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Owner of Historic Hotel in Lawrence, Kan., Considers Filing Chapter 11

By Chad Lawhorn, Journal-World, Lawrence, Kan.
Knight Ridder/Tribune Business News 

Nov. 7, 2003 - The day after state officials conducted their second tax raid in five months, the general manager of the embattled Eldridge Hotel said Thursday he was considering filing for Chapter 11 bankruptcy protection. 

Rob Phillips, general manager of the historic hotel at 701 Mass. said a raid Wednesday night by Kansas Department of Revenue officials -- which resulted in tax agents taking an estimated $1,200 from the hotel's cash registers -- had him thinking about seeking bankruptcy protection. 

Such a filing might be the best way to stop the state tax raids, he said. The business was raided by Kansas Department of Revenue agents June 11, when it was learned the hotel owed $108,982 in unpaid guest tax, sales tax and Kansas withholding tax bills. A bankruptcy filing would delay the state's ability to file a foreclosure proceeding that would force a sale of the hotel. 

"There are means for me to stop their actions, and if I have to do that, I will," Phillips said. 

Revenue officials Thursday said they had no immediate plans to begin foreclosure proceedings against the hotel, but did not rule out the possibility. 

"Ultimately, we're still hoping we can get this resolved through negotiation, but there are other legal actions the department can take," said Dedra Platt, manager of the Department of Revenue's civil tax enforcement unit. 

Phillips was critical of the department's decision to conduct the second tax raid. He said he thought negotiations were going well with the state and earlier in the week sent the department a $2,000 check to be applied to back taxes. Since February, he said, the hotel had paid $20,000. And he said the hotel hadn't been delinquent on any tax bill since February. 

Platt could not confirm those numbers or discuss how negotiations were proceeding because privacy laws prevent the disclosure of a company's tax information. But she said she supported the department's decision to conduct the raid. 

"I can tell you that all of our actions were perfectly appropriate given the situation," Platt said. 

Phillips said he had no timeline for deciding whether to file for bankruptcy protection. He said he was not contemplating a Chapter 7 filing, which would close the business and require a sale of its assets at auction. He is considering a Chapter 11 filing, which would give the business relief from creditors while it reorganizes. 

The hotel, a downtown landmark that is on the National Register of Historic Places, has other financial problems. The business owes about $190,000 in Douglas County property taxes dating to 2000. In March, the Internal Revenue Service filed a tax lien against the property for about $160,000 in back taxes. In September, Mid-America Bank in Baldwin began foreclosure proceedings after the business missed a $1.3 million payment. 

Thursday, a spokesman with the IRS declined to comment on any possible action the federal government might take against the hotel. 

Mid-America Bank officials directed questions about the Eldridge to its attorneys, who could not be reached for comment. 

-----To see more of the Journal-World, or to subscribe to the newspaper, go to

(c) 2003, Journal-World, Lawrence, Kan. Distributed by Knight Ridder/Tribune Business News. 


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