The decision to sell the old post office building to Phat Tire raised some controversy at Tuesday's city board meeting.
Board members spent more than an hour discussing the issue and listening to comments from community members before voting 5 to 2 to sell the building to the Bentonville-based bicycle chain for the price of $260,000. Directors Mindy Hunt, Brad Burns, Reid Carroll, Carol Smiley and Bob Coleman voted in favor of the sale while directors Marla Sappington and Lesa Rissler voted against it.
The city has owned the former post office building on and off since 2001, according to City Administrator Phillip Patterson. The city considered turning it into a home for the Siloam Springs Museum, but after struggling to raise the money and considering moisture problems with the building, the museum board decided instead to renovate their current building on Maxwell Street.
City board members published a request for proposals for the property in February 2017 and Phat Tire was the only party to submit a proposal, Patterson said. In June 2017, the board agreed to a contract to lease the building to the bicycle company with the option for the company to purchase it after three years. In November 2018, the board passed a resolution agreeing on a price of $260,000 for the purchase based on recent appraisals that were made after repairs were completed, he said. The covenants to maintain the facade of the building as well as the historic mural inside will be transferred with the sale.
The price will allow the city to profit approximately $46,000, when taking into account the money spent to purchase the building, make repairs to the roof, remove asbestos, and renovate the heating and air system, plumbing and electrical system, as well as income from the lease agreement, sales tax revenue and utility payments from Phat Tire, Patterson said.
Selling the building aligns with the 2017-2018 board goals of finding a solution for the old post office building and encouraging more small businesses to come to Siloam Springs, he said.
Nickel Potter, director of operations for Phat Tire, said the business started in Bentonville in 2007 and now has nine locations, including Siloam Springs. Since coming to Siloam Springs 22 months ago, the business has sold more than 200 bicycles and paid more than $10,000 in city sales tax and $48,000 in total sales tax, he said.
Phat Tire spent about $30,000 to renovate the floors and walls of the old post office building, he said. The building provides space for corporate employees to work and functions as a central receiving and transport location for stores in Oklahoma, he said.
The Siloam Springs shop has a nine employees, including two full-time staff members, and makes a habit of hiring John Brown University students, he said. The local shop has led 200 group rides and supported local events such as bicycle races, bike nights and a kids triathlon, he said.
Residents Mark Miller and Kevin Williams addressed the board about their concern the building's price is too low.
Miller said he and other developers were never aware of the request for proposals on the building.
"Nothing against small business, I hope (Phat Tire) stays in the building, but I think it's your fiduciary duty to the city to get the best possible price for that property," Miller said. "I don't think all efforts were made to secure that."
Residents Melissa Gute, Patty Arnett and Heather Lanker, who all own downtown businesses, addressed the board in favor of the sale, explaining that Phat Tire is a good neighbor that brings more customers downtown and helps local residents use the trail system.
"I am Phat Tire's neighbor and they have been great neighbors to us," Lanker said. "I mean they answered the call. They did the work. I think they deserve to be in the building."
Director Rissler echoed Miller and Williams' concerns. She said she did her own research and believed the sale of a downtown building to the Chamber of Commerce at a lower nonprofit price brought down the comps on the 2017 appraisal for the old post office building. She shared numbers of several newer building sales that have sold since at a much higher price.
Rissler said she called the Arkansas Municipal League and the organization's attorneys told her that past board members could not bind a future board by a resolution and the previously agreed upon price for the contract was not binding.
City attorney Jay Williams said the resolution may not be binding but said the city could face legal repercussions if they did not honor the contract. After being pressed by Rissler, he was reluctant to say exactly how legally binding the contract is.
"Right now you are getting into a potentially complicated legal issue and depending on what happens I might have to defend the city in court, so I don't want to make an argument that could later be used against us," he said. "But I just want you to understand there are risks if the city does not honor the price specified here, so just be aware of that."
Director Sappington also raised concerns that the city is only making $46,000 from the building sale.
"If we are responsible to the city to do what is best for them, then I don't agree with the price," she said. "I would like to table this until we have time to check with the municipal league. ... I just don't think we are doing justice to the citizens by honoring the price that was set three years ago."
Director Carroll said he appreciates the way Phat Tire has woven itself into the community and addressed the issue of getting young people exercising outdoors. He said he also appreciates the way the business has worked to make downtown a better place and helped other businesses succeed.
"When we have a unity like that downtown, it's greatly appreciated and to drag you through what we are doing tonight, I will say it right now, I am ashamed," Carroll said. "It angers me and I don't think it's proper as a city to be doing this. I am not looking at legality, I'm looking at what is our moral obligation and what I believe is our ethical obligation. We have entered into an agreement with you and being the person I am, I want to do what's best for our city, but I also want to live up to an agreement. And some things that might be taking a step what some may consider back, but we are going to have some integrity in the community and I am going to be part of it."
Directors Smiley, Burns, Hunt and Coleman also made comments in favor of selling the building.
Coleman noted the city did its due diligence in pricing the property and entering the contract with Phat Tire, noting that anyone could have bought it over the past 14 or 15 years. The building is also constructed over a running stream, which causes disintegration and mold issues, and also had asbestos problems, which affect the property value, he said.
"As an investment advisor, I wouldn't consider this to be the very best investment response in the whole world but we've come up with a positive figure in our experience over the years with this building, however it be a rather small interest (rate), but it is in the black," Coleman said. "I certainly wouldn't want to see us at this point sit still and redo what someone may allege we didn't do in the past when we really do that. I think we need to take every opportunity we have to get the city out of the landlord business at a profit, how be it rather small, and look forward to the successful completion of the sale."
Smiley noted she was on the museum committee and toured the building many times. It would have been almost $1 million for the museum to bring the building up to code. She also pointed out a new appraisal could make the property value go down instead of up. Smiley described Phat Tire as a very stable company that brings economic value and employment to the community. Phat Tire took a risk on the building and made a commitment, she said.
"I think we should honor the commitment we made," Smiley said.
In other business, the board took the following actions:
• Approved a budget amendment for $12,500 for the Chamber of Commerce for a makerspace and an agreement with the Chamber for the operation of the space.
• Approved a $29.42 million contract with Burns & McDonald Engineer for design/build services for the upgrade of the water treatment plant.
• Approved the second reading of Ordinance 20-01 for the annexation of 4.99 acres at 3480 U.S. Hwy. 412 E.
• Approved the second reading of Ordinance 20-02 governing the installation and relocation of utility and communication lines below ground.
• Approved Resolution 05-20, amending the 2019 budget to include $6,271 for dissolved oxygen sensors for the wastewater department, and $200,000 for the electric department for materials and supplies required for repairs after the electrical system was damaged by the October storms.
General News on 01/26/2020