The Supreme Court of Missouri this week denied a request by UMB Bank, the trustee for the Zona Rosa bonds, to file an appeal regarding its efforts to force Platte County to pay shortfalls on the Zona Rosa Bonds in 2018 and each year thereafter.
The Platte County Commission issued a statement on Tuesday, Dec. 29 through special attorney Todd Graves.
“This puts an end to the unfortunate effort by the trustee to force Platte County into paying taxpayer funds to bondholders that it never agreed to pay at the outset,” Graves said. Attorney Dane Martin also represented the county.
Platte County filed a lawsuit in 2018 after the trustee threatened to sue unless Platte County paid to cover the shortfalls. The Zona Rosa Bonds were issued by a third-party entity, not Platte County, and are payable from a 1 percent sales tax in the Zona Rosa shopping district. The payments demanded by the trustee would have escalated over time, totaling up to $40 million through 2032. The estimated shortfall is currently over $3.6 million. If paid by Platte County, the shortfalls would quickly deplete the county’s $4 million reserve fund and require either a material reduction in core governmental services or a raise in taxes.
“The commission has always supported Zona Rosa as a private shopping district,” said Ron Schieber, the presiding commissioner of Platte County. “Platte County will always pay its contractual obligations, but as confirmed by the courts, Platte County never agreed to be obligated on the Zona Rosa Bonds. No county or city should ever approve a bondholder bailout at the expense of basic governmental services.”
Platte County has prevailed at both the trial court and the Missouri Court of Appeals, Western District. The trial court found that Platte County never promised to pay the shortfalls. The Court of Appeals agreed, finding that Platte County only promised “to consider whether to pay on the Zona Rosa Bonds” and “[i]t is undisputed that is exactly what the County did.” The trustee sought to appeal the decision to the Supreme Court of Missouri, which rejected the effort.
UMB Bank filed an appeal in October 2019 after Platte County Circuit Court judge James Van Amburg ruled in the county’s favor in May 2019.
Van Amburg issued a summary judgement in favor of Platte County, whose attorneys argued had made no promise to cover shortfalls in tax revenues at Zona Rosa.
“There is no promise or requirement in the financing agreement for Platte County to make payment on the Zona Rosa Bonds,” Van Amburg wrote in his 2019 judgment. “In fact, in section 2.4, the financing agreement specifically states that it ‘shall not in any way be construed or interpreted as creating a liability or a general obligation of debt of the county... nor shall anything contained therein constitute a pledge of the general credit, tax revenues, funds or moneys of the county.’ The trustee (UMB Bank) has admitted the bonds are not secured by the full faith and credit and taxing power of Platte County.”
According to the release, Missouri Lawyers Media recently recognized Graves and Martin as “Legal Champions,” an award reflecting the importance of the principle or policy at stake and for protecting millions of dollars of taxpayer money. This case could potentially impact countless bond financing arrangements for counties and cities throughout Missouri.