TIF suit updated on eve of annual bond payment

Wednesday, October 10, 2012

Last week, Mary Jo Shaney, the City of Monett's lead attorney in the lawsuit over Monett's tax increment financing (TIF) program, met for over two hours with Monett's TIF Commission. Shaney last met with the TIF Commission in late August 2011.

Shaney, who works at the Kansas City-based law firm of White Goss Bowers March Schulte and Weisenfels, reported all the filings have been completed for the appeal in the TIF suit. On July 18, Shaney filed a 97-page response to the appeal brief from Barry County and the Barry County 911 Board. The county is seeking to overturn Judge Neal Quitno's July 27, 2011, ruling in favor of Monett.

At the end of August, the county defendants filed their response. Shaney said the court generally does not allow responses to a response. She found no extraordinary arguments introduced to warrant additional filings.

According to City Administrator Dennis Pyle, it was only a coincidence that Shaney's presentation was given at the time the annual payment on Monett's TIF bonds is due. Concern has been expressed by city officials that the defense repeatedly sought extensions so that the city would run out of money to pay its bonds before the courts resolved the case.

"There were sufficient TIF funds available to make the Oct. 1, 2012, bond payments, on the principle and interest," said Pyle. "The TIF continues to receive funds from the City of Monett's share of incremental taxes and the renewed payments into the Special Allocation Fund by Lawrence County. The city also received the funds held in escrow for Lawrence County when they voluntarily dismissed their case."

The Southern District Court of Appeals is expected to schedule a hearing on the case in the next two to four months. Shaney said oral arguments are unusual in appeals, but both sides have requested oral arguments. She expects the court will grant the request, though the arguments will be limited to a maximum of 15 minutes per side.

A written opinion by the appeals court will likely come three to six months after the hearing. A panel of three judges will hear the case initially. Shaney said the losing party can request another hearing in front of the full panel of judges, or can appeal the case directly to the Missouri Supreme Court.

"Only a small fraction of cases filed with the Missouri Supreme Court receive a hearing," Shaney added.

The process could nonetheless push the final resolution of the case toward next year's bond payment.

"Assuming the litigation stretches out deep into 2013, the TIF will have sufficient funds to make those principle and interest payments through 2013 as well," Pyle added.

Shaney's presentation was made in closed session. She told The Times the TIF commissioners had "lots of questions."

Arguments in the case

The city's last court brief challenged arguments made by the county in its appeal.

Many of the arguments in the appeal, Shaney argued, were new and not applicable. The appeals court is only charged with evaluating the decision of the original trial judge, rather than considering new arguments not previously considered.

Shaney nonetheless raises a defense on several arguments. She furthermore equated the late filing of arguments as an attempted "ambush" which is not allowed in current court practices.

The county argued the city's TIF plans did not conform to the city's 1971 comprehensive plan. Since land involved in the TIF districts were not inside the city limits in 1971, the current land stood outside the jurisdiction of the city plan, which the county argued was only good for 20 years anyway.

Shaney argued the city's long range plan was written as a flexible document. No timeframe was dictated. The plan specified its policy could apply to "unincorporated portions of the planning area." Planning and zoning was indicated in the comprehensive plan as methods to shape specific uses.

The 1997 precedent cited by the county for the argument against the city's use of its comprehensive plan involved a case where an annual review was required, which Monett did not do. Shaney wrote that Monett's plan specified flexibility and had no requirements for review.

Moreover, the 1997 case involved a conflict between the original land use purpose and the final use. Monett's use was consistent, Shaney argued, similar to a St. Louis County case from 1980 upheld by the courts.

Another major argument by the county asserted the quarter-cent sales tax passed to fund the Barry County 911 system was not an "economic activity tax," and was thus exempt from being captured in part by the TIF.

Shaney asserted that a sales tax is the product of economic activity, namely retail sales. Improvements made by the TIF increased the sales tax activity, thus removing the original blight conditions. By definition, the tax was subject to the TIF, and the state legislature had failed to declare 911 taxes as an exception, though the legislature did adjust the amount that could be collected after Monett's original TIF was established.

Shaney challenged the assertion that Monett's TIF was generating excess revenue. State statutes do not require a previous tax to calculate a revenue figure, or that a tax exists for an area that is blighted and has no business.

Time limit for challenges

On several of the county's other arguments, Shaney responded that time ran out to file an objection. Once bonds were sold, and the county paid into the TIF for years, the time to object to the formation of the TIF had passed, according to other court cases.

The five-year statute of limitations, used in the frequently cited St. Peters case, had passed in the 13 years between the start of Monett's first TIF and the appeal against it. Shaney asserted that under the court's own standard, the right to challenge the TIF had passed.

"The Appellants' belated challenges, if allowed, give the Appellants a pass for their own role in the process, taking no action to challenge the TIF districts while enjoying the benefits of improved infrastructure and sales tax allocation," Shaney argued.

The city is asking for the appeals court to uphold Quitno's judgment, which would trigger the release of disputed funds held in escrow. Barry County's total from sales tax and real estate taxes totals $1,847,060.52. Barry County 911 has $323,032 in escrow.

Monett is also making a request for costs on the appeal.

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