The Missouri Court of Appeals Western District on Aug. 25 agreed that Platte County has no legal obligation to make up a shortfall in bond payments for the Zona Rosa shopping district.
The dispute involves an upscale shopping center in northern Kansas City. The center’s parking garages were financed by a series of bonds payable from a 1 percent sales tax in the Zona Rosa district.
When sales tax revenue fell short of expectations, UMB Bank, which serves as the trustee for the bonds, argued that the county was responsible for making up the shortfall. The county’s long-term liability could have been as much as $40 million through 2032.
The Western District, affirming an earlier ruling by Platte County Circuit Judge James Van Amburg, said the plain and ordinary meaning of the agreement showed the county never promised to make such additional payments.
The bonds were issued in 2007, when the Development Authority of Platte County (a separate entity from the county itself) entered into a financing agreement with two transportation districts to fund the garages. Platte County also entered into the agreement, though its role in the deal was disputed.
The Western District said the county had agreed only that its auditor’s office would include a potential payment for the Zona Rosa bonds in its proposed annual budget. But any decision to appropriate that money remained in the hands of the county’s three-member elected commission.
“The County obligated itself to consider whether to pay on the Zona Rosa Bonds by proposing a payment in the budget for the County Commission’s approval,” Judge W. Douglas Thomson wrote for the court. “However, unless and until the County Commission made final, specific approval of the appropriation by its Warrant, a step which had to occur at some point after approval of the County budget, no payment would ever be made to Trustee. This final approval by Warrant never occurred.” Judges Karen King Mitchell and Anthony Rex Gabbert concurred.
Todd Graves and Dane Martin of Graves Garrett, who represented the county, said the commission had declined to make additional payments because doing so would deplete the county’s reserves and require either a reduction in services or a tax hike.
“Since day one, the Commission has kept every word of its promise regarding the Zona Rosa Bonds,” Graves said in a statement. “The Court was correct to reject the Trustee’s attempts to impose a bondholder bailout on taxpayers by seeking to alter the terms of the agreement.”
In a notice to bondholders, UMB Bank said it would “work with counsel to explore and consider its options, all in the best interests of Bondholders.” The bank is represented by attorneys from Spencer Fane.
The case is Platte County, Missouri v. UMB Bank, N.A. the Trustee of the Transportation Refunding and Improvement Bonds (Zona Rosa Retail Project) Series 2007, WD83232.