In the Feb. 12, 2020 edition of the Platte County Citizen, Parkville Mayor Nan Johnston in her state of the city speech is quoted as saying, “The taxpayers are no longer on the hook for millions of dollars in debt for sewer and street improvements that occurred after a failed development many years ago on the same property.”
I made an inquiry to Parkville City Hall after reading this. The pertinent portions of an email exchange with City Administrator Joe Parente are included below. The mayor was copied on all emails; she responded to none.
Once again, city officials are distorting the nature of the Creekside/NID development transaction. Some may call this politics. But after having this email exchange, I believe it may be more critical: city officials don’t understand risk. City officials who originally initiated this NID didn’t understand its risk, and it appears nothing has changed. Read on.
My initial email to Mr. Parente: “…in regard to Mayor Nan Johnston’s recent State of the City speech. I didn’t read all the details of the various packets regarding the development activities, but if that is the case, that is great news. Can you provide the documents evidencing that the city has been fully relieved of its obligations for this debt? In addition, can you also provide documents relating to the party (parties) that has assumed these debt obligations?”
Joe Parente response #1: “The City of Parkville is responsible for the remaining debt payments for the NID Districts. The financial deal with the Creekside Development calls for the payment of $400,000 each year, until such time the city has been paid $6,400,000. The payments will continue until 2035. The NID debt is scheduled to be retired in 2034.”
“The payments to the city are secured by a Community Improvement District with special assessments on apartments and residential homes, and from revenue from the Creekside Incentive Fund. The agreements have sufficient security to assure the city will receive the revenue from the development. Based on this, we are comfortable in our statements that our taxpayers are no longer on the hook for millions of dollars in NID debt.”
My follow up email requested clarification of Mr. Parente’s statement that the agreements have sufficient security to assure the city will receive the revenue from the development. I asked, “What happens if development doesn’t occur as planned and the assessments are not paid or are paid in amounts less than planned? Or the developer is unable to make the $400,000 annual payments? Is there additional collateral being pledged and held by the city that offsets the city’s total obligation?”
Joe Parente response #2: “It works similar to the existing NID districts. When the property owners failed to make their past NID Assessments, the city foreclosed on property and became the owner of two large tracts of land. The differences now are the improvements on the property have added great value. The building values far exceed the amount the city is owed. In the unlikely event the assessments are not paid, the city could foreclose on a 216 unit apartment complex. It is unlikely because the Developer, or the Bank who financed the construction, would want to protect their investment and continue the payments.”
My second follow up email: “Joe, I think the bottom line is that the city has misrepresented the structure and its position on the debt. If the city believes being primarily liable while at the same time hoping for a positive outcome is off the hook, I suggest you talk to legal counsel. I am reminded of a conversation many years ago when a then city official told me there was no risk on this NID debt.”
“Off the hook implies being free and fully relieved of all obligations. As you have outlined this, the city isn’t. Numerous legal actions would need to be undertaken for the city to obtain the properties through foreclosure. It would then have to find a buyer for those properties. In the meantime, the debt payments continue, regardless of that outcome. Nothing has changed other than the city has a different party promising to pay. The city should issue a revised statement and clearly state the facts as they exist.”
Mr. Parente’s third response was lengthy. It defended the city’s position about disclosure and documents, analogized the NID matter to a homeowner mortgage loan (he assumes a homeowner won’t walk away from his/her house), and concluded by defending the position of the city being off the hook.
My third follow up email: “Joe, it appears you are attempting to equate having collateral for a receivable as the basis for saying the city is off the hook for the NID debt.” In this same email, I also requested details as to who else approved the language used by the mayor.
Mr. Parente’s final response: “I prefer to not engage in a back and forth discussion with you over this matter.”
Bankers reading this may be shaking their heads. Following the city’s logic, banks are off the hook to their depositors since banks generally have some form of collateral securing their loans.
City officials who have for years repeatedly stated that this NID debt is a contingent liability (it isn’t) now want you to believe that you the taxpayers are off the hook (you aren’t). They also want you to believe everything else they tell you is true.
–Gordon Cook, Parkville