latte County is not legally obligated to cover bond payments for parking garages at Zona Rosa.
That was the ruling that came down Thursday in Platte County Circuit Court.
Platte County Circuit Court Judge James Van Amburg issued a decision in favor of Platte County in its declaratory judgment action against UMB Bank, N.A., the trustee for the Zona Rosa bonds.
The county’s legal counsel says the ruling could save local taxpayers “tens of millions of dollars.”
County commissioners are hopeful the court decision will help improve the county’s bond rating. which was dropped to junk status last fall after the commissioners made public comments about the possibility of not paying the debt.
Some analysts who follow the ratings industry have told The Landmark that an immediate improvement in the county’s bond rating is very unlikely. Some analysts say that a government agency tanking its credit rating is comparable to a private person filing bankruptcy, and improvement in the rating could take several years.
A bad credit rating could make it expensive and difficult for Platte County to borrow money for future large projects or in an emergency.
The Bond Buyer, a trade publication covering the bond industry, in a May 31 article reported that “while the junk-rated county prevailed in the legal case, several market participants said it’s not likely to restore the county’s credibility with rating agencies and investors because they give considerable weight to a moral or appropriation pledge and issuers that renege face steep penalties.”
While it is possible the matter could be advanced by UMB Bank to the court of appeals, Todd Graves, attorney who represents Platte County in this matter, told The Landmark: “We’re pretty confident about the status of the law on this issue.”
UMB Bank has up to 40 days to file an appeal.
In his ruling, Van Amburg rejected the trustee’s demand for Platte County to pay shortfalls on the Zona Rosa bonds in 2018 and each year thereafter. This demand would have imposed on Platte County an immediate liability of $765,390.95 and a long-term liability of up to $40 million through 2032.
Van Amburg’s ruling agreed with Platte County’s position, finding that Platte County never agreed to make any payments to cover shortfalls for the Zona Rosa bonds.
“The commission’s lawsuit has saved Platte County taxpayers tens of millions of dollars,” said Todd Graves, counsel for Platte County along with Dane Martin and Jennifer Donnelli of the law firm Graves Garrett.
“This was a serious threat to county finances,” Graves told The Landmark, adding that county commissioners might have had to double or triple the current county tax levy, which currently sits at six cents per $100 of assessed valuation.
“The court was correct to reject the trustee’s effort to impose a bondholder bailout on taxpayers. This is a great day for taxpayers—and a firm rebuke to financiers attempting to abuse the public treasury. The Zona Rosa bonds will continue to be paid using the dedicated one percent sales tax in Zona Rosa, as has always been the case,” Graves added.
In its motion, Platte County sought a declaration from the court regarding the validity of the trustee’s demand that it cover shortfalls for the Zona Rosa bonds. The Zona Rosa bonds were issued by a third-party entity, not Platte County, to finance parking garages in the Zona Rosa shopping center. Under the financing agreement, the bonds are payable from a one percent sales tax in Zona Rosa.
County officials have said Platte County continues to support Zona Rosa as a private shopping district and looks forward to the ongoing changes and improvements being made by the owners of the shopping district.
Last November, the county filed the suit to fight the claims made by UMB Bank that the county was now responsible for covering the shortfall in sales tax revenues on bond payments for the parking garages. The county commission refused to cover the 2018 bond payment shortfall that was due last December. Prior to the bond payment default, credit rating agencies dropped the county’s bond rating to junk status last fall after county commissioners made public statements on the bonds.
In a portion of his ruling, Van Amburg wrote: “There is no promise or requirement in the financing agreement for Platte County to make payment on the Zona Rosa bonds. In fact in Section2.4 the financing agreement specifically states that it ‘shall not in any way be construed or interpreted as creating a liability or a general obligation or debt of the county. . .nor shall anything contained herein constitute a pledge of the general credit, tax revenues, funds or moneys of the county.’ The trustee has admitted that the bonds are not secured by the full faith and credit and taxing power of Platte County.”
The judge went on to write: “Because the financing agreement does not contain any promise by Platte County to appropriate or pay shortfalls for the Zona Rosa bonds, voter approval for county indebtedness was not required (under the state constitution). For the same reason there is no violation (of state law) because there is no ‘contract imposing any financial obligation’ on Platte County. Lastly, there is no violation (of state law) because under the terms of the financing agreement Platte County is not liable on the bonds issued by the development authority.