KANNAPOLIS — Pillowtex will ask the bankruptcy court overseeing its Chapter 11 case for permission to pay $728,000 in city property taxes, city and company officials said this week.
“We said we would work with them to to ensure there is no hardship to the community,” Don Mallo, Pillowtex vice president of human resources, said on Tuesday. “We don’t want to hide behind bankruptcy laws.”
Pillowtex filed Chapter 11 bankruptcy on Nov. 14. The court put a hold on all obligations the company incurred up to that point, including its taxes, which came due earlier in the year.
Pillowtex owes a combined $1.9 million in taxes for 2000 to Kannapolis and Cabarrus and Rowan counties. But that money doesn’t constitute nearly as big a chunk of the counties’ budgets as it does in Kannapolis, where Pillowtex taxes account for 4 percent of this year’s budget and 8 percent of property taxes.
Mallo said Pillowtex needs the court’s approval to pay the taxes and intends to file a motion in mid-February asking approval to pay them. He anticipates a hearing on the matter in early March.
Governments owed taxes hold a priority status in bankruptcy proceedings, Mallo said. And the judge will consider that the company accounts for a large part of Kannapolis’ tax base, he said.
“We’re a major player in Kannapolis, less of a player in other areas,” Mallo said, explaining that the request may not mean that the counties — and other places where Pillowtex owns plants — will get their money right away.
The taxes will be paid eventually, he said. But that may not be until after the company emerges from bankruptcy. Company officials have said that will take a year to 18 months.
The company still is obligated to pay taxes that come due or debts incurred after the bankruptcy filing, he said.
Kannapolis officials, including City Manager David Hales, said they have been in constant contact with the company and would be relieved to collect the taxes owed to the city, which they figured into this year’s budget.
“Certainly it’s our hope that with such an authorization, Kannapolis would be one of the first payments they would make because of the special relationship we have with the corporate headquarters of the company, and they have such a significant economic presence in this community,”Hales said.
But if Pillowtex can’t pay, or if the company can’t pay before the end of the fiscal year in June, the city could make up the loss from its $3.5-million fund balance, Mayor Ray Moss said.
“That’s what the fund balance is for, emergencies,” he said. “I would consider that an emergency.”
Today's News