The Platte County Commission is striking back against the investor services firms that downgraded the county’s credit rating last week and may be considering going after those who brokered the 2007 county-backed funding deal that paid for the construction of parking garages at Zona Rosa.
“This is a complicated, difficult, really, really bad situation to be in,” said presiding commissioner Ron Schieber. “However, we’re committed to try to figure out what is best for the development, what’s best for the county and what’s best for taxpayers long term. If Moody’s and Standard and Poor’s are embarrassed because they ranked this bond too high when it was issued, so be it. If they will send a message to Platte County that you don’t even have this discussion, so be it. If they will send this message to other counties and other political subdivisions, so be it. I think this is important enough that we need to take a stand and figure out what’s best for this county and our taxpayers.”
Standard and Poor’s Global Rating recently downgraded Zona Rosa’s infrastructure bonds 10 notches from A to B- and placed it on credit watch with negative implications. Earlier this year, Standard and Poor’s downgraded the bonds two notches from AA- to A.
On the heels of Standard and Poor’s downgrade, Moody’s Investors Service’s downgraded Platte County’s general obligation limited tax rating from Aa2 to Ba1 and the County’s lease appropriation rating from A1 to B1.
The downgrade came due to county backing of a 2007 bond issuance to build parking garages at the financially troubled Zona Rosa, but it also affects the county’s other bonds, including those for the Platte County Community Centers and county Neighborhood Improvement Districts.
At the Monday, Sept. 17 administrative session, Scheiber said the downgrades came as a result of statements made during an August administrative session, where commissioners said that without a “long-term, sustainable solution” they were not inclined to make the bond payment scheduled for December.
Currently, about $700,000 has been set aside to cover tax collection shortfalls, but second district commissioner John Elliott suggested that money may instead be put to use on legal fees to fight the county’s involvement in the entire deal.
A closed session meeting with Kansas City attorney Todd Graves was also held Monday, with first district commissioner Dagmar Wood confirming the topic of discussion was the situation with Zona Rosa.
Commissioners are frustrated that Standard and Poor’s and Moody’s appear to have reduced the county’s standing based on a position statement, one they say has been consistent.
“Evidently Moody’s does not understand the County’s position in this or they are intentionally misrepresenting it,” Schieber said in a press release issued Sept. 17. “The bond documents are clear that the county’s participation is subject to annual appropriation only — nothing beyond that. And in January we appropriated for a possible shortfall and we have not taken any official action since then. Moody’s repeatedly states in their report that the county has a lack of willingness to pay, which again is a clear misrepresentation of our position.”
In May, commissioners issued a press release stating that “until a long-term, sustainable solution is found, we see no reason to use good Platte County tax dollars to subsidize an east coast developer.”
Schieber said he and the other commissioners believe the bonds should have been rated much lower in 2007, when the original financing was put into place by a 2-1 vote of the then-commission.
“Nothing has changed on this issue since the original rating, from the county’s perspective,” he said. “S&P gave the county’s management a very weak rating in their report, which appears to be based on only discussing possible solutions and not based on any official action by the commission or any change of the current appropriation.”
At both the Monday meeting and in the press release, commissioners stated the downgrades were retaliatory moves made by the rating companies due to the commission’s resolve to protect county taxpayers.
Future bond payment shortfalls over the next 15 years could range from $17 million to $40 million depending upon the revenue collected from a 1 percent sales tax. Another problem arises once the bonds are paid off. Should the county choose to honor this agreement and appropriate the funds to cover shortfalls, once the garages are paid off the county is expected to turn over its stake to the private owner.
Schieber said he believed it isn’t in the best interest of the county and its taxpayers to “just roll over and say let’s pay” when the future is so uncertain.