City terminates hotel lease

SHEFFIELD - City council members voted unanimously Friday to terminate the city's lease with the group operating the Holiday Inn hotel in Sheffield.

City attorney Vincent McAllister said the lease with Portfolio Sheffield LLC was terminated because the company, which is owned by Kronos Hotels, of Marietta, Ga., has defaulted terms of its contract with the city, specifically the payment of taxes.

City clerk Clayton Kelly said the hotel is behind in paying lodging taxes for March, April, June and July. Kelly said the hotel paid its May lodging taxes, including a penalty.

City officials have not released the amount of money the company owes, citing state law prohibiting them from releasing details related to the amount of sales produced by businesses.

The council terminated the lease Friday after a called council meeting that could be in violation of the state's Open Meetings Act, which states a governing body must give the public 24-hour notice before any official meeting.

Kelly said he gave as much notification as he could and that the meeting was called on the advice of the city's attorney. Council members said they met at the request of their attorney and because action needed to be taken on the matter as quickly as possible.

McAllister said Portfolio Sheffield has 15 days to respond to the termination notice.

The company can make an effort to renegotiate a lease with the city, seek a temporary injunction or leave the facility.

City officials must also determine what steps to take, said Councilman Waylon Huguley. He said the council and mayor will meet soon to discuss those options. He declined to discuss the possibilities. Among the possibilities are for Sheffield to find a buyer for the property or hire someone to run the facility.

"I fully expect Holiday Inn to continue in some form and by some ownership, whether that's by the city, current operator or another operator," Huguley said.

"The action taken today was very difficult and it was not something we wanted to do," he added. "We had given them a letter informing them of what they needed to do and a deadline. They have chosen not to communicate properly to resolve the situation. The council's goal is to protect the integrity of the structure and building, which belongs to Sheffield."

Sheffield owns the property and the building where the Holiday Inn has operated since the early 1980s.

Kelly said the owners leased the facility from the city for $200 per year.

McAllister said the council acted on the fact that the hotel violated the terms of the lease.

The hotel's lease was held by Portfolio Sheffield LLC, McAllister said.

Donnie Allen, owner of the tax collection service STACS, said the hotel is up to date on its sales taxes.

Kelly explained that Allen's company collects sales taxes while lodging taxes are sent directly to the city. A portion of the lodging tax is also sent to the Colbert County Commission.

Allen said as far as sales taxes, the hotel had actually overpaid the city.

"It appears they overpaid us the first couple months they were there," Allen said. "We owe them a little bit."

Allen could not cite an amount, but said it was not significant.

Kronos Hotels purchased the Holiday Inn and 15 other hotels in the United States in June 2007.

The hotel on Monday was notified that it had lost its license agreement to operate under the Holiday Inn brand. It regained that privilege Thursday after an accounting error was rectified, according to Kronos spokesman Peter Mathon.

The hotel also has been plagued with financial problems affecting its 70 employees. Payroll checks have bounced and employees learned Aug. 1 that as of June 1, their health coverage had been terminated because the company had not paid the premiums.

Calls to Kronos attorneys Lakesha Johnson and A.J. Block seeking comment were unanswered Friday.

"I thought Sheffield owned just the property; I didn't know they owned the building," said Mathon.

"We're looking into the situation and trying to determine the facts right now," he said.

He declined to comment further on the matter.

As of Friday, which was payday at the hotel, there was no money available for employees in the Wachovia accounts, according to a hotel employee who requested anonymity because of the company's policy to fire employees who talk with the media.

Barbara Hall, general manager for the Sheffield hotel, declined to comment, referring questions to the corporate office.

The facility was built in the early 1980s after the Holiday Inn in Florence decided to relocate its aging hotel at the corner of Court Street and Veterans Drive.

Sheffield was chosen because of the availability of property and the fact that Colbert County had just voted to allow legal alcohol sales, McAlister said.

The original developer purchased the property and eventually conveyed the property to the city, which excluded them from paying property taxes. The city then leased the property to the developer.

"The city didn't invest a dime," McAlister said.

He said there were several provisions of the contract, but two of the major provisions were the payment of taxes and utilities.

Mayor Billy Don Anderson said the hotel's owners were given 30 days to take care of the delinquency and once they failed to do so, the city had the option to terminate the lease.

"We want to protect this asset the best way we can," said Anderson, who was out of town Friday and did not attend the meeting.

He said the city has "unimaginable options" that include hiring a management company to come in and run the hotel.

Russ Corey can be reached at 740-5738 or russ.corey@TimesDaily.com.

TimesDaily writer Trevor Stokes contributed to this report.