth more than it was. And if some investor buys it Right Now and turns around and offers it to an industry that's considering Little Rock for $3 million instead of $2.3 million, that's $700,000 worth of reason the company has to look at for going somewhere else.

3. Oh, and that "corporate welfare" y'all keep screaming about? Let my try to explain this real simply. You spend 3 million on infrastructure improvements for this company (I'm pulling that figure out of the air; it may be more, it may be less). Company hires 300 people it pays an average of $25K per year. These people are going to pay state income taxes of about $450,000 on that income. The property taxes on this project are going to run about $470,000 (assuming a 47-mill tax rate and a $100 million investment). Or, $920,000 per year in income the public coffers WERE NOT GETTING prior to this industry's location. And that does not touch the state and local sales tax the employees of this company spend on the goods and services they buy with their paychecks. Nor the property taxes on their homes. So, conservatively, let's say we're looking at $1.2 million a year in new public revenue. Let's see. I'm going to pay $3 million on your behalf, for public infrastructure you cannot pick up and take with you, and in turn you're going to pay me $1.2 million a year AS LONG AS YOU OPERATE IN THAT LOCATION. Uhhh....folks, I will do business like that All Day Long.

And just out of curiosity -- I have no idea, may be so, may not be -- did real estate folk play a role in this purchase at all? Often in deals of this type, they don't. May not have BEEN any commissions, etc.

I know. It doesn't fit wtihin the accepted liberal canon, and y'all may not let me have my Obama sign in my yard in '12. But it's worth looking at the other side before you write it off.

Posted by: deltanomics | June 18, 2009 01:22 PM

Who the fuk are you kiddin deltamaniac. Property taxes are forgiven on these incentive deals. I think there are other give-aways too many to mention. Nice try. Now give them back the vaseline.

Posted by: eLwood | June 18, 2009 01:34 PM

Thank you, Tony, and thank you, Delta. What a bunch of ranting about nothing. The Port now owns the land and can find another buyer. It can sell the land with improvements which, as Jay Chessir said in the ADG this morning, is a more attractive deal. The Port may be out a little money in the short term, but will recoup.

Posted by: booboo | June 18, 2009 01:40 PM

Some interesting background on how Man Industries was recruited to Little Rock in the first place -

http://www.siteselection.com/ssinsider/incentive/

I've been thinking for a while that doing business with India is going to be the downfall of some well-known political figures. (That's a knock against the politicians, not the great nation of India.)

Posted by: Arkansas Blogger | June 18, 2009 02:29 PM

Stodola noted the "deal" did not go through on a moment's public notice as you claim, Max. It was on the Agenda at last week's board meeting and this week's.

ARK. BLOG: Yes. And my updates note this. Question remains. 1) If you wanted this land, why didn't you buy it years ago. 2) Did you let them set the price -- hold harmledss -- with no counter-offer? Why?

Posted by: booboo | June 18, 2009 05:23 PM

Mark Stodola has got to do something while he's out of own to justify his $160,000 salary. He might be angry about the raise Ernie "Pass-me-the-money" talked his way into.

Posted by: dottholliday | June 19, 2009 01:41 AM

eLwood: Try to get it right before you bitch me out. Up to 65 percent of taxes MAY be abated (are not automatically) in a deal like this. 35 percent of the taxes on a $100 million investment are significantly more than 100 percent of the taxes on unimproved property. No one's income taxes are abated, so that income isn't touched. I do not know what percentage, if any, of the property taxes on the Man deal were abated. Get back to me when you check that out.

Posted by: deltanomics | June 21, 2009 08:11 AM

Arkansas Blog

Wheeling and dealing at LR Port UPDATE

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