ON THE COVER North Coast Journal Weekly

INN TROUBLE: The many financial woes of Eureka Inn Owner John Biord [photo of facade of Eureka Inn]
The Eureka Inn. Photo by Helen Sanderson



[John Biord at his desk]LAST WEDNESDAY, THE AFTERNOON SESSION WAS RUNNING LATE IN Judge Christopher Wilson's shabby, makeshift courtroom on the fifth floor of the county courthouse. Wilson was working through the cases of alleged drunk drivers, possessors of illegal drugs, wife beaters -- several of whom appeared in handcuffs and orange jumpsuits, brought down from the county jail. It took nearly an hour to get to the case of John Edward Biord [photo at right], owner of the Eureka Inn, who was charged with misappropriating $117,235 in hotel taxes collected from patrons.

Biord sat though the whole hour, worrying his hands together and quickly turning his head every time a new person entered. A thin man, 49 years old, Biord was wearing a checked brown jacket and dark slacks. He looked more like a lawyer than a criminal defendant, except for the fact that he radiated a melancholy that could be felt all the way across the room.

When his case was finally called, the news did not lighten his mood. Biord and his attorney had waited months to hear Wilson rule on their motion to have Biord's case thrown out of court. While Wilson announced his decision to allow the case to go forward, Biord looked down at his shoes. His attorney entered a plea of not guilty on his behalf, and Wilson set a preliminary hearing for Feb. 11.

Later, Assistant District Attorney Tim Stoen said that he would seek some time in the county jail for Biord. "I think that there has to be some symbolic jail time -- it doesn't have to be much, but it should be something," he said. "It's very important that everyone should be treated equally in society and the mere fact that you're a community leader should not play into that."

On the ropes

But jail time, while maybe not the least of Biord's worries, is far from the only one. Even though he has already paid back all the transit occupancy taxes owed to the city of Eureka, Biord's empire -- so often patched up with the financial equivalent of duct tape over the years -- is on the verge of unraveling completely.

Financial records reveal the following:

In July 2002, the Internal Revenue Service placed liens worth around $750,000 on all property owned by the Biords, including the inn -- the vast majority of them for failure to hand over taxes withheld from employees' pay checks. The liens have the effect of tying up Biord's capital, making it less likely that he can take out any additional loans against the property.

This July, the county filed a notice of property tax default on the inn. With back taxes and penalties, Biord needs around $150,000 to settle his accounts with the county.

The county has also placed a notice of tax default on five parcels that Biord and his wife, Deborah, own in the Willow Creek area. In total, the Biords owe over $34,000 in back taxes to the county on the Willow Creek properties. Unless they pay these debts in full before this summer, the inn and the Willow Creek parcels could be impounded and sold at auction.

But the most dire news came on Monday. A creditor -- Wells Fargo Bank -- announced its intention to foreclose on the inn for unpaid debt, totaling nearly $700,000. The loan was originally taken out in 1990 by the previous owners of the hotel, who had used it to do some much-needed renovations; Biord assumed the debt when he bought the inn. Now, unless Biord can pay off the debt in full or come to some other arrangement with the bank, the inn will be sold at a public auction on Feb. 2.

On Tuesday, Biord said that he has a plan in place that would allow him to keep control of the inn, but he admitted that it would take a good deal of luck for it to succeed. And he reluctantly acknowledged that his tenure as Eureka's most prominent hotelier might be coming to a close.

"The thing might be better off being owned by someone else -- someone who's got more money to put into it," he said. "We'll see what happens on that day."

A deal was in the works to sell the Eureka Inn to a Santa Rosa group late last year. But the negotiations -- never made public until now -- collapsed after the two sides could not come to terms.

Biord's financial strains have left their mark on the inn, a federal landmark rivaled locally only by the Carson Mansion for historic value. In the nine years that Biord has owned the inn, its infrastructure has deteriorated. In particular, the building suffers from chronic plumbing problems. Delivery of hot water to some rooms is slow or spotty.

"After the Biords took over, sometimes it seemed like they were more interested in the flower arrangements than the plumbing," said one long-time member of the local hospitality industry. "The place is an icon. It should be our shining star. This is where our dignitaries stay when they come to town. The place is an embarrassment. It's literally falling apart."

Somber visionary

Biord was up in his office at the inn Tuesday afternoon, sitting behind his desk and fiddling with a pair of pliers while he reflected on his tenure at the inn in a soft, low voice.

He listed the things he has done for the hotel, the money he has pumped into it and the improvements he has made over the years. He installed a patio around the swimming pool, and a new co-generation facility that produces some of the electricity used in the hotel and its restaurants.

He also listed some of the things he was never able to do.

"When we bought it, there was an additional sum of money to refurbish the guest rooms," he said. "Then that money evaporated. That was the first part of the struggle.

"Then you get into the rough winters, the road closures a lot of things. We actually turned a small profit in 2000. Early the next summer, the dot-com crash happened. Then 9/11 happened, and we started receiving cancellations from overseas."

James Poovey, a local attorney who has known Biord since high school, said that he has always known his friend as a fun person to be around and as an artistic spirit. He remembered Biord's talent with the piano and the ambitious plans he drew up for the renovation of Eureka's downtown a few years ago.

"John's got this talent for being creative, and having a vision for how things ought to be and look," he said. "Same thing with music -- he never studied music, he played it by ear. He's a very creative guy."

But Poovey acknowledged that Biord, at times, has struggled to reconcile his ideas with the bottom-line demands of the business world.

"Some people are creative and visionary, but their business side is not necessarily their strong point," he said. "I can see how John would look at the inn and have a great creative idea of what to do there. Now he's struggling financially. But he's a very well-intentioned guy -- even a very generous guy."

[Portrait of Helen Barnum]Past upgrades

Back in 1993, the inn was on the mend. In 1960, Helen Barnum [photo at left], a member of one of Humboldt County's prominent timber families, had bought most of the shares in the Eureka Hotel Co., the semi-public company that built the inn in 1922. The inn was struggling before Barnum bought her stake, and continued to struggle for many years afterward. Barnum spent a good deal of her own money to keep the business afloat.

Then, in 1976, she hired John Porter, [photo below right] a graduate of the University of Nevada-Las Vegas business management school, who had a minor in hotel management and a great deal of experience in the field. Porter said that he and his team would be able to turn the business around. They borrowed money -- including the loan foreclosed upon this week -- and invested it in the hotel.

"The inn was in the black, we paid our notes, and the money that Mrs. Barnum put in before I got there got paid back," Porter said last week. "That's why she liked me." Sometime in the late `80s or early `90s, Porter said, Barnum expressed a wish to sell her shares in the company to him. According to Porter, she went so far as to draft an agreement.

Porter -- now a co-owner of the Benbow Inn -- said that his plan was to buy out Helen Barnum for a reasonable sum, and then embark on another major capital upgrade of the inn's facilities.

"I think Mrs. Barnum and the board of directors had done a good job fixing up the building, but our plan was to take it to the next level," he said. "Our plan was to redo the plumbing, redo the electrical, redo all the windows, and there were still 77 guest rooms that needed total renovation. Our plan was to put at least a million dollars in the infrastructure."

As it came to pass, he never got the chance. After a long illness, Helen Barnum died in July 1993 without having signed the agreement with Porter. Shortly afterwards, Porter said, he got word from the executor of Barnum's estate that another buyer had surfaced, and was offering considerably more money for Barnum's shares.[John Porter]

Paying too much?

The buyer turned out to be John Biord. In his late 30s at the time, he had attended St. Bernard's High School and worked at Eel River Sawmills before becoming a real estate developer and co-owner of an architecture firm, Holmes-Biord. Along the way, he had married Deborah Carter, daughter of Joe Carter and sister of Mark Carter (currently the proprietor of the Carter House Inn).

Biord was backed by Ray Park, a Cleveland industrialist and real estate developer who was a long-time friend of the Carter family. According to Porter, Biord and Park offered the Barnum family around $2.7 million for Helen Barnum's 84 percent stake in the inn. Biord then proceeded to buy the rest of the outstanding shares, consolidating the inn for the first time under a single owner for a total of $3.2 million.

Porter was out-bid. "[Biord] paid a million dollars more than we were offering," Porter said. "The fact of the matter is that the guy overpaid for the business."

Nine years later -- after many tax liens, "mechanic's liens" (for failure to pay contractors) and court judgments in favor of suppliers of goods to the inn -- it appears that Biord's reign at the inn is coming to a close. Even if he can skirt the foreclosure action, pay back the IRS and avoid jail time, it is doubtful that he will be able to delay paying back Park, his original backer, too much longer. Several times over the last few years, Park has sought to sell the note he holds on the inn, sometimes at a deep discount. Whoever bought the debt would likely do so in order to foreclose upon the inn and take over its ownership.

Ironically, in his attempts to get out from underneath the debt Park has turned -- unsuccessfully, so far -- to the old guard of the Barnum era of the inn.

In 1999, Park offered Porter and his partners at the Benbow the debt on the Eureka Inn for 50 percent of the note's face value. They turned down the deal after realizing that Park's note had grown rather than diminished over the years -- it now amounted to $4.2 million dollars, a million over what Biord originally paid for the inn and $2 million more than Porter had offered.

Within the last couple of months, a deal to sell the inn to a small, Santa Rosa-based consortium called Fountaingrove Inn LLP fell apart after the parties could not come to an agreement on a price. The general manager -- Bill Carson, who spent 17 years at the Eureka Inn as John Porter's lieutenant -- said that his company was still open to a deal.

"I would say it's in need of remodeling -- a serious cash infusion to bring it back, to restore it," Carson said. "It's the grand old lady of the county, it's important and that's why we are interested. We're still interested, but the situation is we're not going to pay anything more than it's worth."

Biord said that neither he nor Park thought that Fountaingrove's offer was adequate. "They came up and looked around, then made an offer," he said. "It was not an offer we considered extensively."

Porter said that major hotel chains probably would not be interested in the inn, as its age and physical condition would complicate management of the business. The perfect buyer would be something like Fountaingrove -- a smaller chain that specializes in high-end properties, is flush with cash and experienced in the industry.

"I think it would be outstanding," he said. "What that hotel needs is two things: An infusion of capital and competent management. Bill Carson is an outstanding operator, and [Fountaingrove] runs a high-end operation down there."

[Lobby and hallway of Eureka Inn]But whether or not a deal can be struck with Fountaingrove -- Carson says that his company is sticking to its price -- the end of the Biord era at the inn appears near. The debt on the property, combined with the large federal tax liens, the pending foreclosure and the declining physical state of the building, means that the net worth of the business must be approaching zero, if it hasn't already veered into the red; that makes it difficult for Biord to get any additional credit to pay off his current debts -- probably impossible, given that Park, his biggest benefactor, has been seeking to cut his losses.

[Left: Lobby of Eureka Inn]

But Biord said that he does have a plan to save the inn from foreclosure, though he could not discuss its details. He said, too, that he had been in close talks with the IRS, and planned to enter into a program that would allow him to pay a reduced amount to settle the debt. "The goal is to retire that debt, as we've retired other arrears to stay open," he said.

For his part, Porter said that his company would no longer be interested in the property, unless it were offered to him for "practically nothing." But he had words of hope to whoever did decide to take up the project of putting the inn back on its feet.

"The lodging and restaurant business, like a lot of businesses, is very competitive," he said. "It's difficult for those of us who have been doing it for 30 to 40 years, much less a neophyte. But whoever ends up with it, whatever they do, the community would embrace and put their arms around the project, and go out and support it."

Will stay busy

As for Biord, he said that he hadn't yet given much thought to what he would do if he were to lose the inn, but he doubted he'd be idle for long. "There's lots I can do, and there's lots that needs to be done."

Biord said that in tough times, when there simply was not enough money to go around, the first priority was always to keep the doors open and the employees paid.

"Do we love the inn? Yes," he said. "Has it been a challenge? It's been an extraordinary challenge. Has it been tough? Tougher than I ever could have imagined."

Journal freelance writer George Ringwald contributed to this report.




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