Baxter County Airport Commission Meeting Gets Heated

Baxter County Judge, Kevin Litty and Prosecuting Attorney, David Ethredge, pressure the Airport Commission to approve a corporate lease which the Commission states violates FAA rules and regulations

The discussion was tense and heated during the Baxter County Airport Commission meeting on March 14^th.  Baxter County Judge, Kevin Litty, and Prosecuting Attorney, David Ethredge, both attended the meeting to address the Commission about a corporate hangar lease.  Judge Litty scolded the Commission for what he considers unacceptable delays in approving the corporate hanger lease for a local businessman, Brad Hasselwander, the key principle and owner of Auto Services Company.

Both Litty and Ethredge urged the Airport Commission to proceed with approving a proposed lease, which was drafted by Hasselwander’s attorney, Jason Duffy of Yellville. The Commissioners objected to the terms of the lease, and cited communications from an FAA Compliance Officer who had reviewed the lease and said it did not comply with FAA regulations for airport hangar leases.  The Airport Commissioners said they had been advised that being out of federal compliance on a lease can result in multiple sanctions, including the loss of federal funding and the potential of an airport shutdown.

Litty informed the Commission that if they did not approve the lease drafted by Hasselwander’s attorney, he and Ethredge would draft one, Judge Litty would sign it, and make it official.  “I can tell you right now, if y'all do not agree to a lease with Brad Hasselwander in a timely manner based on these minutes, myself and David Ethredge are going to write him one and we're going to sign it, and he's going to have a lease.”

Below is the audio from the portion of the meeting discussing the hangar lease. A transcript is available here. An additional link to the audio is here if needed. Everyone reading this publication is strongly urged to take the time to listen to this in its entirety.

The Commissioners cited multiple concerns with the proposed lease that were identified by the FAA Compliance Officer, including the below-market rate per square foot, the length of the term (the original proposal was for 15 years, but Hasselwander’s attorney drafted a lease for 30 years), and multiple missing elements required to be included in a hangar lease. In response to their concerns about the rate per-square-foot being well below market value, Litty responded, “That doesn't matter. I don't care if it's market value or Walmart value. The commission agreed to it. I don't give a crap about the market value.”

The Commissioners discussed a site visit on January 18, 2024, by the FAA Compliance Officer, who specifically requested to meet with Judge Litty to explain the situation. Airport Commission Chairman, Dr. Stephen Vester, explained to Litty,

“Kevin, another thing that you need to realize. He called that meeting with you. He called that meeting for the purpose of coming to you and explaining to you what the situation was between us and the FAA. He acknowledged us as guests at that meeting, but that was a meeting between him and you, and I'm baffled that you seem to have not heard all that he had to say, and the importance and the magnitude of the the issues that he brought up. And I say that with no disrespect. I just simply say, you need to understand that that was the nature of that meeting. We've already advised of that. We already know what the situation is. We have done everything we can to try to shield ourselves and the county from all of these issues.

There's other issues that have to be considered here as well. All these grant assurances, every time we get grant funding, someone has to sign off that we are in compliance with these grant assurances. Well, we all know, we've not been. So someone has been making improper statements on these applications that have been done in the past. Now, what are the ramifications of that? I don't know. I don't even want to go there. There's so many things that have happened lately that I don't want to go there, but we are. When your goal is to protect the county, you may believe that it won't happen. I tend to share that view. That having been said, what if it does? And that's the question that we have to ask.”

Litty responded,

“Well, I stand my ground firmly, but I will not get the county in a lawsuit,  and I'm 100% behind him. I'm not going to be convinced otherwise. “

When asked by members of the Airport Commission if they would both do their due diligence regarding the FAA rules and regulations, Ethredge responded,

“I get everything you're saying about the FAA. But I'm not a disagreeing with anything. Y'all bear with me. I'm not the smartest guy here, but I have got a law license, I've done this a day or two. The term you’re missing is called “detrimental reliance.” I don't care. Y'all need to hear me clearly. I do not care about any term of this lease. It's irrelevant to me. I'm being asked to render an opinion to the county. At the time this was agreed to, whether it was right, wrong, or indifferent, the Baxter County Airport Commission approved a lease. I understand what you're saying about there may be some missing terms. . . . At the time the county judge approved it. It was voted on. I'm saying to you, y'all can do whatever you want to with the FAA. The county's in a position. We're bound by what this says. And so what we're looking at is if we say we're not going to do that - I’m talking about the County who I represent in this moment - we're going to get sued by Brad Hasselwander, because his lease, he’s gonna say his lease has been breached….Please, please hear me out. Sure, I've read more rules and regulations than y'all can imagine in my time. And I hear all the time, oh, this is a rule or regulation. But the thing I’m going to say to the FAA guy who's looking me in the eye is show me the law. Because there’s a great judge we had in this district who used to have what's called RTFS - read the frickin statute.”

In response to Ethredge, a Commissioner quoted, “49 U.S.C. Subtitle VII, 14 CFR parts 13 and 16. They came January the 18th. They [the FAA] reviewed this and they said it is not compliant.”

Ethredge responds, “Because you didn't have a lease.”

The Commissioner replies, “We didn't? I thought you said we did.”

THE HISTORY

The Commission proceeded to address their concerns with the history of the corporate hangar and the failure by the previous Commissioners to ensure an appropriate lease was in place before construction occurred and to ensure there was a good business arrangement in place.

“The last commission, as we finally found out, was not doing things up to par, to say the least. It was following the footsteps of all the previous commissions, I will say that.  So we finally want to get this in compliance. We have found out, as we said, this is the airport in Arkansas that is not in compliance.” Airport Commissioner

They also alluded to the fact that the Airport Commission Chairman at the time the hangar construction was approved, Rob Finley, also had an ownership interest in Auto Services Company, LLC. Finley, a business partner of Hasselwander, was listed as the Auto Services Company President and CEO previously. He was heavily involved in overseeing the corporate proposal, the construction of the hangar, the state grant applications, and the Commission responsibilities, all while serving in two opposing roles.

“We get sworn in to take care of this airport in the county and keep it going and make it better and do something right. We're kind of getting tired of getting slapped on the wrist for doing the right thing, people trying to actually do what they should be doing. You cannot tell me that the guys who sat here during that commission, and we all know who they were, and Brad, did not know what they were doing. We all know they know what they were doing.” Airport Commissioner

In the January 2015 meeting, the Baxter County Airport Commission heard a proposal from a representative of Metova, Inc. regarding construction of a corporate hangar and multiple grant options that could be considered. Finley had an ownership interest in Metova. The Commission approved moving forward with determining the best location for a new hangar, the potential size and footprint of the new hangar, possible grants, and an air space determination for both the hangar and a relocation of the fuel farm. The Commission voted to accept this project and move forward with grant applications for a Metova hangar.

Fast forward to the meeting on April of 2017, where the Commission meeting minutes listed a hangar proposal by Commission Chair, Rob Finley, for discussion. The minutes state that engineering work had been completed, bids had been taken, and the grant application had been submitted to the State Aeronautics. He stated the proposal was for a company with which he was associated (Auto Services Company), and that there were two grants involved, one for paving the ramp area and one for hangar construction. The grant amounts were for $400,000, with a total project cost of $600,000. He stated the entity involved (ASC), would pay the matching funds and for any costs over what the grant would cover.

He said he thought the Commission had already voted on the project, but the Commissioners were confused about what had been discussed and approved. The minutes reflect that Finley was questioned about whether there was a proposal for the Commission to review, and he replied no, but they had seen one in the past (referencing the Metova presentation in 2015). The Commissioners were confused, because Finley was presenting on behalf of a different entity, Auto Services Company, but claiming the 2015 proposal was the one being referenced, and he thought had been previously approved.

The Commission continues their discussion trying to understand what has transpired and why they are now hearing a proposal from Finley on behalf of an entirely different entity, but another one in which he has an ownership interest.

One month later, in a May 2017 Special Meeting, the Commission takes up the hangar proposal again. Commissioner Mark Carney led the presentation. Carney, who is now deceased, was on the Commission and also served as the attorney for Auto Services Company. He explained again that this proposal was the same one approved by the Commission in January 2015, but the new corporation, Auto Services Company, had common ownership with Metova. Carney said it would cost $600,000 to complete the hangar. He said the cap on the state grant was $400,000 and that Auto Services would be responsible for costs over that. He said there would be no cost to the airport or the county for the hangar.

Carney said the ASC was seeking a 15-year lease with the amount of $400,000 being pro-rated using $.15 per square foot as the benchmark for credit for lease payments. The property would revert to the County at the end of the 15 year lease. Carney stated that he and Finley would abstain from voting because they were both interested parties.

Finley reiterated to the Commission that there would be no county money spent on the hangar. Commissioners Greg Mills, Nick Goodrich, Susan Stockton, and Cameron Davis all voted to accept this proposal. Commissioners Rob Finley and Mark Carney abstained from voting. Commissioner Danny Ward was absent.

THE FINANCES

There was much discussion during the meeting about the cost to construct the hangar and who had paid for what portions of the construction. There was confusion about the actual construction costs, with estimates ranging from $450,000 to $800,000. There was no clarity on what portion was paid by the state, by the airport, and by Auto Services Company. At one point, Ethredge noted the expense report he had received from Hasselwander showed a $200,000 payment in 2019 for the hangar construction from Brooke Development, another LLC owned by Hasselwander. He asked the Commission where that money had gone. The Commission was not aware of that payment from 2019.

Litty referenced the document and noted it looked to him like Hasselwander had spent upwards of $400,000 of his own money on the hangar construction. Paired with the $450,000 in state and local funds, this amount exceeds $800,000.

The Commissioners asked when and how Ethredge and Litty had received the Hasselwander expense report, because they had made multiple requests for his cost estimates. Ethredge said he had contacted Jason Duffy, Hasselwander’s attorney, and requested copies of all the records they had related to the hangar.

A January 19, 2024 email from Hasselwander’s attorney, Jason Duffey, to Commission Chairman, Vester, reveals Hasselwander’s resistance to negotiation on a portion of lease terms that were discussed in the May 22, 2017, Special Commission Meeting. It also seems to indicate that Hasselwander is including expensive upgrades in his request for credit - upgrades that were far beyond the norm for a standard hangar. The current Commission maintains the proposed terms are not FAA compliant and that the former Commission did not do their due diligence. Commission Chairman, Vester, explained to Judge Kevin Litty,

“Kevin, the date on the minutes, on that document that you're looking, at that stipulated this price, that document was long before these additional expenses were in there, and there was nothing in here that had anything to do with any project information on that. There were no specifications of what was going to go into the living quarters. There was nothing like that at all available for the commission. They just did it. And they did it with Americom. Brad, apparently negotiated with Americom directly on how to put in these things that he was paying for, which, I mean, that's fine. There's no harm in that. The point is, though, is those are things that Brad did for Brad’s purposes. They didn't do that for the airport's purposes. And there's nothing about that that will be of value to the airport once he returns this to the county ownership. So there's the issue. And it's like I was saying a minute ago, if you go in and you've got a bare house, and you decide, I want to put up curtains and, or paint it and I'm going to do all this kind of stuff. Do you just naturally expect that you're going to get that taken off your rent? You know, of course not, once you put those curtains up, because they're the color you like and you painted the color you wanted. And that's the situation that we're in with Brad. He did a great job of what he did over there. And I, you know, I applaud him for being able to do that. But to be able to credit that off as far as lease value that, that just doesn't fly. There's no way that can happen. The FAA is very specific on that kind of stuff. And it doesn't mean you can't do it. It just means you can't credit it against the grants.”

Later in the conversation, Chairman Vester, re-emphasizes this information to David Ethredge:

“Let me let me go back to something, Dave, that you were mentioning here a minute ago. And that just has to do with, you know, crediting him for what he spent on this thing. The fact is, in 2017, when he did this, when these minutes were actually recorded, the expenses that he incurred that were in addition to that happened as construction was going on much after this. And there's nothing in these minutes that sets any kind of a cap on that, describes how much that is, defines what it is. There's nothing at all. So the point I'm making here is Brad could have gone in there and put up gold tapestries and expected to take that off his lease. Well, you can understand that's probably not the best business arrangement.”

Construction of most corporate hangars are paid for by the corporation - not taxpayers - and are built on public property which is leased from the airport. In return, the corporation gets an appropriate market rate for the lease of the public land and a term length (15, 20, or 30 years) that allows the corporation to recover their costs through a long period of usage. The FAA rules and federal statutes are specific about what construction costs can be used as deductions for lease payments and how the hangar can be used. If a corporation wants to add significant upgrades to a hangar they are constructing, they can do so at their own expense, but not at the expense of taxpayers. Any amenities or excess “extravagances” are not eligible for deductions, because that would shift the costs of those upgrades to taxpayers instead of the corporation.

This corporate hangar was built with tax dollars, with significant upgrades paid for by Auto Services Company. These upgrades do not qualify as credit toward the lease. Yet, Hasselwander, a multi-millionaire, is threatening the County with a lawsuit if he does not get the lease terms he has demanded - terms that allow ASC to tie up and use a public facility for an inordinately low price for 30 years.

THE GRANTS

In the April 2017 meeting, Finley reported that the airport already had engineering work under way and was soliciting bids. There was confusion among the Commissioners about which proposal was being considered, and what entity was involved. The meeting minutes reflect that Finley told the Commissioners that the grant application had already been submitted to the State. However, documents now show the grant application was not submitted to the State until December 27, 2018, almost 20 months after Finley assured the Commissioners the applications had been submitted. On December 27, 2018, Airport Manager, Kathy Frederick, submitted a grant application for the hangar and a separate one for the taxiway access to the hangar. Both grants were approved by the State of Arkansas Department of Aeronautics on January 16, 2019.

The hangar grant request was for an 80%-20% match on a $450,000 project. The state would cover $250,000 and the airport would cover $200,000.

The grant request for the taxiway access to the new hangar was for a 90%-10% match, with the airport covering $15,939.77 of the total cost of $159,977.75, and the state covering the rest.

Finley and Carney’s assertions that no local tax dollars would be used for this construction is contrary to the grant application documents submitted to the state. This seems to indicate the core construction project was funded entirely by taxpayers through state funds and airport funds.

Additionally, these grant applications were prepared, submitted, and awarded to the airport for Baxter County Airport use. In the 2015 meeting minutes and A local news coverage story quoted Airport Manager, Kathy Frederick, claiming ASC had applied for grant funding to assist with construction costs, “Airport Manager Kathy Frederick says Auto Services has applied for grant funding to assist with construction costs estimated at $600,000.”

The grant funding was solicited by, and approved for, the Baxter County Airport.

MISSING DOCUMENTS

In Judge Litty’s response to our recent FOIA request for all documents related to this hangar construction, the grants, and the lease, we received a chain of emails stating there was a huge void in documentation from that time period.

Another observation made by MH Watchdogs is that the grant application states on page 3 that applications for hangar construction or renovation funds must include a signed lease agreement.

Neither the County, the Airport Commission, Brad Hasselwander, Auto Services Company, or their attorney Duffey, have been able to produce an executed, signed lease. We reached out to the State Department of Aeronautics to verify whether one was submitted in 2018 along with the application. Director Jerry Chism has confirmed a lease was not provided, but he did admit the application language is ambiguous. They require a lease for an FAA grant, but not for a state grant. However, he said they do not approve a grant for hangar construction unless there is at least a signed letter of intent from the interested party, because they do not want funds expended to construct hangars that could sit empty and unused. A copy of the signed letter of intent has been requested and will be provided in a future update to this story.

This time period of missing documents overlaps Finley’s service as Chairman of the Airport Commission and the Commission’s decision to fund construction of a corporate hangar with taxpayer dollars on Finley and Hasselwander’s behalf.

CONFLICTS OF INTEREST AND LOYALTIES

Despite a multitude of discrepancies, missing documents, conflicts of interest, an FAA warning that Hasselwander’s proposed lease was a violation of their rules, the misleading assurances that county money would not be used for the hangar construction, the unclear accounting of the costs, and no record of how the costs were shared between taxpayers and the corporation, Judge Litty and Prosecuting Attorney Ethredge were forceful in urging the Commission to approve the presented lease agreement. Ethredge argued that Hasselwander could claim “detrimental reliance.” Detrimental reliance is when a party is induced to rely on another’s promise or commitment resulting in a detrimental outcome to the party.

I am no attorney, but common sense would question whether, with all the information presented here, the Airport Commission could also have a claim of detrimental reliance. The Commission was relying on the information presented by an owner of Auto Services Company, Rob Finley, and his representatives, when this deal was orchestrated, and it certainly appears the Commission relied on his information and leadership to the detriment of the county and to the airport.

A recent MH Watchdogs publication Is Something Fishy Goin’ On?, highlighted Finley’s recent public and private dealings in his role as an Arkansas Game and Fish Commissioner, and explores questions about conflicts of interests and inappropriate use of taxpayers’ dollars.

Arkansas Legislative Audit recently found Baxter County in violation of multiple laws in connection with a transfer of money from the County to the Saddle Club arena. Judge Litty was serving on the Quorum Court when they approved giving taxpayer money to this private entity, and Litty voted in favor of this transfer of taxpayer money. Additionally, Ethredge is responsible for guiding the Quorum Court on legal matters, yet this illegal transaction occurred under his guidance. This leads to speculation about their efforts to ensure Hasselwander gets a lease which is more favorable to his private corporation, and yet detrimental to taxpayers and the county. Is this an indication of a pattern of conduct that should be strongly scrutinized by our community and by outside parties?

With a $50,000,000 runway expansion on the horizon for the airport, a resolution to this situation is paramount. The FAA will need assurance that the airport is grant compliant and all leases are in order before they will consider additional funding.

At the time of this publication, MH Watchdogs is awaiting additional documents and information from the Arkansas Aeronautics Division and the FAA Compliance Officer who visited the airport in January. Documents are also being provided to Arkansas Legislative Audit with a request to review all transactions from 2015 to the present that are associated with this arrangement. An update will be provided as soon as possible.

All documents received through our FOIA requests are available in this folder.

MK

NOTE:

Please support the effort to enshrine the Arkansas Freedom of Information Act into the AR Constitution and strengthen citizens’ protections under the law. The documents and recordings would be available with this law. Please contact MH Watchdogs at mhwatchdogs01@gmail.com to sign the petition to get both the Arkansas Government Disclosure Amendment & the Arkansas Government Disclosure Act on the ballot for November 2024.

https://arkansasadvocate.com/2024/01/29/arkansas-ag-approves-proposed-foia-changes-supporters-plan-to-start-gathering-signatures-soon/

Other news coverage about this corporate hangar

$600,000 corporate hangar construction approved https://www.ktlo.com/2017/05/30/600000-corporate-hangar-construction-approved/

Construction underway at BC Airport, master plan under development https://ktlo.com/2019/11/04/construction-underway-at-bc-airport-master-plan-under-development/

This is a publication of Arkansas Grassroots Publishing, LLC.