City land sale again not awarded to highest bidder
by Walker County News Today staff
The latest chapter in the apparent attempt by some at City Hall to manipulate the City’s purchasing processes to get a predetermined outcome occurred at last week’s (15 May 2018) Huntsville City Council meeting.
And the process once again centers around the narrow city-owned strip of land next to Humphrey’s Bar and Grill on Sam Houston Avenue.
As a refresher, readers are referred to several previous Walker County News Today articles on this subject. In the first article, written more than two years ago, we reported that the City conducted a competitive sealed-bid process for a tract of land located behind Humphrey’s that also included this access strip to Sam Houston Avenue. In that competition the highest qualifying bid was made by Area Management Services, Inc., a local company owned by Mr. Charles Smither Jr. of Huntsville.
But after the deadline for receiving bids had passed and after the qualifying bids were opened and read publicly at City Hall, a later bid was received from another company with a higher bid than Mr. Smither’s. Even though this later bid was received too late and contained several flaws disqualifying it under the rules of the competition, the City Staff recommended that it be the winner claiming that it was “in the best interest of Huntsville.”
That led to protest by several members of the public, including Mr. Smither. They challenged the integrity of the City’s procurement process and accused it of “insider trading.” One speaker challenged the City Staff’s interpretation of what’s in the best interest of the City, stating that “We know what’s best for the City, and it’s to be fair.”
In the face of these criticisms, City Council retired into executive session to consult with the City Attorney. It then reconvened in open session and voted to reject all bids and start over.
The matter lay dormant for a year and a half until last December when we reported that Councilmember Keith Olson recommended that the property be split into two parcels and sold separately.
When the logic of that idea was questioned, it was revealed that the strip to Sam Houston Avenue, without the City’s approval or allegedly even knowledge, had been paved over and was being used by Humphrey’s as an extension of their parking lot.[Note: Councilmember Ronald Allen has publicly disputed the claim that no one at the City knew that Humphrey’s was using City property for a parking lot. He noted that he personally learned about it as far back as two years ago and that he immediately advised the former City Manager who told him he planned to take no action on the matter. But the former City Manager said in last December’s meeting that he knew nothing about it. Councilmember Allen repeated his allegation in last week’s meeting]
At last December’s meeting, after considerable discussion, the Council decided to split the two parcels and directed the City Staff to sell the part of the property not being used by Humphrey’s for parking. That sale was successfully accomplished in February without controversy by means of the City’s official competitive sealed bid policy. The winning bid was the highest one in conformance with the City Policy.
With that accomplished, Mayor Brauninger proposed to the Council at the February 20 meeting that the City proceed to sell the remaining .102-acre strip. However, Councilmember Olson objected to the sale claiming that it would hurt Humphrey’s business. After an agonized debate, the Council, over the Mayor’s objections, decided to delay the vote for two weeks.
When Council next met on March 6, 2018, there again was discussion, but it voted to proceed with the sale, with only Councilmembers Olson and Emmett voting “No.” As it normally does, the Council directed City Staff to conduct the sale by a competitive-sealed-bid process according to State Law, the City Charter and the City’s purchasing policies.
The City Staff then advertised the property for sale by official public notice in the Huntsville Item. The date, time, place of bid opening and terms of the competition were specified. When that time came two bids were accepted as official and were opened and read in public. Again, Mr. Smither’s Company offered the highest bid at $25,000. The other bid, for $15,100, was tendered by DSPI, a Texas Joint Venture.
The Walker County Appraisal District website shows the current owner of the Humphrey’s property to be “Drew Slack Management Corp & Peak Interests”, suggesting the source of the DSPI Joint Venture name. The DSPI offer to the City for this property was signed by John Paul Lampson.
The question was then brought back to the City Council last Tuesday for decision. And, despite the rigorous competition held consistent with State Law, the City Charter and the City’s purchasing policies, and the fact that Mr. Smither’s Company was the apparent winner of the competition based on the City’s own rules, the City Staff once again raised the “best interests of the City” argument suggesting that DSPI should be awarded the bid.
But at the meeting, Mr. Smither responded to the City Staff’s argument. He first read directly from the City’s Purchasing Policy document that states unequivocally that the bid for the sale of real estate should be offered to the highest bidder.
Mr. Smither also attacked the way the City Council has been applying the “Best interest of the City” argument. He showed that, while the City has quietly and routinely been subsidizing Humphrey’s to the tune of about $1700/month in parking value, “you all had to be drug kicking and screaming to pay $300 for the Ernst lot to benefit the entire downtown.”
Then Councilmember Ronald Allen commented on the history of this issue, saying [paraphrased] –
“What gets me is that we had some people that literally took over city property and to make it worse, they paved it. That’s just something I can’t get past. If we allow people to take over City property, which is actually the taxpayers property, then say ‘OK, you did it, so we’ll put it out for bids and they bid $500 and someone else bids $25,000, but we give it to them because to not do so would be detrimental to their business, we’ve started a cycle here. – – There’s no one sitting on this council who would let anybody move into their property and pave it. This is a bigger deal than we seem to be talking about here.”
Councilmember Allen continued, “I guess what this means, in the future, is that people in the community who have a business next to City property can take it over and we’ll bid it out and they’ll get it cheap. If I had pulled this stunt the City would have been all over me. They wouldn’t even have put it out for bids. Are we all being treated the same here?”
Councilmember Allen then repeated his charge that this whole problem was caused by the former City Manager not taking action when he first found out that City property had been taken over and was being used to advance the cause of a private business.
Councilmember Olson then argued that this problem wasn’t caused by the landowner (DSPI). “We didn’t even know this was City property. Nobody took anything over, we’re not a hostage, we could vote to throw this whole thing out today and keep it. Or we could vote to put it up for lease for anybody. We could do anything we want to do as a council….I personally brought the first bid of this property to Council. I was asked to….. They said we don’t need this piece of property. We’ll bid on it separately. I said fine, we moved it, it passed through Council, that’s how this deal works.
Mayor Brauninger then weighed in: “It’s hard. You don’t want to injure a business. But at the same time this Council made the decision, some months back, to sell this property, not lease it, not leave it like it is, not forget it, but sell it. We all thought that was the right thing to do, get rid of it, the City doesn’t need it.
We have a process at the City, where it’s an open bid process. Two taxpaying entities in this City put forth bids on the property. They abided by the rules of the bid, they went through it, they submitted their bids, and now we, as a council have to accept it or reject it. Somehow, in my mind, I can’t get over the fact that, if we reject the high bid, we, as a council are picking winners and losers in the City. And I don’t think that’s the right thing to do.”
The Mayor continued, “We had a process, we followed it, Mr. Smither abided by the process. He submitted the high bid. He should be awarded the property and if he wants to make a deal with Humphrey’s to lease it back for parking that’s between him and Humphrey’s. To me it more cut and dried that we are trying to maneuver it to make something happen here.
After additional point and counterpoint discussion, the Council voted to not accept Mr. Smither’s bid of $25,000 but to accept instead the lower bid of $15,510 from DSPI citing it as “in the best interests of the City.” The vote was 7-2 with Mayor Brauninger and Councilmember Allen voting “No.”