Legal battle emerges between property owner and Little Rock Tech Authority

The legal woes of the Little Rock Technology Park Authority became more entangled Monday (Nov. 23) as the authority filed a condemnation lawsuit against Little Rock Attorney Richard Mays Sr. in an ongoing dispute that stands in the way of a $100 million development to lure tech companies and entrepreneurs to the downtown area.

The tech park authority’s lawsuit was filed after Mays beat the authority in a race to the courthouse on his own pre-emptive complaint on Friday (Nov. 20) that the seven-person, taxpayer-financed board had violated the Arkansas Constitution by “an improper delegation of the power of eminent domain from the State of Arkansas to the City of Little Rock and the Authority.”

In the tech park’s filing on Monday afternoon against Mays, 415 Main Group LLC and other entities associated with the Little Rock attorney, the Tech Park makes the case that under the Arkansas’ eminent domain laws it is empowered by the state to ““acquire lands and hold title to the lands acquired in its own name.”

“The Authority is acquiring improved and unimproved parcels of real estate along and near Main Street in downtown Little Rock for the purpose of constructing thereon and housing therein a research park and auxiliary facilities,” the filing states. “To date and despite efforts on the part of the Authority, the Property that is the subject of this condemnation action has been unable to be acquired by a negotiated agreement between the Authority and 415. 415‘s representative has communicated to the Authority that 415 does not believe the Authority has the legal right or authority to condemn the Property.”

In a note to Talk Business & Politics, Tech Park Authority Chair Mary Good refused to discuss the lawsuit or Mays earlier complaint against the publicly-financed board on Friday. Tech Park Executive Director Brent Birch and Mitchell Williams Attorney Scott Schallhorn, who represents the authority, also refused to comment on the ongoing lawsuits.

“At this time I have no comment on the status of the property at 415 Main St and the lawsuits that are ongoing,” Good said.

‘ILLEGAL EXERCISE OF POWER’
In Mays’ brief 11-page filing against the authority, Gov. Hutchinson, Attorney General Leslie Rutledge and the City of Little Rock, Mays and the 415 Main Group LLC partnership argues that the tech park board’s announced intention to take his downtown property by eminent domain is an “illegal exercise of power.”

Mays, a longtime prominent black attorney with law offices at the center of the downtown development, further argues in the court brief that giving the tech park the power of eminent domain when it was established by the state legislature in 2007 “was an unlawful delegation of power by the Arkansas General Assembly.

“The Act, by flatly declaring in (state law) that a Research Authority taking private property by eminent domain is per se a ‘public use,’ exceeds the General Assembly’s authority and thereby deprives 415 Main of its rights under Arkansas law,” Mays argues in his filing. “It is a well settled principle of the separation of powers in Arkansas that

whether property is being taken for a public or private use is a judicial question which the owner has a right to have determined by the courts.”

The 415 Main Group is the partnership headed by Mays and partners in his downtown law firm at the center of the tech park’s plan to kick start the first phase of the controversial downtown development that the city hopes to promote to attract tech companies and startup entrepreneurs to Central Arkansas.

TECH PARK PROBLEMS WITH EMINENT DOMAIN, BANK GROUP
This is not the first time that the Tech Park Authority has resorted to eminent domain powers to attempt to kick start the multimillion dollar development, which has been in the works now for eight years. After Little Rock votes approved a sales tax in September 2011 to allocate $22 million for the construction of the Technology Park over the next 10 years, the board approved a measure to condemn the homes of mostly black residents near the University of Arkansas at Little Rock to build the development. That plan was eventually tabled after months of protests.

So far, the tech park has not attracted a major tech company or firm to the city’s downtown Creative Corridor, but has said more than 20 early stage, startup companies with scant operations or revenue are renting space at the authority’s downtown offices. Three of those companies, Apptegy, Elyxor and bfonics, recently were announced as the first “graduates” of the authority’s incubator program that have now moved out on their own.

The tech park board also recently approved a measure by a vote of 5-1 to accept a letter of commitment from a local bank consortium to finance the first phase of the project through a $17.5 million loan over a 72-month term. Under the terms of the proposed deal, the financial consortium would provide necessary funding in two parts to begin Phase 1 of the downtown project at fixed interest rates 4.19% and 2.95% over a period of six years. The $17.5 million loan will consist of two promissory notes, one taxable in the amount of $7.9 million and the other tax-exempt at $9.6 million.

Led by Centennial Bank, the bank consortium group also includes Simmons Bank, Bear State Bank, Arvest Bank, First Security Bank, Eagle Bank and Trust Company, First Arkansas Bank & Trust, Malvern National Bank (MNB) and Relyance Bank.

The composition of that consortium, however, could also cause the tech park to end up in court because of the banks’ decision to leave the Arkansas Federal Credit Union out of the arrangement that the former said could net it $400,000 in interest and fees. During a tech park board meeting more than a month ago, Little Rock attorney Richard Downing said the consortium of six local banks led by Conway-based Centennial intentionally left out AFCU in a proposed bid to provide financing for the project because of its financial status as a credit union.

JANUARY 2016 DEADLINE
Downing also said the tech park authority’s 67-page request for proposals (RFP) was not conducted in compliance with state law because the bid was not sealed, did not follow the state’s “public notice” rules, and failed to treat all bidders “fair and equal.” Downing has told Talk Business & Politics that AFCU will keep its “legal options open” in regards to the tech park’s financing package. To date, no complaint has been filed in state or federal court concerning the tight-knit financing deal that emerged from the tech park’s 67-page request for proposal (RFP) in May.

According to the particulars of the tech park an agreement to close a $11.6 million deal with two real partnerships affiliated with Stephens Inc. CEO for nearly 142,500 square feet of building space, or 3.25 acres, in the downtown area that will serve as the city’s proposed tech park, the financial and development package has to be completed by January 2016.

Tech Park officials have also said on several occasions that the authority hopes to begin construction of the downtown park by early next year and have tenants by the summer of 2016.

In several recent meetings, tech park board members have had feisty and prolonged internal discussions over the “public use” At an Oct. 15 board meeting, Darrin Williams took a strong stance that he would not vote to use the constitutional power to force Mays from the property without additional information on the “public use” statute of state law.

The Southern Bancorp CEO and former Democratic lawmaker, who served as chief deputy attorney general under Mark Pryor, told board members at the meeting that he believes the Arkansas Constitution only allows for “narrow exceptions” to deploy eminent domain authority for publicly-financed projects.

“I would like to know a whole lot more facts because I don’t know where we are in these negotiations,” Williams said. “The ‘public use’ determination could hold us up a whole lot more than the issue of money.”

‘NOT AS SCARED AS YOU ARE’
But, Tech Park Chair Mary Good has on several occasion implored the board to move forward immediately and take over the Mays property so the multi-million downtown project won’t stall.

“We’ve got to do something to move this forward because the schedule will be destroyed if we don’t,” Good said, citing the development’s tight deadlines and a clause in an agreement with Stephens that a deal to purchase the downtown property has to be closed by early 2016.

Later, at a Nov. 2 meeting, Williams again questioned whether the Arkansas Constitution only allows the authority to deploy eminent domain powers for publicly-financed projects. Following a testy debate with Good over the issue, Williams asked board members if the construction of the project could move forward if the Tech Park was “mired in a lawsuit” with Mays. Good concluded the discussion by telling Williams that she believes the authority had full legal power to Mays property, notwithstanding a challenge all the way to the state Supreme Court.

“I am not saying it’s 100%, but I am saying ‘my opinion’ is that we have public use,” Good said. “Not being a lawyer – I am not as scared as you are.”

At that meeting, the board then agreed by a vote of 5-to-1 to engage Mitchell Williams law firm to prepare a condemnation lawsuit by Nov. 18 against if he failed to respond to the authority’s $845,000 offer to purchase his downtown law firm, but extended that the deadline to Friday (Nov. 20) at the request of board member Jay Chesshir.

Under its agreement with Mitchell Williams, the local law firm estimates that its fees and related litigation expenses, including trial preparation, written discovery and deposition and court filings, would cost nearly $75,000. If the case ended up before the state

Supreme Court, the fees and expenses would likely amount to more than $105,000, said Mitchell Williams attorney John Baker.

OTHER OPTIONS
At that same meeting, the authority handed out a 20-page document to board members that provided a case for Monday’s (Nov. 23) condemnation lawsuit and provide board members with talking points on whether or not the publicly-financed authority had the power to take land for public use.

Although the tech park board has publicly debated whether or not a legal battle with Mays would delay the first phase of the downtown project, including a suggestion by one board member to bypass purchasing Mays property altogether, there doesn’t seem to yet be a consensus on that issue.

In its court filing, the Tech Park board asks the court to move quickly to condemn Mays property.

“It is necessary for the Authority to acquire immediate possession of the property for the purpose of constructing the Authority’s office and support facilities, auxiliary facilities for the Tech Park, or both, and because the determination of questions in controversy in this proceeding will delay the progress of said construction …,” the court filing states.

Mays, a former judge and Arkansas lawmaker, has said he believes the “public use” question weighs in his favor, and has asked Pulaski County Judge Alice Gray for a jury trial.