Platte County commissioners are expected to have a verdict by the end of this week on their responsibility — or lack thereof — to make payments on infrastructure at Zona Rosa.
Judge James Van Amburg heard arguments from Platte County special attorney Todd Graves and UMB Bank attorney Joseph Bednar on Friday, May 24. The approximately two-hour hearing included a PowerPoint presentation by Graves and a rebuttal by Bednar. Van Amburg said he would render his decision by Friday, May 31.
Last November, Platte County filed suit over the claims made by bond trustee UMB Bank that the county was now responsible for covering the shortfall in sales tax revenues on bond payments for parking garages at Zona Rosa. County commissioners refused to cover the 2018 bond payment shortfall due last December and did not appropriate funding for the 2019 bond payment. Credit rating agencies dropped the county’s bond rating to junk status last fall based on commission statements made on the bonds before the bond payment default.
Graves’ main argument was that the bonds in question are revenue bonds and not general obligation bonds of the county, therefore the county was not responsible for covering revenue shortfalls. In the original financing agreement, approved by a previous commission in 2007, it reads that the county “intends” to appropriate funds — and Graves said the county auditor had done so — but that the final decision to make any payment was in the hands of the county commission. Graves argued that due to this wording any payment decision is discretionary.
The careful wording of the finance agreement was intended to “draft around the law” according to Graves and only obligated the county to “consider” making payments.
Van Amburg cited service agreement contracts that the county enters for everything from a magazine subscription to professional services, questioning if by that reasoning the county could theoretically renege on any agreement.
“There is no promise in the financing agreement that Platte County ‘shall’ or ‘will’ pay any funds that are appropriated (by the auditor),” Graves said. “It was written very carefully to skirt the (Missouri) constitution.”
If the agreement said “shall” instead of “intends” it would violate the constitution, which prevents the commission from entering into agreements that would indebt the county without a vote of the people.
Graves reiterated the stance that commissioners have stated for months, that the agreement outlined a moral obligation instead of a legal one. Intention is not an implied duty, he said.
“The trustee is trying to cut the bologna pretty thin here,” Graves said.
Graves said to make these payments, the county would need to drastically increase property taxes or cut essential services such as law enforcement. In asking for Van Amburg to rule in the county’s favor, he said commissioners believe the ruling would be the first step in restoring the county’s credit rating.
Bednar started his argument by pointing out the benefits of Zona Rosa to Platte County since its opening in 2004.
“It’s been a successful project and allowed the county to roll back property taxes,” Bednar said. Over the years, Platte County has benefitted to the tune of $70-100 million, he said, and that last year was the first time the county had been asked to contribute to the project.
“The bond holder is not asking for a bail out,” Bednar said. “They just want the county to live up to its obligations.”
Bednar said the auditor had made appropriations as outlined in the agreement, but the commission had breached the agreement through its actions. Since the auditor had made a budget appropriation each year up until now, the money has been set aside each year, but not spent. This implies the county has had funds available to cover shortfalls without cutting law enforcement or raising taxes.
The agreement calls for a year-to-year appropriation only when shortfalls occur and the county has the money available, Bednar said. He also argued that any money spent by the county on bond payments would be repaid through sales tax funds.
Graves objected to this statement, noting that the tax is set to expire with the bond retirement in 2032. The payments are set to increase until the payoff and the transportation development district cannot be relied upon to refund any money to the county.
Van Amburg observed that if sales tax revenues within Zona Rosa don’t increase, the county could be stuck making year-to-year payments through 2032.
“If that sales tax never comes up then they’re on the hook for 12 years,” Van Amburg said.
Bednar argued that if sales increase, then the county would never need to make another payment, adding that the county agreed to these terms in 2007.
There were several points of disagreement between the attorneys, including the actual ownership of the garages. Graves said the builder owned the property, but the actual structure was technically owned by the county, as part of a tax abatement arrangement. Bednar argued that the property and structure are completely owned by the county, although the county auditor had never counted it as a county asset.
“How do you not pay for something you own?” Van Amburg asked.
“Exactly,” Bednar said.