More bond-related ratings troubles for Platte County have emerged in the past few days.
In activity some at the county say they view as an effort by ratings agencies to ‘make an example’ of Platte County, on Thursday, Moody’s downgraded county bonds that are not related to the troubled Zona Rosa bonds.
Due to Platte County’s failure to make a payment on the Zona Rosa bonds, Moody’s has downgraded unrelated bonds. These unrelated bonds include Neighborhood Improvement District bonds and Special Obligation Refunding and Improvement Building bonds.
The downgraded bonds already had a junk rating, but the latest action sends a message.
“I think the ratings agencies are trying to make an example (out of the county),” Todd Graves, who is representing the county in legal action against the Zona Rosa bond trustee, told The Landmark in a phone conversation last week.
“It appears to me that they’re trying to push the county for not making the voluntary (Zona Rosa) payment by downgrading bonds that are not related to that voluntary payment,” Graves added.
Moody’s distributed a press release stating it was downgrading the NID bonds and the special obligation bonds from B1 to Caa1.
Later in the day, the county–through Graves office–put out a statement of its own. The county-endorsed press release said in part:
“Today, Moody’s issued a press release stating that it is downgrading Platte County’s Neighborhood Improvement District bonds (series 2008A, 2010, 2011, 2013, and 2016) from Ba1 to B2 and Platte County’s Special Obligation Refunding and Improvement Building Bonds from B1 to Caa1.
“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. 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.
“This distinction is important because, under the constitution and laws of the State of Missouri, Platte County must obtain taxpayer approval to obligate its general tax revenues. The taxpayers have never approved such indebtedness on their taxpayer funds.”
The county’s position is that the Zona Rosa Bonds are ultimately considered “revenue bonds” because they are only payable from one percent sales tax in Zona Rosa, not general tax revenues as would be the case with taxpayer-approved, “general obligation” bonds.
Prior to Moody’s news release, Platte County reviewed the release and informed Moody’s of statements the county considers to be inaccurate.
“But Moody’s would not reconsider its position,” the county said in its press release issued through Graves’ office.
“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,” the press release from Graves said.
A bench trial in the county’s lawsuit against UMB, the trustee in the Zona Rosa bonds, is scheduled for May 24 in front of Platte County Circuit Court Judge James Van Amburg. That case will rule whether the county is legally obligated to pay the shortfall in the Zona Rosa bonds. UMB Bank believes the county is obligated to pay.
The Zona bonds are paid with revenue from a one percent sales tax within the shopping district. Previous owners–Olshan Properties–for years covered any shortfall, but then stopped that practice when the district ran into financial troubles. Zona Rosa now has new owners and the new owners have indicated they are not legally obligated to cover that shortfall.
The severe downgrading of its credit ratings came at a time when the current county commission–Ron Schieber, Dagmar Wood and John Elliott–had been proposing an expansion of the county jail. One proposal called for a project that would nearly triple the capacity of the current jail at a cost of $43 million.
Analysts say the credit rating downgrades will severely impact the county’s ability to get a decent interest rate on any project.
Though the parties are in legal action and there is a war of press releases, county officials have encouraged the public to continue to shop at Zona Rosa.
Graves emphasized last week the county wants what is best for the shopping district and is open to a long-term solution but does not want to do it at taxpayers’ expense.
The bonds are for parking garages in place at Zona Rosa. Graves describes it as essentially a private loan to benefit a commercial enterprise.
“So the county is not all that receptive to a private enterprise saying we’re not going to pay this anymore, we want the taxpayers to pay for it when it is for Zona Rosa’s benefit,” Graves said last week.