Palmer business shuttered

PALMER — On Tuesday, the doors of the Gold Miner’s Hotel were once again locked amid charges of foreclosure and tax evasion.

On Jan. 30, Yong Piening, the owner, signed a lease-to-buy agreement with Joel Costonis. The two agreed on an owner-financed deal where Costonis was to pay Piening a percentage of the monthly and annual profits until he reached the purchase price of $3.4 million.

When Costonis took possession of the building, it had recently been closed by the fire marshal, and the Department of Environmental Conservation had a 2 1/2- page list of citations on the structure.

He brought the building up to code and did general cosmetic upgrades. He passed a fire inspection and received a letter from the DEC commending his efforts and offering their support. He changed the name from the Gold Miner’s to the 49th Star, and the hotel-resturant-bar was open for business.

Less than a month later, Pacific International Bank, Piening’s lender, asked the court to put the building in receivership. Piening had not made payments for 15 months, said court-appointed receiver Kevin Tubbs. A foreclosure hearing was set for June.

Before Tubbs took possession of the building, Costonis offered to take over the payments for Piening even though their contract explicitly states Costonis is not responsible for any outstanding debts Piening had. The bank agreed, as foreclosure is always a last resort.

However, Tubbs said, the bank never received its payments, and Pacific International asked Tubbs to lock the building to protect its assets.

Tubbs toured the building in the beginning of March and found tenants living in the rooms, many of whom were working for room and board from Costonis. The bank gave them a few days to get their property out, then Tubbs changed the locks.

The court revisited the matter on March 12. Piening and Costonis pleaded their case to the judge claiming the business could make a profit. The judge ruled to lift the receivership.

Shortly thereafter, the city of Palmer revoked the building’s business license citing $64,894.38 was owed in back taxes.

A few days after the March 12 ruling, Piening called Tubbs to get possession of the keys. Tubbs was confused because he had already seen Costonis in the building. Piening thought Tubbs was joking at first, Tubbs said. When she realized he was serious, she asked Tubbs to take receivership of the building again.

“I’ve been a court-appointed receiver for a long time,” Tubbs said, “but I have never seen a mortgagee ask for her property to be put back into receivership.”

The building can only be put into receivership by a court ruling, and the judge could not fit the case into the docket until Thursday.

In the meantime, Costonis still controlled the building under the contract Piening had signed, but he could not get a business license from the city. The state and the borough have already given him licenses, said Costonis, but the city will not do so until he pays the entire sum of back taxes.

Without a business license, he cannot generate the revenue to pay the city and the bank, Costonis said.

“I’ve already agreed to pay the $55,000 in back payments to the bank,” said Costonis. “I am willing to make up the back taxes, but they are not willing to work with me. Ideally, they would give me a provisional license and demand I make quarterly payments on what’s owed.”

City Manager Bill Allen said the city is willing to work with people if there is a legitimate case of hardship. However, in this case, the city does not want to extend a line of credit to Costonis when he still does not technically own the building.

“I don’t know who owns the property. I don’t know if I’m dealing with the bank, with Joel or with Ms. Piening,” Allen said. “This thing is in litigation. The city does not want to be involved in it. (...) If Joel becomes the owner and he applies for a business license in good standing with all the utility bills and taxes paid, we will give it to him.”

Costonis said he could probably pay the debt out of his own pocket, but he has no assurances he will get his license if he does.

“I’m starting to feel like I’m throwing good money after bad,” he said. “Am I going to gamble and risk the integrity of my hard-earned money on a debt that’s not mine? Right now, the business cannot afford to put out $65,000 before I start bringing money in.”

Beyond the $3,000 to $5,000 Costonis claims he is losing everyday, the impact to Palmer is his main concern, he said. In addition to the bar, restaurant and hotel, the room in the back was a place for teenagers to hang out in an alcohol-free environment. He said he partnered with the Red Cross to give victims of domestic violence a place to stay, and employees were allowed to temporarily work for room and board if they needed help.

Additionally, Palmer is stifling their own economic growth, Costonis said. All of his employees are now out of work, and other revenue-generating businesses were headquatered in the building. A new visitor center was even looking at moving in, he said.

“The fact that the city won’t give me my license is incredibly counterproductive,” Costonis said. “If I lose (the building), it will sit vacant for a long time.”

Thursday the court ruled to put the building back into Tubb’s receivership. During the hearing Costonis was at an interview with KWHL in Anchorage. Less than an hour after getting back to the 49th Star, Palmer Police showed up with Tubbs.

The police ordered him to collect his personal belongs and leave the building immediately. The bank had taken possession of the building and issued a trespass order if Costonis returned.

“When I toured this building three weeks ago, it was ready to either run or sell,” said Tubbs. “Now look at it. The rooms are thrashed, all the TVs and artwork are gone, and the room full of liquor is missing.”

But even Costonis admits that this all could have been avoided if he got title insurance on the original transaction.

“Had I done this the proper way, this wouldn’t have happened,” said Costonis. “I didn’t want to do that for personal reasons.”

Now, the building will go to the foreclosure hearing in June.