Platte County Commissioners, frustrated by the prospect of spending taxpayer money on a private retail project, want a judge to sort out who is responsible for settling up Zona Rosa’s debt obligations.
Platte County on Friday filed a lawsuit in Platte County Circuit Court asking a judge to find that the county is not legally on the hook for shortfalls on bonds issued 11 years ago to build parking garages at Zona Rosa, a large open-air shopping center near Interstate 29 and Barry Road.
The shortfall on the annual debt payment to bondholders, which is due on Dec. 1, exceeds $1 million. The lawsuit asks a judge to declare that Platte County is not legally responsible for shoring up Zona Rosa’s debt, and that it would be unconstitutional for the county to do so.
“The decision of whether to pay will be made by the Platte County Commission based on the law and the best interests of Platte County taxpayers, not the demands of a Trustee representing investors that accepted the risks of their investments,” reads the lawsuit.
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Platte County is represented by Todd Graves, formerly the Platte County prosecutor and former U.S. Attorney, and Dane Martin of the Kansas City law firm Graves Garrett LLC.
Zona Rosa, like other shopping centers, is facing the headwinds of the retail economy as more consumers opt for online shopping. Several large chain retailers have gone bankrupt.
As a result, Zona Rosa has not generated enough in sales tax revenue to pay annual debt payments from when $32 million in bonds were sold in 2007 to provide up-front financing for two public parking garages. The bonds would be paid back over time by sales taxes generated at Zona Rosa.
Platte County Commissioners have chafed at the idea that taxpayers should cover the gap between the development’s sales tax receipts and the annual payment owed to bondholders. They suggested at a meeting earlier this year that even though they budgeted $500,000 to cover the predicted shortfall that they may walk away from the obligation.
Municipal credit ratings agencies caught wind of the Platte County Commission’s thinking and pummelled their credit ratings into junk status, meaning it will be expensive for Platte County to borrow money in the future, if it can at all. The trustee for the bonds, UMB Bank, told the Platte County Commission on Sept. 24 that it was in default of its obligations under the financing agreement for the Zona Rosa parking garages.
But the Platte County Commission has argued, both publicly and in its newly filed lawsuit, that doesn’t have a legal obligation to cover debt payments. Under the Missouri constitution, it would have required a vote of Platte County resident to obligate the county to cover Zona Rosa’s debt, the lawsuit argues.
Scott Goldstein, a Spencer Fane attorney representing the trustee for the Zona Rosa bonds, was not immediately available to comment.