As county commissioners expected, the rating of the Zona Rosa bonds of which Platte County is a part have been downgraded by Standard and Poor’s.
The rating downgrade – from AA- to A – was issued by Standard and Poor’s on Friday, May 18, and came in response to the recent financial woes of the Zona Rosa shopping district, located at Interstate 29 and Barry Road. Late last year, for the first time since it opened in 2004, Zona Rosa’s owner Olshan Properties, of New York, N.Y. failed to make a bond payment. Earlier this year, the mortgage went into default.
During its initial development and 2007 expansion, road work in and around Zona Rosa was funded through a Transportation Development District, TDD. While the original TDD funding was created through an agreement with the City of Kansas City, in 2007 Platte County joined in as well on a two-to-one vote of the then-commission. This has brought Platte County into a tight place, as it backed the bonds paying for construction of the parking garages, and could be stuck paying for them.
Over the last month, the commissioners have put several ordinances into place prohibiting future commissions from utilizing legal loopholes to enter into similar public-private partnerships.
In February, S&P warned that a downgrade of the infrastructure bonds was forthcoming, due to the “relatively weak relationship between the financed project and the county’s basic functions.”
“We’re pleasantly surprised that it wasn’t a much larger downgrade,” said second district commissioner John Elliott. “This could help us resolve this situation much sooner. Funding private development with taxpayer dollars is not a basic county function. It is true now and it was true 11 years ago. Commissioner Tom Pryor was right 11 years ago when he opposed this proposal. Unfortunately, two other commissioners failed to heed his wisdom and now it has fallen on us to clean up another financial mess. The bondholders and taxpayers were sold a bill of goods. It’s our goal to ensure that other governmental entities are made aware of these financial shenanigans.”
Pryor cast a vote in opposition to the 2007 proposal. Then-commissioners Betty Knight and Jim Plunkett voted yes.
The commissioners recently learned that sales tax income from the first half of the year will cover the June TDD bond payment. However, commissioners anticipate a more than $600,000 shortfall for the December bond payment.
“Until a long-term, sustainable solution is found, we see no reason to use good Platte County tax dollars to subsidize an east coast developer,” said presiding commissioner Ron Schieber.
Schieber said the commissioners agree with the downgrade, but that it came 11 years too late.
“This bond issuance would likely not have occurred had this been the initial rating, as it should have been,” Schieber said. “We believe the intent of the constitution is clear, that governmental entities should not be taking on debt obligations without a vote of the people. These special interest financial end-runs should be challenged and stopped.”
Future bond payment shortfalls over the next 15 years could range from $17 million to $40 million depending upon the revenue collected from a 1 percent sales tax supporting the bonds.