December 2, 2022

Just Moments

Travel Groove

A coal CEO promised a new luxury hotel to revive their town. It’s still not operating

Something is amiss in the small rural town of Milton, West Virginia. As we recently reported for The Real News, taxpayers in Milton, and in the surrounding county of Cabell, have been on the hook for the generous public assistance failed coal baron Jeff Hoops has received to realize his plans to build the luxury Grand Patrician hotel in the small town on the Kentucky border.

New documents obtained by the Police Accountability Report (PAR) reveal that said plans have been facing setbacks, including: delays in completing the construction of key facilities until late 2022, difficulty collecting fees and taxes from contractors working on the site, and changes to the sprinkler system ordered by the state fire inspectors, which required connecting to an alternative water main to increase water pressure. 

Both Milton and Cabell County approved a $15-million tax incentive known as a TIF (Tax Increment Financing) to aid construction of the lavish 300-room resort proposed by a firm controlled by Hoops. In 2018, Milton sold Hoops 170 acres of city-owned land—including the former site of the Morris Memorial Hospital—for just twenty bucks. And, according to sources, the city of MIlton has been forced to write off thousands of dollars in uncollected taxes and license fees due from contractors working on the site who failed to pay as required by law.

This is all taking place in a community with a median household income of $32,000, roughly $40,000 below the national median. 

Moreover, key details regarding the taxpayer largesse fueling Hoops’ dream of a luxury hotel remain elusive: amid the delays mentioned above, city and state officials managing the project have not been transparent about its future prospects. They said they are unable to answer questions about when the hotel will be completed. They have also been circumspect when it comes to discussing details about a state fire inspection that concluded the hotel sprinkler system was not up to code, causing additional delays.

In 2018, Milton sold Hoops 170 acres of city-owned land—including the former site of the Morris Memorial Hospital—for just twenty bucks. And, according to sources, the city of MIlton has been forced to write off thousands of dollars in uncollected taxes and license fees due from contractors working on the site who failed to pay as required by law.

Meanwhile, new documents obtained by PAR reveal that the project is already millions of dollars behind projections, both in terms of tax revenues and economic impact on the surrounding area, highlighting residents’ cause for concern about the secrecy surrounding the hotel and its construction. These revelations point to a troubling pattern that some say is the inevitable result of using public funds (in the form of tax incentives) to fuel private profits, especially when there is little if any sustained scrutiny of how the project is actually performing. 

Greg LeRoy, Executive Director of Good Jobs First, an organization that tracks tax incentives like TIFs across the county, says that substantive public disclosure is often lacking after such deals are approved. “TIF districts are the most problematic incentive we encounter across the country, and they are poorly disclosed,” said Leroy. As eyebrow-raising as these latest revelations about the Grand Patrician hotel are, it’s important to remember at the outset that such cases are not anomalies—this kind of public underwriting of private enterprise, and the corresponding lack of transparency, is a feature of our political economy, not a bug.  

PROBLEMATIC POLICING LEADS TO A DEEPER INVESTIGATION

The stonewalling by public officials comes after PAR documented the details of the lucrative tax break Hoops received for his luxury hotel in an article published at The Real News last month. The story came to our attention after we reported on a series of problematic arrests by the Milton police department, which we featured in several episodes of the Police Accountability Report.

But our investigations into the troubling track record of Milton’s police prompted viewers to ask us to also look into the deal to build an upscale hotel on a piece of city-owned property previously occupied by the Morris Memorial Hospital, a facility that was itself built with federal funds during the Great Depression to treat children suffering from polio.

“No one in the town will even be able to afford to step foot in that hotel. Don’t see it providing much business for our local businesses either.”

resident of MIlton, who wished to remain anonymous

The luxury resort was billed as a lifeline for the city that would attract tourists and create much-needed jobs. Plans for the Grand Patrician hotel include a nine-hole golf course, a wedding chapel, a banquet hall, an olympic-sized swimming pool, and a gated community.

Our initial reporting revealed a business controlled by Hoops secured roughly 170 acres of city-owned land on the former site of the hospital for just $20 dollars. We also documented that the cost of the deal was steeper than officials had announced publicly: accounting for the interest on the municipal bonds issued to fund the project means factoring in an additional $5 million, increasing the original $10 million price tag of the TIF by 33 percent.

The luxury resort was billed as a lifeline for the city that would attract tourists and create much-needed jobs. Plans for the Grand Patrician hotel include a nine-hole golf course, a wedding chapel, a banquet hall, an olympic-sized swimming pool, and a gated community.

In the time since our previous article was published, however, we have received a flood of tips and revealing emails from residents about the project, including concerns about safe drinking water, critical infrastructure, and affordable housing. 

“That place definitely won’t benefit any of us,” a resident of MIlton, who wished to remain anonymous, wrote in an email. “No one in the town will even be able to afford to step foot in that hotel. Don’t see it providing much business for our local businesses either,” he added. 

A LUXURY LIFELINE THAT HAS FAILED TO DELIVER

In 2017, when Milton and the surrounding county of Cabell approved the $15 million TIF, Jeff Hoops was the owner and operator of Blackjewel, LLC, then the sixth largest coal company in the country.  

In an application for the tax break obtained by PAR, Hoops promised a sprawling development.  Along with 300 rooms, the destination resort would have a 9-hole golf course, a clubhouse and spa, a 300-seat wedding chapel, a conference center, a ballroom, an amphitheater, replica baseball stadiums, and a residential community featuring townhomes and condos. The final value of the entire development was estimated at $187 million.  

But the deal hinged on the city of MIlton foregoing almost all the new property tax revenue that would be generated by the resort. The mechanism to make this happen is a TIF

TIFs were originally designed to stimulate construction in blighted areas. The argument for TIFs is that they incentivize private investment in and (re)development of areas in need of economic revitalization.  

Buried in a survey of TIF projects across West Virginia, however, is a report that reveals the hotel has, to date, woefully underperformed.

Developers commit to building on a site with little tax value, with the promise that any new taxes assessed against the newly developed property—known as the “increment”—would be refunded. The process works by estimating the value of the “increment,” or new development, and then issuing bonds for the entire amount of projected taxes paid on the newly assessed value. The idea is that this allows the developer to use future property taxes for construction and other costs.

This is the type of deal that Jeff Hoops secured with Milton and Cabell County in 2017. 

But just two years later, in 2019, Hoops’ Blackjewel coal company imploded into a messy and contentious bankruptcy. As Katie Meyers wrote in The Ohio Valley Resource, “The Blackjewel bankruptcy case has been ongoing since the summer of 2019 when Blackjewel, LLC abruptly collapsed, leaving over 2,000 miners in Wyoming, Kentucky and West Virginia without their jobs, their benefits, or their final paychecks.” Coal miners enrolled in direct deposit found that their paychecks had been clawed back from their accounts, leaving families hurting and rent and essential bills unpaid. In response, one group of Blackjewel miners in Eastern Kentucky set up a blockade for two months to prevent a coal-filled train from leaving the Cloverlick No. 3 mine until they received the back pay they were owed

A series of lawsuits in federal bankruptcy court accused Hoops of using the firm to secure lucrative deals for family and friends, and of violating his fiduciary duty by withdrawing millions from the company just before it went belly up. 

At the time, Brent Walls, the CFO of Clearwater Investment Holdings, LLC, a Hoops-controlled firm that is part of the Grand Patrician development team, pledged publicly in the local media that Hoops’ financial woes would not affect the timeline of the hotel. But new documents obtained by PAR tell a different story. 

The aforementioned report states that, to date, only $392,000 in bonds have actually been issued. This figure falls far short of the $10,000,000 in bonds authorized to purportedly fund infrastructure, raising questions about why the funding that was deemed vital to the project has not yet been tapped.

Initial projections filed with the state outline a fully operational hotel by 2020 generating 77,000 room days (ie, the number of rooms occupied in a year multiplied by the number of days said rooms are occupied) and roughly $3 million in annual revenue for the hotel itself for 2020 and 2021. The estimates also include $6 million in annual economic activity directly related to tourism stimulated by the project for both 2020 and 2021. Those same projections estimate the hotel generating nearly $1 million in property taxes, which would be used to service the bonds issued by Milton and Cabell County to fund construction. 

By way of justifying plans for the lavish hotel, Milton officials ambitiously compared the Grand Patrician to the world-renowned Greenbrier Resort in White Sulphur Springs. Located in Southeastern West Virginia, the destination resort has hosted heavyweight boxing matches and PGA golf tournaments. The Greenbrier aspired to achieve a 68% occupancy rate after opening an $80 million underground casino in 2010; notably, that targeted occupancy rate is lower than the one Hoops predicted the fully functional Grand Patrician will achieve after just two years of being fully operational.

Buried in a survey of TIF projects across West Virginia, however, is a report that reveals the hotel has, to date, woefully underperformed.   

In 2021, the hotel generated just $36,000 in property taxes. The assessed value of the property, which was projected to be roughly $10,000,000 over the same time period, is listed at $1.5 million. The report also reveals that many of the hotel’s facilities will not be operational until the fall of 2022. PAR called a number listed for the hotel to confirm the opening date, but a woman who answered the phone said she is “not confident” about when it will actually be in operation.  

Even more troubling is the status of the TIF bonds sold to finance infrastructure. The aforementioned report states that, to date, only $392,000 in bonds have actually been issued. This figure falls far short of the $10,000,000 in bonds authorized to purportedly fund infrastructure, raising questions about why the funding that was deemed vital to the project has not yet been tapped. 

In our previous report, we detailed how the initial application for the TIF disclosed that the bonds had been slated for purchase by an entity controlled by the developer—namely, Hoops—instead of being sold to outside investors. But finding answers that can explain what has actually happened with the project and why has been difficult. 

The Cabell County Commissioner’s office referred PAR to the West Virginia law firm Steptoe and Johnson, which represents them. In an email to PAR, Steptoe attorney John Stump wrote that updates on the opening date for the hotel would not be publicly available until October because the county has not been communicating with the developer.    

Finding answers that can explain what has actually happened with the project and why has been difficult.

“The County Commission has not had any communication with the Developer regarding the status of the Project since the completion of the 2021 Report. The Project is not subject to County permitting nor has the Developer requested additional proceeds of the Bonds, accordingly no reporting has been required,” Stump wrote. 

“The County Commission will obtain a status report on the Project for the Report due on October 1, 2022,” he added. 

Even more intriguing is the status of the bonds. According to Stump, the entirety of the $10 million in TIF bonds has been issued, but the developer has only accessed roughly $392,000 of the proceeds. 

“The Bonds remain outstanding,” Stump wrote. “The Bonds are issued on a ‘draw down’ basis.  While the Bonds were issued in the amount of $10,000,000, only the original amount advanced at closing is currently outstanding.” 

FEES AND TAXES UNPAID, A SPRINKLER SYSTEM UNDER SCRUTINY

Delays in construction are not the only problems plaguing the Grand Patrician.  

Sources have told PAR that a significant number of contractors working on the site initially failed to properly register with the city or pay taxes and fees. The lack of compliance reportedly led to a heated closed-door meeting between Hoops and Milton Mayor Tom Canterbury. Even though the pair eventually reconciled, the city was forced to write off thousands of dollars in tax losses that were deemed impossible to collect.  

Neither Canterbury nor Hoops returned emails and phone calls seeking comment. 

Even with laws requiring status reports on such publicly subsidized developments, the fact of the matter is much of the critical information about these tax deals (including how the public’s tax dollars are being spent) remains, for the most part, secret.

Developers are also facing challenges meeting safety codes. Sources told PAR the West Virginia Fire Marshal’s office has concerns about the hotel’s sprinkler system and has asked for alterations. The problems are related to issues with water pressure at the site, which developers are scrambling to address. 

The West Virginia Fire Marshal’s Office told PAR they could not directly comment on the sprinkler system’s deficiencies. They did issue a statement acknowledging the agency was working with the developer to fix it.  

We have been involved in discussions with the builders of the Grand Patrician Hotel in regards to making sure that they are following the best fire safety according to practices,” the agency said in an email. 

Meanwhile, Milton’s building inspector Mike Ramsey told PAR that the issues with the sprinkler system were resolved when the city connected the property to a new water main. “It was an 8-inch main off of route 60,” Ramsey told us. 

THE PEOPLE GIVETH, THE PRIVATE SECTOR TAKETH AWAY

Still, the most troubling example of the lack of transparency regarding the Grand Patrician is the fact that no one involved with the project will say when it will be completed. All the projections, tax breaks, taxpayer-issued bonds, and promised benefits of the ostensibly region-saving destination resort hinge on a clear completion date. As of right now, there is none. 

As has been the consistent theme of investigating this story, getting an answer to the simple question “When will the Grand Patrician have its grand opening?” has proven to be difficult. Emails and phone calls to a variety of city officials, including lawyers tasked with reporting on the status of the bonds, did not result in securing a clear answer or timeline. Similarly, Ramsey also said he did not know when the luxury resort would be open to the public.

“I have no idea, you would have to ask Mr. Hoops about that.”  

Multiple emails sent to Hoops asking for comment—using an address listed on the TIF application—have not been returned.  

But as Leroy, Executive Director of Good Jobs First, notes, even with laws requiring status reports on such publicly subsidized developments, the fact of the matter is much of the critical information about these tax deals (including how the public’s tax dollars are being spent) remains, for the most part, secret.   

The most troubling example of the lack of transparency regarding the Grand Patrician is the fact that no one involved with the project will say when it will be completed.

“Indeed, many big cities that use them fail to disclose even basic records about them, and only a handful of states have centralized online records of TIFs,” Leroy told PAR.

Thus, the Grand Patrician—what exists of it, that is—stands as a cautionary tale about the limits of neoliberal policy making and the costs of taking an approach to governance (ie, improving the lives of residents and helping society function well) that extols the private market as the cure for poverty, unemployment, and all manner of social degradations, and that, consequently, channels public resources into profit-seeking enterprises.

In fact, nothing could be more emblematic of the privatization of our collective civic imagination that this governing philosophy has produced than the flailing hotel sitting unfinished on a West Virginia hill. A grand experiment in social engineering via private checkbook that has so far failed to deliver.   

At the very least, the political leaders and the failed coal baron should consider answering the concerns of the community regarding when and how their envisioned luxury development will materially improve the lives of the people who are financing it. If they don’t, the deafening silence tells the people all they need to know about whose interest the hotel serves.