A Dec. 1 payment deadline came and went without anyone volunteering to pay up on a shortfall for debt supporting the parking garage at Northland’s Zona Rosa shopping center, further muddying its financial picture.
About $760,000 was owed on Dec. 1 to investors who bought $32 million in bonds in 2007 to provide upfront cash to build a parking garage at Zona Rosa. Investors were to be paid over time by sales taxes generated at Zona Rosa, but the shopping district hasn’t produced enough revenue to make payments on its own.
That’s left an ongoing and unresolved question: Who’s supposed to pay up?
Platte County continues to insist its taxpayers aren’t on the hook for making the payment, even though it has budgeted the money to do so. It’s been said that the county has a “moral” obligation to shore up any shortfalls to investors, but not a legal one.
“The county has a moral obligation to not waste taxpayer money,” said Todd Graves, a partner with Graves Garrett LLC.
Platte County Commissioners hired Graves Garrett to file a lawsuit in the county earlier this year, asking a judge to confirm that the county has no legal obligation to bail out Zona Rosa’s investors. Commissioners think that money can be better used elsewhere providing county services, rather than propping up a shopping center’s finances.
The trustee for the Zona Rosa bonds, UMB Bank, filed a motion asking Platte County Judge James Van Amburg to compel Platte County to cover the payment, a request that Van Amburg denied last week.
Van Amburg did tell the county to hang on to the money it had budgeted for the Zona Rosa shortfall until he decides what to do with the matter. A bench trial is scheduled for May.
On Monday, UMB Bank sent a notice to bondholders letting them know that Zona Rosa remains in default. But all was not lost: The trustee took out money from a reserve fund, similar to a savings account, to cover interest payments to investors.
There’s more than $3 million left in that reserve account, but the trustee wants to be conservative with its use because of the uncertainty of Zona Rosa’s future revenue sources. That’s why the Dec. 1 payment was for interest only.
Platte County Commissioners haven’t decided how it will handle future Zona Rosa shortfalls. Their decision to not cover the Dec. 1 payment caused municipal credit rating agencies to clobber the county’s credit rating, sending it from a good score to what’s referred to in the industry as “junk status.”
Much like a personal credit score, a lousy credit rating for cities and counties means it will be expensive to borrow money in the future, if anyone will lend to them at all.
Graves said county commissioners want to identify a long term, sustainable solution.
“While they want the best for Zona Rosa and they’re willing to find a solution,” Graves said, “they’re not willing to be the patsy in this situation.”
Last year, Zona Rosa went into default on its mortgage after spending down a $500,000 letter of credit and failing to obtain a new one. Opened in 2004, the shopping center has been on and off the market for sale.