Milton, West Virginia, might be a small town, but it’s an oversized example of how too much police spending can be both a symptom and a cause of bad public policy.
Earlier this year, while reporting on a series of questionable arrests in this small rural community of roughly 2,500 people, we discovered the town had, quite literally, turned policing into a business. Ticket writing, fines, and court fees had tripled from $234,000 in 2012 to $600,000 in 2020, while police spending doubled to $1.1 million over the same period.
A deeper investigation into the finances of Milton has uncovered even more questionable priorities for the town and its local government. It turns out that a failed coal baron, Milton resident Jeff Hoops—perhaps best known for bankrupting the mining company Blackjewel, leaving hundreds of coal miners unpaid in the process—has been soaking the town for millions in tax breaks in a deal to build a luxury hotel that makes the town’s penchant for overpolicing look like a bad governance side gig.
The Earth-Shaking Collapse of Blackjewel
The previously undisclosed details of Hoops’ deal with Milton include the purchase of roughly 170 acres from the town for just $20 by a company that Hoops controls. This is land that Hoops later valued at $8.7 million in documents submitted to the West Virginia Economic Development Authority to obtain a lucrative tax break.
Add to this a $15 million tax incentive bestowed by Milton to finance construction costs for a major hotel slated to be built on the property, and what emerges is a remarkable story of how a man whom lawsuits claim is responsible for a spectacularly destructive bankruptcy has managed to use taxpayer dollars to fund his comeback as a luxury hotelier.
Hoops, a West Virginia-based mining magnate, was the principal owner of Blackjewel, the sixth largest coal mining company in the country. In July of 2019, the firm declared bankruptcy, a financial unraveling that would have devastating consequences for coal miners and the environment alike.
Unlike other mining firms that continued operations after filing for Chapter 11 protection, Blackjewel disappeared into a black hole, ceasing to exist altogether. Shortly after the company declared bankruptcy, miners who opted to be paid via direct deposit discovered that their expected paychecks, which had been electronically deposited, had been clawed back from their accounts. The move left many workers penniless and suddenly unable to pay crucial expenses, prompting miners to set up a human blockade across a Kentucky railroad track. The coal miners pledged to stop freight trains from delivering coal owned by the company until they were paid. Eventually, after nearly 60 days of workers blocking the train track and a protracted legal battle, the miners got their back pay, but the damage had been done by that point. In her reporting on the ongoing strike at Warrior Met Coal in Alabama, TRNN contributor and labor journalist Kim Kelly spoke to two former Blackjewel employees, both of whom had both participated in the Blackjewel blockade before moving to Alabama for work, about the fallout from the collapse of the company.
“I went to work one day and then [they] said, ‘We’re filing bankruptcy, come back tomorrow,’” former Blackjewel miner Chris Lewis told Kelly. “They put the last check in the bank and pulled it back, everybody was in the red.”
“People were getting arrested over child support,” he added.
Meanwhile, lawsuits and countersuits over the remains of the sprawling energy firm have clogged the federal court docket.
Some claimed Hoops doled out contracts to family, friends, and other companies he controlled, all for his own personal financial benefit. Others accused him of violating his fiduciary responsibilities by taking millions out of the company just before it went belly up. Several states were also left on the hook for reclamation costs for abandoned mining sites. Roughly 200 former Blackjewel-owned properties have been left without money to repair damage caused by mineral extraction, with no immediate plan regarding who will cover the costs for cleanup.
It’s a track record that might send some entrepreneurs packing for good. But not Hoops. The documents reviewed by the Police Accountability Report reveal that, thanks to taxpayer largesse, the beleaguered coal baron is set to come back in style.
A Taxpayer-Funded Comeback?
How did a coal baron end up with a prized piece of real estate amid the ruins of a notoriously bad bankruptcy? It was, in no small part, courtesy of the taxpayers of a small West Virginia town called Milton, and the surrounding Cabell County.
Situated on the Western edge of the state, bordering Kentucky, both Milton and Cabell are, by most measures, poor. The median household income in Cabell is $40,000, well below the national mean of $67,000. Milton’s numbers are equally anemic, some $24,000 below the average.
That’s why, in 2017, when Hoops announced a deal to build a luxury resort hotel, the media coverage was breathless. The project, to be built on the abandoned site of the former Morris Memorial Hospital, was portrayed as a lifeline for a community with dim economic prospects. But records show that city and county officials were offering some pretty lucrative lifelines to Hoops, as well.
Named after Hoops’ wife Patricia, the Grand Patrician was pitched as a destination resort with a laundry list of amenities, featuring roughly 200 guest rooms, a nine hole golf course, two baseball stadiums (designed as replicas of Yankee Stadium and Fenway Park), and an assisted living community. The plan also included a 200-seat wedding chapel, a grand ballroom, an upscale restaurant, and horseback riding and hiking trails.
The deal to build the hotel came to PAR’s attention after an investigation into a series of questionable arrests in Milton. The town’s aggressive brand of law enforcement prompted a deep dive into the city’s finances, revealing a community that was increasingly reliant on policing as a business—and that business has been booming.
After we published our findings, tips flooded our inbox. Along with complaints about overzealous policing in Milton, residents expressed concern about plans to build a sewer line to service a planned luxury hotel. The spending was criticized as misguided, given that the city’s antiquated water system was plagued with problems, racking up dozens of EPA violations for unsafe concentration of chemicals and insufficient testing. The gist of the message was simply: Why is the city ignoring such a vital public service to finance a hotel?
That’s when we decided to probe deeper into the details of how the project was financed, and how much it benefits Hoops.
Private Profits, Public Funding
With a little bit of digging through county land records, we learned that Hoops bought the 173 acre site of a former hospital from the town in 2018. The price tag? A total of $20. The site has been owned by the town since 1935 when the federal government built the aforementioned Morris Memorial Hospital to house children suffering from polio.
Cabell County land records show Hoops made two deals to acquire the land in 2018. First, in June, the council approved a deal to sell 123 acres to Grand Patrician LLC for $10. Several months later, a second 53-acre parcel was sold, also for $10. The language of the council ordinance authorizing the sale noted that the city has been “unable” to develop the property, and approved the purchase after Hoops presented a “plan” to revitalize it.
Namely, the Grand Patrician hotel.
But where the council apparently saw a worthless chunk of land, Hoops saw a valuable opportunity. In an application for a tax incentive filed shortly after he bought the land with the West Virginia Department of Economic Development, Hoops valued the entire property at $8.7 million, or 435,000 times the original cost—a pretty hefty markup from the $20 price tag.
In fact, in 2020, Hoops received a loan from a bank through Grand Patrician LLC for roughly $21 million using the formerly city-owned land as collateral, according to land records reviewed by PAR. The loans appeared on land records filed with Cabell County and were inked in 2020 for $10 million and $11 million respectively.
Another deal between Grand Patrician LLC and the council remains, for the most part, secret. Sources say a conflict flared in May of 2019 when the town’s recorder abruptly resigned after refusing to sign off on a deal involving the Grand Patrician and city funds designated for the Morris Memorial site.
Public minutes from the city council meetings for May, June, and July of 2019, when the conflict over the deal erupted, are missing from the city’s official website. However, PAR obtained the missing documents through an FOIA request. The agendas only note that the recorder resigned. However the details regarding the deal and how much money was involved remain secret.
Neither Milton Mayor Tom Canterbury nor Hoops responded to emails seeking comment on the timing of the deal or the amount of the payment.
A Lucrative Deal to Sweeten the Pot
However, that’s just the beginning of the story of how Hoops made profitable private deals with the help of taxpayers. PAR obtained the public application for a tax incentive to partly fund construction of the hotel known as TIF, or Tax Increment Finance. It’s a deal that could possibly make Hoops’s hotel even more profitable, but has received little if any public scrutiny.
TIFs were originally designed to stimulate construction in blighted areas.
Developers commit to building on a site with little tax value, with the promise that any new taxes assessed against the newly developed property—known as the “increment”—would be refunded. The process works by estimating the value of the “increment,” or new development, and then issuing bonds for the entire amount of projected taxes paid on the newly assessed value. The idea is that this allows the developer to use future property taxes for construction and other costs.
But all TIFs come with a catch for the communities that award them: how do you evaluate the true cost of a specific TIF deal for taxpayers—in this case, the residents of Milton? And just how much are Milton taxpayers on the hook for if the deal doesn’t live up to expectations?
These are questions PAR attempted to answer by obtaining the TIF application filed by Hoops with the West Virginia Economic Development Agency in 2018. It reveals previously undisclosed details of the deal, including the myriad ways Hoops has made the entire project more profitable behind the scenes.
First, the application shows the public estimates of the final price tag of the deal are inaccurate. The deal was billed as a $10 million tax incentive all in. But that total excludes debt service on the bonds issued to finance the TIF. Adding the interest on the bonds to the final tally, the full amount of tax revenues lost balloons to $15 million. That’s due to the fact the bonds pay a generous 5% annual interest rate, adding an additional $5 million of payments made to bondholders.
But this added burden for taxpayers is actually another deal sweetener for Hoops. How? The application discloses that instead of selling the bonds to outside investors, an entity controlled by Hoops bought the $10 million in bonds issued by the county, This means the taxes Hoops pays to fund the TIF will actually go straight into his pocket with an additional 5% interest compounded. Hoops will earn an additional $5 million in interest while basically paying himself back.
Not bad for a guy fighting multiple suits claiming he drained his company days before going bankrupt.
Similar to other TIFs, the application reports that most of the money will be used for infrastructure—in this case, 1.8 miles of new roads to be built around the site itself, along with a sewer line inside the property boundaries. Why the city should have to forgo tax payments to build out private roads and plumbing for a coal magnate is not entirely clear, but again, these cost estimates are provided exclusively by the developer, without any third party auditing.
Meaning, trust and don’t verify.
There is another section of the TIF application that seems even more troubling than the iffy construction estimates.
Most jurisdictions require the developer to submit projections. Calculations that estimate the fiscal viability of the project. These estimates usually require opinions from an objective third party projecting the project will be profitable to pay off the bonds and ensure that taxpayers don’t get hung out to dry.
But projections submitted by Hoops were calculated by entities with either personal ties to him, or financial interests in the project itself.
The primary projections were calculated by the staff of Marshall University School of Business. The West Virginia university, located in Cabell, lists Hoops in their alumni “Hall of Fame.” He’s also a major donor. Elsewhere in the application Hoops notes his involvement in the “funding” and “planning” of the planned Hoops Family Soccer Field at—you guessed it—Marshall University.
Nowhere in the application are these ties disclosed.
Then there is the opinion from investment banker Piper Jaffray. The firm was tasked with managing the sale of the bonds. But it was also hired to assess the viability of the project vis-a-vis its ability to pay the debt service.
In a letter enclosed in the application, the firm practically guarantees it. But buried elsewhere in the document is another troubling fact. Piper Jaffray will collect (and has already) a $478,000 fee to issue the same bonds. Hardly an arm’s-length opinion on whether taxpayers will be left responsible for the debt.
If the provenance of the numbers to justify the deal aren’t troubling enough, the estimate of how many jobs the hotel will create also raises questions.
The report projects just 208 part-time hourly jobs, and only 38 full-time positions after the hotel is built. That adds up to roughly $63,000 per job, most of which will be seasonal positions without benefits, in exchange for $15 million diversion of property taxes—not exactly a great return on investment for what promises to be.
The report does tout other benefits from the deal. It estimates $2.8 million annually in extra tax revenue for the city from sales tax and occupancy tax. That’s a huge plus for a town that currently collects $450,000 per year in business-related taxes. It also promises millions more from the “multiplier effect” of wages paid to local hires, along with construction jobs during the build out. The application estimates that roughly 75% of all wages earned by hotel employees will be invested in the local economy.
But a larger question looming over the entire application is, will they come? Meaning, will the hotel lure enough paying customers to an arguably remote location to deliver on the promise to bring much-needed business into Milton? Will it generate enough business to pay all the promised taxes and economic activity these types of deals are based upon?
The numbers provided by Marshall project the hotel will have a 70% occupancy rate by 2026 and will be profitable thereafter. It’s an estimate that seems optimistic given how difficult it is to travel to Milton from major population centers.
The closest airport is in Huntington, a city of roughly 50,000 residents. However, it is not an active hub and requires travelers to change planes even when flying from nearby cities like Washington, DC. Travel by car from most East Coast cities is seven hours, at best. But again, the report does little to explain how a rural hotel will draw thousands of guests willing to pay top dollar to stay in a relatively isolated rural destination.
The Largest Landowner in the Country?
One of the most shocking revelations in the entire document has little to do with the hotel.
In the section requiring applicants to list their qualifications to manage the project, Hoops makes a curious declaration: Hoops states that he is “one of the top one hundred real estate land holders” in the country, with over “120,000 acres in seven states.” It also touts his ownership of roughly “2 Billion tons in reserves” of unmined minerals.
The estimates of personal wealth were made a year prior to Blackjewel declaring bankruptcy, raising the question of why he required taxpayer help to build the project.
We put these questions to Hoops directly in an email. We also asked Milton’s Mayor Tom Canterbury for comment on the pricing of the land, and the benefits of the TIF.
Neither responded to multiple requests for comment.
Of course there is grand irony in the Grand Patrician. The first occupant of the site, the Morris Memorial Hospital, was the epitome of pre-neoliberal policy: a public need met with a public good without market intervention or private profiteering. A project funded by the government for the benefit of people suffering, at the time, an incurable disease.
The fact that soon the site will be home to a luxury hotel funded in part by taxpayers but actually owned by a failed coal magnate is a stark reminder of how policymaking has been radically transformed by market orthodoxy and private profiteering. It’s also an example of how the brute force of capitalism and the risk of ruin rarely falls upon the rich. Instead, taxpayers have been asked to fund someone else’s luxury, all in exchange for paltry offering of part-time jobs.
It’s a formula for communal despair that defines our era of rampant inequality and the concentration of power via exceptional wealth. Consider the stark contrast between the coal miners left without pay and little recourse, and the path to renewed riches for Hoops.
Similar to the city of Milton, the people who live with consequences of our extractive economic regime and the people who benefit live in two distinct realities. Unfortunately, as the deal to build the Grand Patrician hotel reveals, those two worlds are growing farther apart, and it will be the residents of small communities like Milton and others across the country who will suffer the consequences.