Request: Revisit tech park lenders

C.J. Duvall asked the rest of the Little Rock Technology Park Authority Board to reconsider the makeup of the banking group that is financing the first phase of the $100 million tech park downtown.

Duvall, the vice president for institutional advancement at Philander Smith College, sent an email Monday to other board members with the request.

Two letters of intent were submitted to the board by a banking consortium that is packaging financing for a $17.5 million loan -- an August letter that included the Arkansas Federal Credit Union and a second in September that replaced the credit union with two other banks.

The credit union, faced with losing $400,000 in revenue from their participation in the lending group, sent a letter to Little Rock's Board of Directors two weeks ago asking directors to intervene. The letter got no response, said the credit union's attorney, Dick Downing.

Duvall contacted tech park Director Brent Birch and the rest of the board suggesting they at least look into it. Duvall said the tech park board did not discuss whether it thought the exclusion of the Arkansas Federal Credit Union from the original financing proposal was appropriate or fair.

"Members of the community, including an officer of the Arkansas Federal Credit Union, [have] asked me to review and reconsider the discussion with the Board," Duvall said in his email Monday. "I feel obligated to make this request of the board on behalf of citizens that did not make the last board meeting."

Efforts to reach Duvall were not successful Tuesday. Birch said he did not know of any board members who had responded to the email as of mid-afternoon.

Birch said the matter could be brought up before the tech park board at its regularly scheduled meeting at 4 p.m. Oct. 14 at the tech park's temporary space, known as LR Tech Park @ 107 in the Block 2 building on Markham Street. Downing said he would be there to speak on behalf of the credit union.

The removal of the credit union from the lending group was suggested by the Arkansas Bankers Association. Some member banks complained that the credit union, which is exempt from federal taxation, should not be chosen over other bank association member organizations.

Downing said he believes the credit union has a case against the association for interfering.

"My client isn't interested in a lawsuit," Downing said. "They just want fundamental fairness."

Said credit union president and chief executive officer Rodney Showmar: "I don't think the tech park board can tell the citizens of Little Rock that all parties that were interested in providing financing for their project received a fair and equal opportunity to do so."

Banks collectively making the loan initially included the credit union, Arvest Bank, Bear State Bank, First Security Bank, Simmons Bank and Centennial Bank, which is steering the work of the consortium of lenders.

Bob Birch, regional manager for Centennial, is Brent Birch's father.

After the bankers association got involved, the credit union got the boot and two more banks were added: First Arkansas Bank & Trust and Relyance Bank.

Bill Holmes, president and CEO of the bankers association, has said he called the underwriters at one of the banks to suggest replacing a non-taxpaying entity with taxpaying entities to support a tax-funded park.

As a Sub-Chapter S corporation, First Arkansas Bank & Trust generally is not subject to federal income taxes at the corporate level. Its taxable income flows through to its shareholders in proportion to their stock ownership, and the shareholders generally pay federal income taxes on their share of the taxable income. As a result, an institution's reported income tax expense can be reduced and after-tax earnings can be increased.

By the time the tech park board signed a second letter of intent, the deadline had passed for the credit union to make a competitive bid.

The Jacksonville-based credit union serves about 9,000 state government employees and other groups. It's the 10th-largest financial institution in Arkansas with just under $1 billion in assets.

Tech board members contacted about the situation maintain that the consortium, not the board, is driving the decisions about who is and isn't included in the lending group.

Dickson Flake, a tech park board member who is working closely with Centennial and the other banks to assemble financing, said, "When a group like that gets together, we deal exclusively with the lead bank. And the lead bank is this case is Centennial.

"They don't get our approval for adding or deleting banks [from the bank consortium]," Flake added.

"I wouldn't care if it came from Joe's Pawn Shop," Flake said of the loan.

In regard to the tech park director being related to the Centennial executive, Flake said "I guess you could say there's potential [for a conflict of interest] but there's absolutely no evidence to that in any way and that doesn't bother me."

The $17.5 million is to buy the first phase of land for the park, which will be located in and adjacent to a downtown city block between Main and Scott streets off Capitol Avenue. The first phase of the park includes renovation and construction of the Exchange Bank annex and the Mays law firm building at an estimated cost of $24 million.

Brent Birch said Tuesday that the loan package to pay for the first phase could not be written until the board's attorneys determine what part of the properties will be taxable and which parts will be tax exempt.

Business on 10/07/2015

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