Platte County’s bond rating dropped again last week due to the situation at Zona Rosa.
Moody’s Investor Services issued a statement Friday, Dec. 7 stating it had downgraded Platte County’s issuer rating to Ba3 from Ba1. Bonds affected are for a Neighborhood Improvement District and the lease appropriation rating on special obligation refunding and improvement building bonds.
According to the statement, Moody’s outlook remains negative.
The Graves Garrett Law Firm, representing Platte County, issued a statement of its own later in the day.
“The stated basis for these credit downgrades is a purported failure by Platte County to make a payment on the Zona Rosa Bonds as demanded by the trustee,” according to the statement. “However, under the financing agreement governing the Zona Rosa bonds, Platte County never entered into a contractual obligation to make payments. Instead, Platte County only agreed to consider making voluntary payment on any shortfall for the Zona Rosa Bonds.”
According to Moody’s, “the county’s lack of willingness to pay an obligation in the capital markets calls into question its willingness to pay other obligations. There has been no change in the underlying credit characteristics which, absent the county’s current position regarding the IDA bonds, would correspond to a much higher rating.”
Platte County administration and its attorneys maintain that the county has no obligation because the debt was not approved by Platte County voters.
“The Zona Rosa bonds are considered revenue bonds because they are only payable from a 1 percent sales tax in Zona Rosa, not general tax revenues as would be the case with taxpayer-approved general obligation, bonds,” the attorneys state. “Whether or not Platte County makes a voluntary payment on the Zona Rosa bonds has no bearing on Platte County’s ability and willingness to pay its legal obligations. Platte County will continue to take action to meet its lawful debts and obligations.”
The payment on the Zona Rosa bond was due Saturday, Dec. 1 and while Circuit Court judge James Van Amburg ordered the county to set aside the funds, the payment was not made by the county. The disposition of the funds will be determined by bench trial next May.
In November, the county filed a petition seeking a declaration from the circuit court regarding the legality of a demand that the county repay the bonds.
For now, the payment shortfall was covered by the trustee itself from a reserve fund. Tax collections in Zona Rosa have come up short every year, but former ownership covered the shortfall until last year. The county received notice from the bond trustee in October that revenues to make the bond payment were short more than $1 million.
The commissioners’ statement that they would not cover payments without a plan made earlier this year sparked off retaliatory strikes from credit rating organizations. In September, Moody’s and Standard and Poors reduced the county’s credit rating. Since the suit was filed in November, Standard and Poors reduced Platte County’s bonds to junk rating.
Platte County’s reputation among investors has taken a hit, with several industry publications blasting the commission’s move over the past month.