Tim Love’s Woodshed restaurant fights for property tax exemption

When Tim Love opened the Woodshed Smokehouse along the Trinity River four years ago, he looked at it as a unique public-private partnership in a place he loved.

Granted an exclusive lease for his 5,267-square-foot open-air restaurant — partially built by the Tarrant Regional Water District on its land — Love and the agency shared a vision of using the eatery to show how people should turn to, not away from, the river.

“I was pro-river before it was cool to be pro-river,” Love said. “The Woodshed is the great community place, which is what all of us envisioned it being.”

Besides being in an ideal location — near the Fort Worth Zoo, Colonial Country Club and TCU — the Woodshed turned out to be an even sweeter deal for Love since he didn’t have to pay taxes on land valued at more than $800,000.

So Love was caught off-guard this year when he suddenly got a $23,197.82 property tax bill after the Tarrant Appraisal District won its multi-year fight contending that the restaurant, while on public property, was being used for private purposes and should be taxed.

“I was surprised when we got the bill, and we paid it,” Love said. “I pay all of my taxes on time because that is what people should do.”

But since the Woodshed was “a big community effort,” Love is suing the appraisal district to recapture the property tax exemption. His lawyers argue in court documents that the district’s land typically is not taxed and that the Woodshed is a recreational amenity just like parks, trailheads and benches.

“Originally, in our deal, it was an exempt property,” Love said. “That is the legal limbo we are in.”

TAD officials have argued since 2012 that the eclectic, light-industrial-meets-urban-fish-camp style restaurant should be taxed because a large portion of it is being used for a private purpose. The appraisal review board agreed in November and issued an order that it should be taxed in February.

“State law clearly states that property owned by the state or a political subdivision of the state is exempt from taxation only if it is used for a public purpose,” according to TAD Chief Appraiser Jeff Law. “Property owned by the state or a political subdivision of the state that is not used for a public purpose is taxable.”

The water district originally sought to keep the tax exemption and lost. Under its lease with Love, the celebrity chef is on the hook for any property taxes. He must also bear the cost of any further litigation against TAD, even though the lawsuit is in the water district’s name because the agency still owns the land.

The issue needs to be litigated because it has the potential to affect other projects along the Trinity, say water district board members. In the past few years, a handful of commercial developments have sprung up along the river, and how this case is handled could influence others.

“I’m sure that people will look at it as corporate welfare,” said Jim Lane, a water district board member. “But that is what we have judges for, so let them earn their pay.”

Feeling the love

Sometimes, it seems Love is everywhere.

Known locally as the owner of the Lonesome Dove Western Bistro, the storied White Elephant Saloon in the Historic Stockyards and Queenies Steakhouse in Denton, he also appears on Restaurant Startup, a CNBC show where he and a co-host compete against each other to invest in restaurant concepts they believe will make them millions.

His world-class reputation as a chef attracted officials at the Trinity River Vision Authority, a political subdivision of the water district, to reach out to Love in 2011. It felt that bringing Love to the table could generate interest in North Texas and beyond. The authority is the lead agency for developing the river, including the Panther Island project north of downtown.

Without going out for bids, the authority negotiated a deal that the water district approved for the district to spend about $1.1 million to build the restaurant’s shell, with the chef footing the bill to finish it out. Taking into account the trailheads and retaining wall it would have built anyway, the district spent $2.4 million on the Woodshed property, officials said.

The water district then entered into a 10-year lease with Love to run the restaurant. Officials said the district couldn’t sell the property to Love since the land was bought at the insistence of the Army Corps of Engineers as part of flood control. Lease provisions would allow the district to demolish the smokehouse in an emergency.

And to guarantee the public’s access to the area, it was also agreed that patrons running, biking and walking along the trail must be allowed to rest on the smokehouse’s outdoor patio without buying anything. Love said he even gives away water and Gatorade to those on the trail.

“On Saturdays, we have 250 people come off the trail to hang out and listen to music for free,” Love said. “It is an open and public place; you can just stroll in and see what is happening.”

Adding to the unique nature of the deal, instead of collecting monthly rent, Love and the district entered into a profit-sharing arrangement. In the past four years, the district has received nearly $836,000 through the lease, recouping its original investment, records show. The lease has been a “better model for the water district because it gives us a long-term gain,” said Jim Oliver, the water district’s general manager.

The Woodshed has accomplished the goal of bringing people to the river and has influenced the development of other projects, said Vic Henderson, president of the water district board. It is an amenity that serves the public good, while also making money that can be used for other things.

“I think that speaks loud and clear that we have done a good thing for the community,” he said.

Just another concession

While many share love for the Woodshed, there still is a spat about whether it should be taxable.

In its February ruling, the Tarrant Appraisal Review Board agreed with the chief appraiser that 11,472 square feet of the property, which is accessible to the public, is exempt. But taxes had to be paid on the remaining 35,067 square feet of space, which includes the restaurant.

“The public trailhead and parking lot have a public purpose,” Law said. “However, TAD looks closely at property for which exemption is sought based on its ownership, use, and the particular laws that apply.”

The appraisal review board also ruled that the property tax exemption should be lifted going back to 2012 when the restaurant opened. In 2012 and 2013, the appraised value of the land was $817,438. In 2014 and 2015, the valuation dropped to $808,738.

If the appraisal district is successful in court, the county is likely to try to collect the taxes owed since the restaurant opened, said Tarrant County Tax Assessor-Collector Ron Wright. His records show that the exemption was lifted in 2013, but no property value was listed on his records until 2015, he said. As a result, no statement was issued for the previous years’ taxes.

“Is it exempt or not? If it is not exempt, it is taxable for those years,” Wright said. “What you are talking about here is a mess, but that is why you have courts of law.”

Wright said his office will collect the taxes if it’s decided that they’re due. “It is whatever the court determines,” he said. “We’ll do whatever the court says to do.”

Since 2012, the water district has protested denial of the exemption, while at the same time knowing that under its lease Love would ultimately be responsible for paying the taxes.

“We think it should be tax-exempt as a recreational amenity, but it wasn’t an accident that the lease was structured that way,” said Lee Christie, the attorney who represents the water district.

Granting the exemption to the Woodshed is no different than a concessionaire at Dallas/Fort Worth Airport or at Globe Life Park in Arlington: They may pay personal business taxes but not property taxes, he said.

“It is the same concept. You’ve got a government-owned piece of property and you allow a private interest to come in and create an amenity for your citizens,” Christie said. “There are a myriad of these type of hybrid situations.”

While there is a line in the state statute spelling out the water district’s powers that says it shall not be required to pay taxes on its property, Christie says part of the problem may be that other governmental entities have specifically been granted power to make these kind of deals with businesses. The water district statute is silent on the matter.

“This is a good-faith dispute over whether he ought to be paying taxes,” Christie said.

Love’s attorney said they have a strong case against TAD.

“I do feel confident on the language in the tax code and founding statute for the Tarrant Regional Water District that we have a strong basis for claiming the property should be exempt,” said Bill Warren, an attorney at Kelly, Hart & Hallman.

“From a broader perspective, it would certainly help with the development of the water district if its tenants were able to enjoy the tax-exempt status that was represented to Tim,” he added.

Whatever the judge decides is what Love says he’ll do. Besides being proud of his restaurant, he has fond memories of the site, which has one of the best views of the Trinity. He said he used to go there as a kid and play miniature golf and ride paddle boats.

“I will be happy to pay the tax if the judge says so,” Love said.

This story was originally published May 7, 2016 at 4:46 PM with the headline "Tim Love’s Woodshed restaurant fights for property tax exemption."