Platte County taxpayers don’t have to settle up for Northland shopping district Zona Rosa’s financial issues, a judge ruled last week.
The decision, rendered May 30, could save taxpayers millions over the next 13 years. The county’s credit rating, however, was pummeled by agencies that track the creditworthiness of cities and counties that look to borrow money. That could make it expensive and difficult for Platte County if it looks to borrow money in the future to pay for large projects or in an emergency.
At issue was whether Platte County had promised to make payments on debt that was taken out in 2007 to build a parking garage at the shopping center, near Barry Road and Interstate 29, in the event that Zona Rosa didn’t generate enough sales tax revenue to make annual payments to investors on its own.
The parking garage debt was supposed to be paid for by a 1% sales tax on purchases at Zona Rosa. But the shopping district hasn’t generated enough sales to make debt payments. In the 2007 financing agreement for the Zona Rosa parking garage, Platte County indicated that it would consider pledging county dollars to make up any difference between sales taxes generated and a total annual debt payment.
In recent years, the Platte County Commission has balked at the idea of covering Zona Rosa’s debt by an appropriation of general fund money from taxpayers. The county, commissioners have said, has other needs to pay for and doesn’t need to shore up a private business’ financial issues.
Zona Rosa reflects broader issues with storefront retail as consumers opt more for online purchases. Zona Rosa collected $1.46 million in sales taxes for its garage project in 2018, the lowest amount since the onset of the recession in 2008, according to a trustee’s report.
Platte County Circuit Judge James Van Amburg ruled that Platte County’s consideration didn’t amount to a promise or legal obligation to cover any shortfalls.
Todd Graves, a lawyer representing Platte County in its litigation against Zona Rosa bond trustee UMB Bank, said Van Amburg’s decision spares Platte County an immediate $765,391 liability and up to $40 million through 2032.
“This is a great day for taxpayers — and a firm rebuke to financiers attempting to abuse the public treasury,” Graves said in a statement. “The Zona Rosa Bonds will continue to be paid using the dedicated 1 percent sales tax in Zona Rosa, as has always been the case.”
Van Amburg’s ruling wasn’t unexpected. The bonds for the Zona Rosa parking garage were not structured as a general obligation, which would have meant that the county was required to have to cover shortfalls.
And while the county is off the hook for Zona Rosa shortfalls, its credit rating has taken a nosedive, similar to a consumer who stops making payments on an automobile loan until it goes into default.
The Platte County situation has been closely watched in the bond markets as it has been an unusual case of a government borrower being unwilling to pay, as opposed to being unable to pay on debt.
And like a consumer who defaults on a car loan, Platte County will find it expensive to borrow again in the future, if it can borrow at all.