It’s anybody’s guess when the Imperial Hotel in Canton will open.

The deadline for finishing renovations to the hotel, owned by outgoing Canton Mayor Pat Smathers, has continually been pushed back. The initial opening date in May turned into July, then August, with the latest target now sometime in December.

“There is just very little left to do,” said Smathers, who expects to finish renovating the hotel by the first or second week in December. “It’s just taken time, but it’s an old building.”

The renovations have been progressing in fits and starts during the past decade. Piles of bricks and other tell-tale signs of construction have been a mainstay in the yard of the downtown property for years now.

This time, however, completion really is just around the corner. If Smathers doesn’t create 15 jobs in the renovated hotel by this time next year, he will have to repay a $90,000 state grant for the project from the N.C. Rural Center.

Smathers himself will only create one of the required 15 jobs directly, however. An independent restaurant leasing space from Smathers inside the hotel will create the other 14 jobs required under the grant.

Smathers must repay a portion of the grant for each job not created.

Plans for a restaurant inside the hotel have taken a turn last week, however, with one restaurateur stepping back and another stepping in. Originally, Greg Petty, owner of the Canton Lunch Box, was going to open a restaurant in the Imperial Hotel. He expected to open this summer and even closed his other restaurant to focus his efforts on the new location.

“We closed our Canton Lunch Box in anticipation of getting this place opening on Aug. 1,” Petty said. That’s after previously touting a June opening.

Petty said the prolonged renovations were not the main reason he opted out of the Imperial locale. He said he was still planning to open the restaurant when he was approached by Sid Truesdale, who wanted to buy him out.

Truesdale said he was looking for an opportunity locally.

The goal for opening a restaurant in the hotel is New Year’s Eve, said Truesdale, calling the timeline “pretty aggressive.”

The restaurant, called Sid’s on Main, will offer “a little bit of everything,” such as steak and soups, Truesdale said.

The renovation project was about 80 percent complete in June, according to a progress report submitted to the Rural Center as a requirement of the grant. The main items remaining were painting the interior and installing a sprinkler system, bathroom fixtures, HVAC units and lighting fixtures, according to the report.

Now, the sprinkler system has been installed, as well as the light fixtures. However, workers are still inspecting the hotel’s pipes and finishing several outdoor decks or walkways, among other things.

Smathers purchased the property in 1983 with several others. During the next 15 years or so, he bought out his partners and began renovating the historic building.

The mayor said he did not know “off the top of my head” how much he has spent on the project during the last decade. However, he said the final stages of the project should cost about $180,000.

Smathers, through the Haywood County government, has obtained a two-part grant from the N.C. Rural Center to renovate the Imperial Hotel. The center awarded Smathers a $25,000 pre-development grant for architectural and engineering plans and a $90,000 grant for construction.

Smathers had to match the grant with an equal level of spending. As of Nov. 10, the remaining grant funds totaled about $4,000.

To meet the terms of the grants, the hotel must create 15 new jobs — 14 in the restaurant and one in the hotel — before November 2012 or repay part of the grant.

Canton residents and business owners said the hotel will have a positive impact on the community but are wondering how much longer they will have to wait.

“Anything that brings people downtown will help businesses,” said Julie Spivey, an area resident. “It’s taking longer than anyone expected,” she added.

Charles Rathbone, owner of Sign World WNC, said he would like to see the hotel and restaurant open for the upcoming holiday season.

“There is a lot of anticipation waiting for the opening day,” Rathbone said.

Lake Junaluska Conference and Retreat Center has reached a critical crossroads on the eve of its 100-year mark. It’s headed toward financial insolvency, and the only thing that can save it now is a bold and aggressive makeover aimed at reclaiming dwindling guest numbers.

The Methodist institution and Haywood County landmark has struggled to stay relevant in a changing world. Lake Junaluska found itself suddenly marooned — caught off guard and with no lifeboat in sight — as the audience for its mainstay church conferences and theological retreats aged.

Meanwhile, its outdated facilities failed to keep up with the tastes and expectations of guests it could have otherwise courted to make up for the lost numbers.

Failure to change course is certain death. But the road to recovery is marked by a modicum of risk — taking on debt in order to bail itself out.

The Smoky Mountain News had a candid and open conversation with the man hired to turn the ship around, Lake Junaluska’s new executive director Jack Ewing.

SMN: So just what is Lake Junaluska’s financial status?

Jack Ewing: “The bottom line is in the last six years we have balanced our budget only once, and I am sorry to say in all probability we will end 2011 with a deficit budget as well.”

Losses have ranged from $200,000 to $400,000 a year recently out of a nearly $9 million budget. Reserves have made up the difference, but those reserves are running out, down to around $2 million.

Meanwhile, guests continue to decline. And subsidies from the Methodist church have been taken away, making the situation even worse.

Why is the conference center losing money?

The Lake has seen a 17 percent decline in overnight stays since 2007. Overnight stays are the conference center’s main source of revenue, and more than 90 percent of its hotel guests are part of a group conference or retreat held on the groups.

“We are heavily dependent on groups for revenue. It is not good for us to be heavily dependent on group business because our group business is declining. Here is another unfortunate truth about group business. A majority of our groups book two to three years in advance. The projection for 2012 is worse than the projection for 2011.”

Is there a clear road back to financial solvency?

“You might look at this and say, ‘It is bleak. You may as well shut the doors.’ It is bleak until you stand on the balcony of the Terrace Hotel and say, ‘This is unbelievable.’ The potential is great. Once we have lodging, food and meeting space that meets or exceeds our guests’ expectations, it will be so easy to sell Lake Junaluska. But, it is going to take some money. We’ve got to find some money to make it happen.”

What solution have you and the board of directors decided on?

“The world is changing. What people want is changing, and what people are willing to pay for is changing, and therefore Lake Junaluska will have to change as well. The first major challenge we have is the condition of our dining, lodging and meeting space are not of the standard that will sustain our traditional guest base nor attract a broader guest base.”

What do you mean by a larger guest base?

“We have to figure out how to optimize our leisure vacation business, because who would not want to come and stay at Lake Junaluska. We are open to people to come off the street and say ‘Can I stay at your hotel?’ They don’t have to be United Methodist, they don’t have to be part of a group. Our lodging facilities are open for people to stay.”

With an annual occupancy rate of only 26 percent, revenue simply isn’t covering the overhead of keeping the facilities open. The Lake has to increase its guest numbers, and that means tapping the vacation market and going after secular conference business.

Why didn’t the administration take action to right the ship sooner?

“It is always easy in retrospect to look at things and say ‘Why didn’t we figure this out earlier?’ I think it is a combination of several factors.” In a sense, the Lake was hit by a perfect storm that is obvious in hindsight but perhaps not so much at the time.

The traditional audience for church conferences and retreats is aging. Meanwhile, the Lake put off make-overs to guest rooms and failed to keep its facilities modern and as a result couldn’t attract new business to make up for what it was losing.

Were you hired as the turnaround guy?

In short, yes, Ewing said.

“I didn’t know the details of the challenge, but I knew the challenge.”

He took over as director of Lake Junaluska in January following the 11-year tenure of former director Jimmy Carr.

Ewing comes from a background in college education, serving as the president of two Methodist colleges during 16 years. He equates his role now with his role at Dakota Wesleyan University, where there hadn’t been a balanced budget in 10 years and a sense of hopelessness had set in before Ewing arrived.

“It is amazing how a sense of hope helps both the employees of and organization and the supporters of an organization. I am trying to give hope. It is not a pie in the sky hope, it is real.”

Lake Junaluska was dealt a major blow four years ago when the Southeastern Jurisdiction of the United Methodist Church began phasing out $1 million in annual subsidies for operations. How is that going?

“Hear me loud and clear: we are exceedingly grateful for the funding the church has provided us. The church has made it possible for us to remain in business.”

The loss of that funding, however, was major.

“That is a huge challenge for us going forward. It is the crisis that helps us to focus our efforts and energy going forward.”

Why are fewer groups booking conferences at Lake Junaluska?

Part of the problem is the traditional demographic that attended Methodist conferences.

“United Methodists are aging and are not being replaced by younger people attending events. They are either dying or they are not physically capable of coming. We are going to have a very focused effort on trying to attract children, youth and their parents.

How do we get those young people to come to Lake Junaluska?

It is going to require us to think differently. The playground built 35 years ago may not be the right playground for children today.” The same for other athletic and recreation facilities.

Where will you pick up extra business if Methodist conference attendance is dropping?

“We are going to have to attract some secular business.”

Lake Junaluska plans to heavily market itself as an ideal retreat and conference venue to the non-profit world.

But the Lake also hopes to pick up business from individual guests who just want to come on vacation to Lake Junaluska. Right now, only 10 percent of guests staying at the lake are simply vacationers unconnected to a conference or group. That has to increase for the operations viable.

What does Lake Junaluska have going for it as a conference and retreat center, or vacation destination for that matter?

“What makes Lake Junaluska so spectacular are the outdoors spaces. The lake is by far our greatest asset. We have got to take care of it, we have got to invest in it. We have to make sure we are protecting our shore and our water quality. All our renovated facilities on the lake need to engage with the lake.”

How much will renovations and new facilities cost?

About $20 to $30 million. But it’s sizably less than a master plan for the lake created three years ago, with a price tag of twice that amount.

What role will fundraising play?

“I think we can raise half of that money. There’s a lot of people who have money who want to give it to Lake Junaluska, they just don’t know it yet.

“Because of the incredible experience people have had at Lake Junaluska over the years, when we tell the story and give specific examples of how a gift can impact the future of Lake Junaluska, they will want to give.

“It is really beautiful when you can sit down and say, ‘Here is what we are trying to accomplish’ and connect with the need all of us have to be a part of something significant beyond ourselves. They are ready to give but they want to know what we are going to do.”

Where will the rest of the money come from?

“We are going to have to borrow some money in order to make this happen.”

Ewing hopes to take out a traditional loan from a financial institution, but as for collateral, that “is an existing question we would have to look at.”

The lake has undeveloped land it could put up for collateral rather than the facility they are taking out a construction loan for. To pay back the loan, the Lake will need to net more each year than it spends on operations — not only erase its deficit but actually create a positive balance sheet — to make the loan payments.

The lake only has $2.5 million in current debt.

What if the extra business you are banking on doesn’t materialize after taking on the debt?

“Who has ever been successful in their lives from an entrepreneurial perspective if they haven’t taken the risk?”

But in this case, Ewing sees the risk as almost nil.

“We have confidence this will happen.”

Stuart Auditorium is old as Lake Junaluska itself, originally little more than a canvas roof over a tent frame, holding the very first Methodist sermons when the institution was founded in the early 1900s. What will become of this large lakeshore venue?

“When Stuart was built in 1913 it was not intended to last for two centuries.”

It isn’t big enough — it seats 2,000 but really the Lake needs a venue for closer to 3,000. It has exorbitant heating and cooling costs. It doesn’t meet modern audio-visual standards. In short, it might be torn down, although complete overhaul isn’t out of the question.

“Stuart is a place people love. While I strongly desire us to have a facility that meets our need going forward, if it can be done by preserving the current facility, great. But what is most important is to have a forward-looking building.”

Whatever is built back in Stuart’s place will have the same signature look of a giant revival tent.

“If we replace it, people will know it is Stuart Auditorium. It would be a newer version, a 21st century building that meets our space needs going forward. Stuart will be the signature building going forward for the next 100 years.”

What else could face the wrecking ball?

The Harrell Center falls dismally short as the primary meeting space on the grounds and fails to accommodate the needs of groups coming to the Lake. A new Harrell Center will be outfitted with flexible meeting space and will tie in with the new Stuart Auditorium next door — as well as integrate with the underutilized lake shore.

A new Harrell Center would be able to host a 400-person banquet. The largest banquet space on the grounds now is 150.

Jones Cafeteria is also on the short list, but like Stuart, could be fixed with a major, major renovation instead of complete tear down.

What about the Terrace?

Ewing called the Terrace an unfortunate example of the “architecture du jour” syndrome. It looked great in the 1970s — but the fleeting look didn’t last.

The Terrace needs façade work to make it more attractive from the outside, new furnishings in all the guest rooms, and complete gutting of the guest room bathrooms.

It is terribly dated. Most hotels update their rooms every five to seven years. It’s never been done at the Terrace since it opened in 1977, and people aren’t getting the value of what they are paying now, Ewing said. A major interior renovation is in the cards.

Any plans for the Lambuth?

Ewing wants to transform the stately inn into a “grand hotel experience.”

“I like to think about it being Greenbrier like. People will want to come to Lake Junaluska to stay at Lambuth Inn.”

Renovations will make it into a luxury hotel, although not with the luxury price tag.

What’s the time line?

Everything must be finished in five years. The Terrace will likely come first, then the Harrell Center, then Stuart, then the Lambuth.

How did you decide what needed fixing most?

“How do we strategically invest in things that will be revenue producing? We cannot be spending money on things that will not have a return on investment.”

A strategic planning committee in concert with the board of directors for the lake developed the master plan for what had to be done. Also, a facility audit of every building at Lake Junaluska was prepared by an outside firm with the help of a local architect.

What will you do about the deficits until the Lake’s new image and facilities start to bring in increased revenue?

The Lake will balance its budget starting in 2012. It has to come up with at least half a million to do so — enough to cover the $200,000 to $300,000 operational deficit it has been running and to cover the last $250,000 in subsidies from the church that will be phased out next year.

“Everybody on the staff has been challenged to think of ways to optimize revenue and control expenses.”

If demand doesn’t justify keeping all the buildings open, why not shut some down?

“We have the same number of facilities open today as we had 10 years ago. We may have to in the short-term ‘right size’ the organization before we can grow bigger and grow stronger. We may have to shut down some buildings.”

In fact, the Lake has been shutting down the Lambuth Inn – and occasionally even the Terrace – during slow weeks in the winter for a few years already.

“It is not new. We are just trying to be a little bit more strategic in the way that we do that. But it isn’t what we want to do long term.”

Has Lake Junaluska considered offering alcohol to appeal to a broader market and younger demographic? Or at least allowing it under special use permits?

“There is nothing in this plan about serving alcohol to attract groups from the outside. There are plenty of groups that would love to come that do not expect or need to have alcohol. We are planning this future with a clear understanding and commitment of Lake Junaluska as a place that does not include alcohol.”

Besides, the property deeds that govern facilities at Lake Junaluska ban alcohol.

“So at this point it is a moot issue. There may be a need for that issue to be evaluated at some point in the future, but it is not part of our planning process.”

Is charging for a grounds pass on the table, rather than allowing free public access to the walking trail, rose walk and gardens, playground and other recreation sites?

“The way I am approaching that is not from the perspective of charging people to come but giving people the opportunity to spend money when they arrive. There is a tremendous opportunity for a place where we are not charging somebody for the experience but giving people an opportunity to get something they want and that will be beneficial for us.”

This means ice cream, coffee, sandwiches and retail — perhaps by vendors but perhaps food ventures run by the lake itself. Ewing envisions a plaza lakeside around the new Stuart Auditorium.

Once you hit the Haywood County line after heading west on Interstate 40 out of Asheville, Western Carolina University is the acknowledged cultural focal point for all the remaining seven counties in this southwestern corner of our great state. We expect vision and smarts from university leaders, the professors and the students it graduates. We expect those same leaders to value the culture and history of this region, and to help us preserve, protect and brag about our assets.

That’s why it is refreshing to see new Chancellor David Belcher re-start a strategic planning process that he hopes will help steer the university as it deals with the new realities of state budget cuts and other financial challenges.

Many in this region take for granted the gem that we have in WCU. All it takes, though, is a roll call in our public schools and community colleges, small businesses, financial institutions, arts communities and the local governments to see the impact of this university. Its graduates are our leaders, particularly in the seven western counties. WCU and this region are inseparable.

I think the university recognizes this special relationship, though some of its leaders have placed a higher value on it than others. As long as these ties remain strong and grow even deeper, both the university and the region will be better off.

•••

Town Public Works Director Fred Baker. Town Planner Paul Benson. Planning board member Ron Reid. Concerned citizens like Bicycle Haywood’s Cecil Yount. Realtor Brian Noland.

That’s a short list of those who think the state Department of Transportation’s initial plan for Waynesville’s South Main Street does not fit what Waynesville needs. We offer our wholehearted support to those who want something better than a four-lane road with a raised median.

By the time this edition of The Smoky Mountain News hits the streets, a community brainstorming session to gather ideas for the road will be in the history books (it was held Sept. 20). But that doesn’t mean those who want something better shouldn’t continue to let those in charge know exactly how they feel.

Those who want to maintain the character of Waynesville while still allowing Wal-Marts and Best Buys are asking for a smaller road — three lanes at most — with roundabouts instead of traffic lights, bike lanes, and trees between the road and the sidewalks. This is the vision laid out in the Waynesville’s comprehensive land-use plan, and it’s one I believe a majority of citizens want.

Many of us who argue for smart growth have been in this situation too many times: disagreeing with DOT and seeking a compromise that is about more than just moving cars quickly from one spot to another. In this case Waynesville has had to spend its own money to hire a traffic consultant in hopes it can convince the state bureaucracy that it knows what is best for its own community. It’s frustrating to be in the same position again and again.

But it’s a good fight, one worth all the time and energy we can give it. When roads are done wrong — Russ Avenue in Waynesville, N.C. 107 in Sylva — the problems linger for many, many years. Getting it right on the front end is critical.

•••

Our cover story last week on Macon County’s Phil Drake and his business success (“Seizing Opportunity,” www.smokymountainnews.com/news/item/5066) ran at a time when there is great controversy in this country about how best to nurture the economy and shake the lingering recession.

Drake is a local example of someone taking a small family business and growing it exponentially, taking some lumps along with way but finding his way through problems. Just as important as his business success, though, is the commitment to Macon County and Western North Carolina shown by Drake, his family, and his network of businesses.

The global economy has brought riches to many people and lifted many from poverty to the middle class. At the same, however, it has robbed many communities of the ability to control their own destinies. Decisions made in boardrooms thousands of miles away take jobs from thousands, leaving families and communities to pick up the pieces.

The “buy local, shop local, do business locally” concept can only go so far, but we in this region can help lift ourselves up by pushing it to its limits. It’s easy to shop with the big boys and to buy stuff over the internet, but in most cases it doesn’t do as much to help your neighbor.

Phil Drake is proving that doing business locally when possible can lead to great successes. Whether you’re a consumer or a businessperson, there’s never been a more important time to take that lesson to heart.

(Scott McLeod can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..)

You know economic times are tough when the business that helps other businesses thrive shuts its doors, too.

The Mountain BizWorks office in Sylva, which serves would-be entrepreneurs and other small business owners in the state’s seven westernmost counties, will close next June.

Shaw Canale, executive director of the group, emphasized this is “a pause” by the group, not a full stop or retrenchment. Mountain BizWorks, headquartered in Asheville, has maintained a physical presence via the Sylva office in the westernmost counties for more than a decade.

“We need to figure out, how do we deliver what we need to deliver into very rural communities?” Canale said. “What’s the real impact we are having, and how do we measure that?”

Bottom line, financial issues forced the closure. The decision to close the Sylva office was made “carefully and systematically,” Canale said. “This very difficult decision was made to ensure that in time Mountain BizWorks can achieve a level of self-sufficiency that will assure that we remain financially healthy.”

One full-time staffer and one part-time staffer, as well as workshop leaders and business coaches hired on a contract basis, will lose jobs as a result of the shutdown in Sylva.

Resource specialist Sheryl Rudd is the part-time staffer at Mountain BizWorks. She and her husband, Dieter Kuhn, started Heinzelmannchen Brewery eight years ago with the help from the nonprofit where Rudd now works. She said Kuhn went through an eight-week course provided by the nonprofit to help determine whether a craft brewery could be successful in Sylva. Kuhn developed a business plan and figured out how to market the product he wanted to produce.

“It was critical,” Rudd said, “to deciding is this going to work, is it not going to work.”

Rudd and Kuhn also relied on Mountain BizWorks for a loan that, coupled with personal funding and investor dollars, allowed them to launch Heinzelmannchen Brewery. Rudd worries whether future entrepreneurs in the area will be able to find similar support in years to come.

Rudd said as the economy soured and grant dollars became increasingly difficult to attain, Mountain BizWorks found itself competing for an ever-smaller pot of money with organizations that provide food, clothing and utility-payment help.

“Of course if it comes down to helping small businesses or feeding someone, you are going to choose to feed someone,” Rudd said, adding that such an obvious need, however, does not mean small-business owners don’t deserve help.

The loss of Mountain BizWork’s local presence also worries and saddens Annie Ritota, who with husband, Joe, owns Annie’s Naturally Bakery in Sylva. The wholesale side of the bakery is based in Asheville.

The Ritotas turned to Mountain BizWorks for help about four years ago. The business, founded in 1999 in the couple’s garage, had grown into a success story “but we’d sort of lost our focus,” Annie Ritota said.

“They helped right our ship and get it turned in the correct direction,” she said. “We were at a place where we weren’t sure where we were going.”

Mountain BizWorks helped the bakery reduce the line of products offered, plus helped resolve cash flow and bookkeeping issues. Ritota said after that positive experience, she often recommends new business owners avail themselves of the nonprofit’s expertise.

Now, Mountain BizWorks has similar anxieties regarding its own purpose and focus. “We are not getting the type impact we want to see,” Canale said. “We want to do things in a much more thoughtful, durable way.”

“There are times when the best decision to make is to stop doing what you’re doing and to give yourself a clear space for reconsidering what to do,” she said. “That’s the situation we’re in now  — the answer is not to try harder and do more, but to stop and think and be sure that whatever we do next is right and that we can support and sustain our work.”

Canale said there is definitely a huge and growing interest in agriculture options in the western counties, as well as across Western North Carolina. Agriculture might well provide at least one area where Mountain BizWorks can continue to serve this section of the region.

Rudd said 35 people attended a workshop recently in Sylva, hosted by Mountain BizWorks, on forest-farm products.

The group is working on a three-year ag-biz pilot project to determine whether, and how, Mountain BizWorks would be helpful to small family farms in Western North Carolina.

Phil Drake acknowledges that he has two kinds of enterprises. There are those launched or purchased for strategic business reasons; others he owns to ensure family members in Macon County have places to work.

Drake has a lot of family, and he owns a lot of businesses: some 18 or so under the Drake Enterprises umbrella alone. These include a tax software company, an internet company, a performing arts center and a printing press.

Here’s how Drake and Drake Enterprises work, in what’s virtually a textbook model of a business practice dubbed “vertical integration,” or expanding within the core company’s supply chain of operations:

• Drake Enterprises was responsible for 75 percent of the work at Macon Printing in Franklin. Drake, once alerted to that fact by the shop’s owners, bought the business.

• Drake needed more reliable internet service than was available in WNC, so he joined with the Eastern Band of Cherokee Indians to create BalsamWest FiberNet. The company, headquartered in Sylva, has built 225 miles of underground fiber in Western North Carolina.

• Drake Enterprises had extensive marketing needs; Drake launched PRemiere Marketing in response. PRemiere serves as an in-house marketing service for Drake Enterprises, plus handle advertising and marketing for “outside” companies.

• Drake’s companies use computers extensively. Today he owns TechPlace outlets in both Franklin and Hayesville, specializing in computer and cell-phone sales and repairs.

Not bad for a boy from Franklin whose mother used to come home from work with bloody fingers from making denim jeans for Wrangler at the local factory. These days, Drake owns that place, too — he turned the 56,000-square-foot building into a “Fun Factory” for kids, complete with arcade games and a go-cart track.

Buying into the Drake dream

More than 500 people work for Drake. Key employees, those he wants to keep in the company for life, are encouraged to buy stock in Drake Enterprises using money Drake loans them. These employees now own 10 percent of the company.

“I picked employees who are loyal, have the same vision I do, and who don’t have an exit strategy,” Drake said. “I hope to work there until I die; the employees I picked, I hope they’ll work there until they die.”

With that many employees, there are that many people in WNC who owe Drake their comforts and livelihoods. His legion of supporters view Drake as a man who takes care of family and community, pays his dues and debts, and gives proper homage to God.

“He has worked very hard for what he’s got,” said Ronnie Beale, a Franklin native and Democratic county commissioner who owns and operates a construction company in Macon County. “We might differ politically on some things, but Phil has a heart for Macon County and its people.”

Drake would like to branch out of the private sector and serve in Congress. To date, however, his wife has made it clear she’d rather he not. Drake was equally clear in a recent talk in Asheville to area business owners about his intention of honoring her wishes.

Don’t count Drake out of politics too quickly, however. When you examine his history, this is a man who has managed to do pretty much whatever he’s wanted, one way or another. Through sheer perseverance, an uncompromising business intellect and an almost uncanny ability to time his business deals, Drake has prospered, and the extended Drake family has prospered right along with him.

“If I can create a job, make a little money or break even, I’ll do it,” Drake said. “God put me in the right place at the right time, and I really hit a homerun in software. On some of these other businesses, I’ve gotten some singles and some doubles. I’m still out there trying to find that next homerun.”

From bankruptcy to wealth

Drake’s rags-to-riches, Horatio Alger Jr.- type tale takes something of an odd turn in 1981, when shortly before the age of 30 he plunged into bankruptcy. Drake, a proponent of small government who has spoken at area Tea Party venues, was forced to rely on food stamps to help feed his family. Today he expresses gratefulness for that particular program of the federal government.

Drake grew up on a farm. He went to Davidson College after graduating from Franklin High School, and then headed into neighboring South Carolina. Drake taught high school math for three years in that state before deciding he couldn’t support a family on take-home pay of $425 a month.

Drake returned to Franklin in 1976 and joined his father in the family tax business. These were the days when taxes were done with pencil and calculator — pre-computer and pre-computer tax programs. Drake said he just knew there had to be a better way of preparing people’s taxes.

Drake bought an IBM computer for $22,385 in 1977 using borrowed money. At his son’s urging, his father mortgaged a piece of property to cover the cost. Drake was confident he could program the new computer — which, in fact, he did. Drake developed an accounting program that he was soon selling to other accountants.

He remembers boasting to his wife, “I’m going to be a millionaire by the time I’m 30.”

There was one problem with Drake’s plan, however. Each year the computer needed updating. The updates required new, expensive computers — not the relatively cheap, internal fixes you’d get today. Drake kept borrowing and buying new, expensive computers.

“I was $100,000 in debt just from buying computers,” he said.

Then he left the state and went to Kansas City for a time to help another company automate its tax service, putting faith in an on-site manager to take care of his business at home.

That didn’t happen. The Internal Revenue Service didn’t get its due in the form of payroll taxes. One day a federal agent informed Drake the IRS planned to padlock the family’s office door and seize their business equipment if the government didn’t get its money.

Drake didn’t have that kind of cash. He instead drove to Asheville, retained an attorney, and filed for bankruptcy.

Time seems to have helped heal the sting of that decision, and there’s clearly balm on the wound from having, Drake emphasized, paid back every dime to every creditor involved. He estimated that took about six years.

Drake described learning some hard lessons during those times. About not using money you don’t have, and about not getting out on a limb and sawing it off behind yourself.

“You know the only thing my wife and I could talk about then? Money. We didn’t have any, and that’s all I could talk about,” Drake said.

He’s self-critical, too, of the 100-hour weeks he once worked, remembering tearfully how one of his three children begged him over the phone, “Daddy, please come home.” Drake described his younger, driven self as “ornery,” a perfectionist who had difficulty letting workers write some of the most basic software code the business needed.

Now, he said, he hires good people and gets out of their way.

“I’m getting easier to work for,” Drake said.

And, he turned to his faith.

“This was a life-changing experience for me,” Drake wrote of the bankruptcy in an article published by the National Christian Foundation, on whose board he serves. “I came to the place where I finally said, ‘God, I’ve messed this up. From now on, I’ll manage your business, and Lord, would you manage mine?’”

The National Christian Foundation is based in Atlanta, Ga. It is the largest Christian grant-making group in the world, self-reporting that it has received more than $4 billion in contributions since 1982 and given more than $2.5 billion in grants to thousands of churches, ministries, and nonprofits. While board members such as Drake are technically elected each year, they are expected to serve for life.

An ‘angel’ investor

In a downward spiraling economy that has seen countless businesses go under, Drake has instead thrived — these days he’s emerging as a self-described “angel investor,” a man with enough money at his command to select only those investments that interest him. He likes to buy-in low, on the promise that the sellers will get their money back, and more, if the targeted business turns around. That minimizes his risk, and promotes cooperation to get the invested-in business moving in the right direction.

“We don’t pay more than we can sell it for tomorrow,” Drake said.

Bob Dunn, director of consulting for Mountain BizWorks, said Drake motivates companies he invests money into.

“His deals are tough love, but they have an attainable upside,” Dunn said.

Cecil Groves, a former president of Southwestern Community College who is overseeing BalsamWest for Drake and the Eastern Band, described Drake as a man who reaches business decisions quickly and decisively. Groves also sees Sharon Drake as a true partner of her husband, in every sense of the word, including in the business side of his life. Sharon Drake handled accounting and human resources for Drake Enterprises for two decades.

In addition to an ability to sift through facts and data quickly, Phil Drake has that near perfect pitch when it comes to timing on business deals. He was among the first in the nation to start filing taxes electronically, for example.

Drake is also a stickler for customer service — in January, just as the tax season kicks off, his business gets 14,000 to 15,000 calls a day from customers needing support using his tax software. Drake has call centers in both Sylva and Hayesville.

He expects the support line to be answered in three rings, an eight-second wait on average. This, Drake said, compares to the 45-minute wait time of some competitors.

Ron Haven, a Republican commissioner in Macon County, is an unabashed fan of Drake’s and of the business empire he’s built.

“He could have picked up and moved everything away,” Haven said. “But he’s stayed here instead in Macon County, and helped this community.”

Drake’s political future, if there is one

On YouTube there’s a video from an April 16, 2009, Tea Party event in Franklin featuring Drake. He sounds familiar Tea Party themes, such as: “you cannot legislate the poor into prosperity; you cannot borrow your way out of debt;” “If you take the resources from successful companies and reward those that are failing, that’s a picture of our bailout, and that’s unacceptable.”

For the most part, Drake appears on the video reasonably polished and smooth during this minor political foray. But there’s an awkward intellectual straddle when he attempts to pin the U.S. deficit, in large part, directly on abortion, which as a fundamentalist Christian, he strongly opposes.

“We have killed 30 million people who could work today and pay into the social security administration,” he told the crowd.

Drake said though he certainly would love to serve in Congress, he’s not really willing to run.

“I think I’d have some trouble,” Drake said. “I’m somewhere to the right of Jesse Helms. So getting elected might prove tough.”

The Drake empire:

• Drake Income Tax and Accounting: founded by Phil Drake’s father in 1954, Drake sold it to employees in 2004 for $1 on the 50th anniversary of the business’ founding.

• Drake Software: Software for accountants and tax preparers. Headquartered in Franklin, with additional call centers in Sylva and Hayesville.

• WPFJ Radio: Commercial AM station, Christian programming, in Franklin. Donated this year to Toccoa Falls College in Georgia, a Christian college. The move will save Drake Enterprises $50,000 a year, Drake said, and the college plans to continue with the same Christian-based music and programs.

• WNCSportsZone: Sports equipment and athletic shoes and apparel. Stores in Franklin and Waynesville.

• Dalton’s Christian Bookstore: Stores in Franklin and Waynesville.

• Macon Printing: A commercial printer in Franklin. Publishes The Real Estate Buyers Guide in five communities.

• PRemiere Marketing: Advertising and marketing agency based in Franklin.

• Franklin Golf Course: Nine-hole public golf course, driving range, pool.

• DNET Internet Services: Dial-up, DSL, wireless, webhosting. Based in Franklin.

• BalsamWest FiberNet: A partner with the Eastern Band in building underground fiber.

• TechPlace: Computer and cell-phone sales and repair, stores in Franklin and Hayesville.

• The Fun Factory: Family entertainment center in Franklin. Includes the Pizza Factory and The Boiler Room Steakhouse in the same building.

• The Smoky Mountain Center for the Performing Arts: 1,500-seat theater in Franklin, with orchestra pit and full staging; 80 events per year.

• EPS Financial: Process banking transactions and debit-card transactions. Based in Easton, Pa.

• GruntWorx: Converts scanned documents into readable and searchable PDFs and can import data into tax software. Originally based in Massachusetts, Drake moved the company to Derry, N.H.

• Stellar Financial: Drake is an investor in this Stroudsburg, Pa., company providing software and integrated management services for nonprofit donors.

• Sylvan Sport: Drake is an investor in a Brevard-based company that builds the “GO,” a camper.

• Galaxy Digital: Drake is an investor in this Asheville company that creates digital campaigns and works on web communications.

• Drake Capital: Drake is a partner in this Matthews-based real-estate acquisition and development company.

U.S. Senator Richard Burr, R-N.C., didn’t don kid gloves when addressing a cross section of Haywood County business leaders representing agriculture, tourism, banking, construction and professional sectors last week.

“Here’s the hard, cold reality. We’ve got to cut an additional 6 trillion in spending. That’s to get on a glide path so that 30 years out we can balance our budget,” Burr told about two-dozen businessmen at a private lunch at the Waynesville Inn.

The magnitude of what must be cut is staggering, and the results won’t be pretty, Burr said.

But, Burr said this juncture provides a rare critical mass to reform the corporate and business tax structure, something he hopes to see passed by Congress in coming months.

“All the tax loopholes, all the credits, all the deductions — gone,” Burr said.

Bad news for big corporations, but great for small business owners like those in the room, Burr said.

Burr sympathized with those who have fruitlessly tried to borrow capital to expand their businesses in recent years.

“You almost walk away and say ‘Gee, they’d lend it to me if I had enough money to where I didn’t need it,” Burr said.

But don’t blame the local bankers, Burr said. They are merely acting on orders from the banking regulators harping on debt-to-capitalization ratios.

Meeting with Burr was a little like sitting down with an economic analyst. He talked about currency and trade, foreign investment, the still frozen credit market, lack of capital, sovereign debt, how a new tax code could effect business’ bottom line. Europe’s financial crisis perhaps topped the list.

“Dominoes will fall from what happens in Europe. Nobody is smart enough to know what they are going to hit,” Burr said.

Burr was quick to joke and banter with those at his table as they introduced themselves.

“I should have given the caveat that for any brokers in the house, don’t trade based on my predictions. I don’t even take my own trading advice,” Burr told Larry East, financial advisor with Wells Fargo.

Aside from the occasional “welcome WCU students” signs, there isn’t much visible evidence in Sylva that signals more than 7,000 students have flooded this community for the start of school.

The town isn’t awash in purple, the school’s official color. You won’t see many images of catamounts, the university’s mascot, splashed about.

But despite the lack of an obvious welcome mat, the influx of students is a critical cog in Jackson County’s economic engine — and merchants and elected leaders here know that.

But it’s not always about the direct exchange of dollars. The economic ties between the university and community are often subtler than that.

At Rick’s Full Service Car Wash, Manager Mark Harwood relies on students for a workforce. And, as a general rule, he said, the students are simply stellar in that role.

“They do a great job for us,” he said, gesturing toward the car washers busy cleaning out a line of cars. “I love having them.”

Without WCU’s students, Harwood said he’d be hard pressed to find the dozen or so workers he needs to keep the 15-year business running. Students don’t usually have enough extra cash to get their cars cleaned here, he said, but they are vital to the car wash’s economic wellbeing nonetheless.

“With the economy the way it is, we are a bit of a luxury item,” he said.

At Super Wal-Mart in Sylva, displays cater to students and parents to shop for go-back-to-college items. That money returns to the community in the form of retail taxes.

“It’s a really big deal,” said Jackson County Commissioner Charles Elders of the economic ties between this county and the university.

Elders owns a gasoline station on U.S. 441 between Sylva and Whittier. Students headed west, or commuting in from outlying communities, help make up his business clientele, too — though gamblers headed to the Cherokee casino are even more important on a day-to-day basis, Elders said.

But at the Exxon service station on N.C. 107 in Sylva, students make up most of the business, and on this day WCU student and worker Samantha Talbert is rushing to keep up. It’s 9:30 a.m., and she oversees both the main cash register and drive-thru area.

Even at this early hour, people are driving though picking up six-packs of beer. It’s a Saturday, and people are eager to start their day of fun.

“It’s mostly locals during the day, and college kids at night,” Talbert said between customers.

Talbert eats at local restaurants and shops at local stores. Though she’s more frugal than many — she prefers to make her own meals most days, for health and economic reasons — Talbert still, like other WCU students, helps bolster Jackson County’s economy.

When construction on the lofty Clarion Inn started in 2008, the town of Sylva thought it was finally going to get a recognizable name-brand hotel to help attract visitors and commerce.

Three years later, and the Clarion Inn is instead the town’s biggest eyesore, defacing the viewscape high atop a mountain along the main commercial corridor. If the unfinished hotel today serves any useful purpose, perhaps it’s as a visual reminder that when granting regulatory breaks, beware of big-talking dreamers bearing big plans.

The developers, TJ Investments — father and son team Thomas and John Dowden — went into bankruptcy. Alpharetta Community Bank of Georgia, which seized the property after the men failed to payoff a $5 million loan, now owns the unfinished Clarion Inn.

In turn, however, the bank is being sued by Cooper Construction Company, which the Dowdens left $1.9 million in the red after failing to pay the firm for all its work. DeLaine DeBruhl, vice president and field operations manager for the Hendersonville-based contractors, declined to comment about the situation here in Sylva, citing the pending litigation.

Court records indicate the case has been stalled since February, when one of the parties involved had a lawyer withdraw as counsel. The two case files at the Jackson County Clerk of Court on the hotel litigation are some six inches thick, including depositions and court motions. But there is not the smallest sign to be found of possible resolution, and in the meantime, finding a new buyer to take over the project seems remote given the lien against the property.

Hindsight 20/20?

A tangled, drawn-out court battle over an abandoned building sure wasn’t the economic development the town’s leaders dreamed of when they granted that building height variance to the father-and-son duo.  

“We were so thrilled to be getting a big chain hotel there,” Sylva Commissioner Harold Hensley said of the town’s decision four years ago to allow the Clarion Inn a fourth floor instead of holding it to three.

The developers claimed the hotel required a 75-foot maximum height instead of just 45 feet as mandated by town regulations.

Hensley, Stacy Knotts, Ray Lewis and then-commissioner-now-Mayor Maurice Moody voted in favor of the variance; Commissioner Danny Allen missed that meeting and an opportunity to vote yes or no.

On paper, at least, things looked good: plans called for a restaurant, convention room and 78 guest rooms.

Instead the economy crashed, and the hotel never opened. In fact, the hotel was never even finished. Today it’s a hulking, depressing presence on top of a steep cutout bank, with boarded-up windows, a surrounding chain-link fence to deter derelicts, and landscaping consisting of waist-high weeds.

“Obviously it didn’t turn out how it was expected,” Knotts said. “I didn’t envision it would be sitting there vacant. We’ve been waiting a long time for something to happen.”

You do the best you can do at the time, make the best decision that you can, and move forward, Hensley said.

“I don’t know that (it’s particularly useful) to go back and regret anything you’ve done,” he said. “Hindsight is 20/20.”

Chris Matheson, a council member who was not on the board at the time of the variance, said she could sympathize with how the situation must have appeared then.

“Had the economy not taken a turn for the worse, if it had been completed as planned and bought a tremendous amount of revenue and activity to that end of town, we’d look at it through different eyes,” Matheson said. “I don’t think we’d even be having this conversation.”

Hensley said he hopes something changes — positively — in connection with the vacant hotel, located across from Wal-Mart.

Town Manager Adrienne Isenhower said it has proven difficult to get straight answers about the hotel’s future — or determine if it even has one. She spent some time early on trying to track down decision makers.

“When I first got here, there was an investment company that said someone was interested. But I haven’t heard anything since. Something needs to happen, it’s a major eyesore,” Isenhower said.

She said if there isn’t an actual use for the building, perhaps the time has come to consider tearing it down.

The problem is, the town isn’t legally in a position to make that decision. And it would seem that until the court case is resolved, no one — anywhere — can make any meaningful decisions regarding Sylva’s empty Clarion Inn.

Six years ago, amid great fanfare, Joe Kimmel pledged $6.9-million dollars to Western Carolina University.

Based on that pledge, with payments expected to come in over an eight-year period, WCU went forward with a new school: the Joe W. Kimmel School of Construction Management, Engineering, and Technology.

Kimmel’s ability to pay WCU, however, abruptly ended in December 2009, when his company, Asheville-based Kimmel & Associates, went into bankruptcy. He stopped at $1.43 million — more than $5 million short of the original pledge to WCU.

The date of the last payment isn’t known. WCU would not release the payment schedule.

Chapter 11 bankruptcy afforded Kimmel and his wife, Cynthia, legal protection to try to reorganize their finances, both personally and for Kimmel & Associates. The company recently came out of bankruptcy proceedings. But it remains unclear whether Kimmel will, or even would be allowed under terms of his bankruptcy emergence, to fulfill the remainder of his promise to WCU.

The Kimmels said they had $7.2 million in personal assets and $15.8 million in liabilities. Kimmel & Associates listed $2.1 million in assets and $7.2 million in debts, according to federal bankruptcy filings.

Kimmel did not return a phone message seeking comment, with an employee at his company declining on his behalf.

Construction industry crashes

Kimmel & Associates is an executive head hunting search firm founded in 1981 that is focused on the construction industry. Kimmel & Associates could at one time — and did — boast of a national client base of more than 100 companies.

Pairing a construction-management school at a university seeking national prominence in the field with a construction head-hunting firm must have seemed a match made in heaven — particularly given Kimmel’s nearly $7 million dowry.

With an additional $3.5 million in matching state money secured as a result of Kimmel’s generous gesture, WCU promised to create a first-class educational program.

“We expect this pledge, combined with additional public and private support, will result in a school that will place Western on par with the nation’s finest institutions of higher education in preparing students for careers in construction management and related fields that are critical to the emerging economy of the state and the nation,” Chancellor John Bardo said in a press conference at the time.

Kimmel generosity didn’t stop with WCU. He and his company made contributions to numerous organizations in WNC, including the University of North Carolina at Asheville, Asheville Art Museum, Buncombe County Medical Society’s Project Access, Humane Society, Center for Diversity Education, Asheville Buncombe Community Christian Ministries, Meals on Wheels and the Fine Arts League of Asheville. Kimmel also established in 2004 a fund that provided $1,000 scholarships for students in construction fields.

“Giving and serving is the nucleus of the world, when the world is right,” Kimmel noted in a company newsletter as he reflected on his donation to WCU.

That was then; this is now. The world, at least the world according to Kimmel & Associates, soon wasn’t right.

Not even close: The housing boom, which seemed to promise ever-increasing profit margins to a construction industry left almost giddy by that prospect, instead crashed. Kimmel and his firm saw business dry up, virtually overnight, as builders were forced to put their measuring tapes up and hammers down.

In 2007, Kimmel & Associates was pulling in gross revenue of more than $19 million, bankruptcy documents show. That number dropped to $16.4 million in 2008, and by the following year, the company had dropped to $8.6 million.

Kimmel & Associate’s gross monthly income in 2009 still amounted to $625,000. But, with total monthly expenses coming to $626,047, Kimmel’s company was $1,047 a month in the red.

“Collapse of the construction industry” is the single reason given as a contributing factor in Kimmel & Associates fall into bankruptcy, according to documents.

School nuts & bolts

Today, the Kimmel School offers six degree programs in two departments: construction management and engineering and technology. There are state-of-the-art laboratory facilities; and about 300 students enrolled to take advantage of them.

The Kimmel contributions have gone toward endowments for distinguished professorships, student scholarships and program support for the construction management program, including allowing students and faculty to expand their participation in academic competitions, national conferences and industry meetings, said Bill Studenc, a WCU spokesman.

WCU landed a big-name, politically connected dean in March of 2008 when Robert K. “Bob” McMahan Jr. came on board. An astrophysicist, McMahan came to the university from his previous position as then North Carolina Gov. Mike Easley’s senior adviser for science and technology.

It wasn’t just WCU that Kimmel & Associates left in the lurch. UNC Asheville, where six of Joe and Cynthia Kimmel’s seven children attended school, built the Kimmel Arena — the health and wellness center was the result of a $2-million pledge from the couple. Last year, a UNCA official told the Asheville Citizen-Times that half that amount had been received.

WCU optimistic

A full assessment of the Kimmel School financial outlook is difficult to ascertain. When asked directly whether the school would be given a different name to more accurately reflect the true giving-picture, Clifton Metcalf, WCU vice president for advancement and external affairs, responded in a written statement:

“The university has taken a long-range view in our relationship with Kimmel & Associates,” he said. “We have been confident that Kimmel, one of the nation’s premier firms in recruiting executives for the construction industry, would rebound as economic conditions improved generally and as construction activity, specifically, accelerated. That appears to be happening now, and there is no intention to rename the school.”

Metcalf’s assessment of Kimmel & Associates’ ability to fulfill its pledge might be more hopeful than realistic.

The bankruptcy plan called for Kimmel and his wife to sell their $1.2 million in gold jewelry and 100 acres in Madison County, plus turn over to debtors the leases on two properties — the business itself on Page Avenue in Asheville, and a beach house in Folly Beach, S.C., used by customers and employees. Even leases on the company’s fleet of cars were up for grabs.

Haywood County, like everyone else, is bracing for the impact of state budget cuts. But the good news is that they may leave the budget fray with fewer scrapes than they thought.

In Raleigh, budget committees have been busily trying to bang out cuts in the billions, and while nothing is yet final, a proposed House budget released last week gave a view of the carnage that may be to come.

So Haywood commissioners met with county staff to hash out what this might mean for the county’s budget and the services that rely on it.

Though there will certainly be state cuts that will fall to counties to pay for, but County Manger Marty Stamey told commissioners at a budget workshop last week he’s not as concerned as he could be.

“Best case scenario, we’ll be $250,000 out, which is good,” said Stamey, meaning that a mere $250,000 shortfall would be their best landing in the budget fallout. “A lot of counties would be proud to be where we are. People say what they want to say, but budget-wise, we’ve done the right things over the last few years.”

The county’s budget is still in flux, waiting on both state cuts and the reaction of other groups, such as community colleges and the school system, which may come to the county for helping plug holes from state cuts of their own.

Currently, community colleges are looking at a 10 percent reduction in state funding, while K-12 education was slightly shielded, only facing an 8.8 percent cut.

One area where the county might feel some crunch is in its health and human services budget. The state is seeking to reduce spending there by $527 million, including $527 million in Medicaid, $67 million for mental health services and half of the funding for senior centers. Also on the chopping block are Community Care block grants and Smart Start spending.

“Human services are really busting at the seams for demand in this county,” said Stamey, noting that a decline in services would affect many citizens harshly.

Another proposal that staff said seemed likely to come through is the closure of four state prisons. Though there’s no word yet on which prisons would close, it would shift the burden of housing prisoners serving time for misdemeanors to county jails.

Stamey reported that, while Sheriff Bobby Suttles said he was confident he could house the criminals currently in the system, predicting whether they’ll have room in the future is impossible.

“That’s one reason that we think we might need to have higher contingency this year, for things like this, because that’s an unknown,” said Stamey.

On the revenue side, Finance Director Julie Davis told commissioners that the picture is no clearer there.

Surprisingly, said Davis, the property revaluation that happened this year isn’t what’s throwing projections into turmoil.

Usually, property values would go up with a revaluation, requiring counties to tinker with the tax rate to offset would would otherwise be an unpallatable rise in property taxes.

But due to the stagnant real estate market, the total value of property remained nearly flat in the recent revaluation — requiring little adjustment to the property tax rate to bring in the same amount of revenue as last year.

Sales tax is a different story, however.

“Sales taxes have been up and down. Looking at the comparison to last year, four months they’re up compared to the current year and three months they’re down,” Davis said. “Were chasing a moving target on revenues.”

The fluctuation makes it hard to predict how much money the county can bank on from sales tax next year, but year-to-date on average, sales tax collections are down 10 percent over last year.

In light of that, and state-level slashing, a property tax rate increase might not be out of the question.

Overall, though state cuts do look grim, Stamey said he’s confident in the county’s ability to stay afloat without undue carnage. But, he said, there just aren’t any solid numbers yet to be had, so it’s impossible to know for certain.

“We’re at the mercy of a lot of people’s budget’s right now to sort of figure out our budgets,” said Stamey. “I feel like I’d be doing us an injustice right now [to give numbers].”

The picture painted by county staff was in broad strokes, an overview of what could be coming in stead of the nuts and bolts of what to do about it. But that was purposeful, according to Davis.

“We specifically did not mention numbers or the revenue neutral rate because there is so much up in the air right now,” said Davis.

Commissioners will be meeting throughout the spring for more budget talks, though they noted that much of it is out of their hands.

As Commissioner Kevin Ensley said, “so if the state leave’s us alone, we’ll be alright.”

A state budget is expected by early June.

Haywood schools talk budget

Haywood County Schools could be facing a budget shortfall of $4 million if the state House of Representatives proposed budget gets adopted. The school board held a public hearing on Tuesday to hear community feedback and discuss what cuts might mean for local schools.

The reductions would mean 46 positions would be slashed within the system. Teacher assistants would be scaled back by 49 percent, textbooks by 68 percent and dropout prevention programs, school technology and staff development initiatives, among other things, would be eliminated.

See www.smokymountainnews.com Thursday for an update on the public hearing and the impact of threats to school funding.