Trial testimony began Monday in a case that asks whether Kansas City must make payments to hundreds of apartment and condo owners to cover their trash services. If the case ultimately goes against the city, it could involve $10 million in past-due payments and millions more going forward.
It all stems from a 1976 court order relating to the city’s earnings tax. A Platte County judge said at the time that Kansas City had improperly created two classes of earnings-tax paying residents, because the city provided free trash pickup for single-family residences but not for large apartment buildings. His order required the city to make payments to multifamily buildings with seven or more units to cover their trash services.
The City Council decided in 2010 to halt those payments because of severe budget constraints. The payments stopped to most apartment owners, except for a group that reached a separate legal settlement.
“They just assumed the power to ignore the order,” attorney Greg Leyh told Platte County Circuit Judge James Van Amburg in opening arguments for the bench trial. “The city simply flouted it.”
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Leyh is one of several attorneys representing the Sophian Plaza Association, Townsend Place Condominium Association and several hundred other owners in the class-action lawsuit that argues the city is in contempt of court.
But Assistant City Attorney Chad Stewart said the 1976 agreement was signed by an assistant city attorney who had no authority to bind future city councils to those payments. He also said that both sides — the city and the apartment owners — made promises in 1976, and the apartment owners didn’t hold up their end of the deal to provide tenants with equivalent or better trash services than the city.
“Times change,” Stewart told the court, adding that the city in the mid-2000s began curbside recycling, yard waste collections and bulky item pickups, while limiting households to just two free bags of trash every week to save landfill space. None of the apartments implemented those trash service changes that would be equivalent to what the city does, Stewart argued.
Assistant City Attorney Tara Kelly said during a recess Monday that the city believes the 1976 court order and agreement were not valid contracts and are void.
“That’s one of the things the judge will have to take a look at,” she said.
Complicating the case is the fact that the Heartland Apartment Association, a group of 117 major apartment complex owners, threatened to sue over the loss of the rebates. The city agreed to pay them annual rebates, costing about $750,000 in recent years, so they could hire their own trash contractors.
Leyh said it was unfair that these politically connected “real estate elites” who hired a lawyer and a lobbyist got a deal from the city, while his clients, including smaller mom-and-pop apartment owners, did not.
He said that since the payments stopped in 2010, the loss to the class totals about $10 million, and going forward five years it could total $7 million more.
“There’s a lot at stake in this case,” he said.
Stewart countered that none of Leyh’s clients were part of the 15 original plaintiffs in 1976, and many weren’t even in business then. “That’s important,” he said.
He also said the council’s discussions about eliminating the apartment rebate program were well publicized beginning in 2008, and Heartland was the only group to challenge the decision.
In videotaped deposition testimony shown Monday, City Manager Troy Schulte, who was budget director in 2008, said he would have preferred that the city go back to the Platte County Court to alter the 1976 order before halting the trash rebate payments, but the Law Department chose not to do that. “I was hoping for a permanent solution,” Schulte said in his deposition.
The plaintiffs also showed video of a 2008 City Council finance committee meetings, in which then-council members Jan Marcason and Bill Skaggs worried about litigation over the curtailed payments, but said the budget woes were so great that they supported the cut.
The trial is expected to last through Wednesday, and Van Amburg is expected to take arguments under advisement. No matter which way he ultimately rules, both sides expect an appeal.