|By Jan Falstad, Billings Gazette, Mont.
Knight Ridder/Tribune Business News
Aug. 7, 2005 - On Wednesday morning when a city of Billings employee came to shut off the water at the Northern Hotel, the owner of the historic hotel cut a check and a crisis was avoided.
Despite seriously delinquent back taxes and bills, owner Robert Van Riper said he's slowly turning the Northern's financial situation around.
"The hotel's bottom line will be in the black and it hasn't been in the black for about 15 years," he said. "The hotel will lose a very minor amount of money this year, but the Golden Belle Restaurant and banquets will be very profitable."
The 113-year-old Billings landmark needs cash. The hotel, rebuilt in 1941, and adjoining parking garage owed three years of property taxes, or $232,547, to Yellowstone County.
However, that redemption cost jumped on July 7, 2004 when a Miles City company called Kate Properties paid off the Northern's back taxes, plus penalty and interest. In return, Kate Properties received a tax lien against the hotel and the guarantee of 10 percent interest per year.
To keep the Northern, Van Riper must pay Kate Properties his original tax bill plus 10 percent. That's a total of $250,968, at least $18,421 more than his original bill with the county.
Details on the Kate Properties of Miles City are sketchy. Curtis and Melinda Kelley are listed as the owners. Curtis Kelley is vice president in charge of credit at Stockman Bank in Miles City. They were away and not available for comment. The Secretary of State's office in Helena says Kate Properties is not registered to do business in Montana as required by state law.
Yellowstone Treasurer Max Lenington said the Northern's situation is unique.
"I've been doing this a long time and you get a lot of assignments against houses and vacant land, but very seldom do you get one on a hotel," he said.
If the taxes aren't redeemed by May, Yellowstone County will give Kate Properties a tax deed and Kate could go to court and try to obtain clear title to the Northern.
That won't happen, Van Riper said.
"I would never lose the hotel over taxes," he said. "I would never."
Van Riper said he takes responsibility for falling three years behind in taxes and other bills since he bought the Northern in July 2002. He notes that in January surgeons performed five bypasses on his heart, which kept him from paying full attention to recent business.
"I knew these taxes were delinquent, but felt the other bills were being paid," he said. "I found out that wasn't correct."
His attorney, Sid Kurth of Billings, said with Van Riper weak and on oxygen, his employees were worried about his heart.
"Everybody was glad to have him back, but they were keeping him protected from some of the problems," Kurth said.
From his office on the ground floor, Van Riper glanced out the window at North Broadway while ticking of on his fingers the problems he inherited from previous owners, including pricey leases and sky high water bills.
He also listed the progress he's made in the three years since he bought The Northern.
Recently, Van Riper let go a general manager and an accountant. He has hired certified public accountant Bruce Knudsen of Billings, who is modernizing the accounting and helping Van Riper collect his overdue bills.
"We're almost $100,000 out and that's too high," Van Riper said.
Van Riper said he inherited a lot of expensive and some bad leases on everything from pictures to the piano.
"They're all paid off now. I had probably $250,000 worth of leases," he said.
Air conditioning on the second floor ballroom has been on the fritz during the heat wave, turning Downtown Rotary Club meetings into toasty affairs. Van Riper said he spent $10,000 for equipment, and, as soon as some other parts arrive, Billings Refrigeration will fix the problem.
However, that news came too late to keep the Downtown Rotary Club from moving its meetings, which attract about 150 members each week. Rotary is switching to the Sheraton Billings Hotel starting tomorrow.
Van Riper is a Montana native from the Hi-Line who moved to Billings with his wife, Sue, from Sioux Falls when he bought the Northern three years ago. He said he has owned hotels before and that he's never declared bankruptcy.
Here are some delinquencies Van Riper said he is close to paying.
Like all hotels, the Northern pays Montana's 7 percent bed tax to the Department of Revenue in Helena. That bill is in arrears. Bureau Chief Gene Walborn said the department filed a warrant July 26 to collect about $73,000.
Spokeswoman Michelle Robinson said the department issued a lien on April 1 for $5,640 for back payments for unemployment insurance.
The Department of Labor and Industry in Helena said the Northern is currently up to day with its worker's compensation insurance. However, the hotel's coverage was suspended for non-payment, and then restarted earlier this year.
The City of Billings declined to release the hotel's water bill records to The Gazette, arguing that they weren't public information. A water department employee said that property tax records are public but water records aren't because "property taxes are attached to the property, utility bills are not."
Despite the city's secrecy, Van Riper confirmed that he had fallen seven months behind in his water bills.
After The Gazette was denied the water records, Interim City Administrator Tina Volek wrote an e-mail Tuesday saying that because the bill hadn't been paid as agreed, the city would cut off the Northern's water Wednesday morning. A recipient of the e-mail shared it with The Gazette. E-mails between city officials are public record in Montana.
Again, Van Riper avoided cutoff by paying one month's back bill with a check for $5,824. He has agreed to pay the latest bill, plus a past month, until he's current again.
Despite his late payments, Van Riper said he has a good relationship with city water officials. They helped him figure out how to tap into a basement well to supply water for the heating and air conditioning system. So his yearly water bills to the city that were exceeding $100,000 have been cut to $34,000, he said.
After Van Riper bought the Northern in 2002, the union filed 26 grievances for violating the labor agreement and the National Labor Relations Board agreed in all actions.
That has all changed, Van Riper said. In June, he signed a three-year contract with UNITE.
"Today the union loves me and I love the union," he said. "The union is sending me a lot of business."
The Northern Hotel won't be sold for a fire sale price, Van Riper said.
In addition to improving his cash flow, he's awaiting word on a loan package to replace original financing by Cornerstone Financial out of Polson.
"We have a financial package before one of the banks in town that addresses these tax issues," Van Riper said.
Liquor is his ace in the hole.
"I own a full liquor license," he said. "As a last resort, I can sell it, keep beer and wine here and pay off all my bills,"
Despite all the bumps in the road, Van Riper said he's determined to make this property work.
"The Northern is alive and well. I think I'm going to do succeed, but say I'm wrong, somebody will take this over," he said.
"The Northern's doors will never close."
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