TIF appeal ruling backs Monett on all counts

Thursday, May 23, 2013

The Missouri Court of Appeals for the Southern District ruled on May 13 in favor of the City of Monett in the lawsuit over the city's tax increment financing (TIF) program. The three-judge panel, citing two Missouri Supreme Court rulings that have been on the books for more than a century, ruled against the Barry County Commission and the Barry County 911 Board on every argument.

Appeals Court Judges Jeffrey Bates, Daniel Scott and Don Burrell heard oral arguments on April 4 in the TIF case in Springfield. Barry County and 911 sought to overturn Judge Neal Quitno's July 27, 2011, ruling that confirmed the legitimacy of Monett's TIF program and the debt owed from sales taxes generated by sales in Monett.

As of May 2013, according to estimates from the city, Barry County owes Monett $2,393,290 and Barry County 911 owes $380,081.

The appeals court judges issued a short 13-page ruling, compared to the 46-page ruling from Quitno. Judge Scott wrote the decision and the other two judges concurred. The judges determined the case hinged on two principle questions:

1) "Can a county watch TIF projects be undertaken and completed, and collect, distribute and retain TIF monies related thereto, all for years without protest, then claim the TIF actions were void "ab initio" (from the beginning)?"

2) "Is an E-911 tax subject to TIF allocation if voters approved the tax after the TIF district was created?"

Scott went into significant detail citing support for Quitno's decision. He observed the county's case had few sources to back it and found the 911 board's argument "strained."

The summary judgment ruling made by Quitno relied on the legal principle of "laches," which argues parties cannot appeal an issue after an unreasonable delay. Similarly, the legal principle of "estoppel" argues parties cannot take actions, develop expectations of others because of those actions and then stop, causing harm to others in the process.

Quitno found both applied in the Monett case. Barry County raised its objections after having representation on Monett's TIF commission and after paying sales tax into the TIF for 13 years, from 1996 to 2009. Barry County 911 waited four years before objecting.

In his ruling, quoted by Judge Scott, Quitno wrote, "The TIF Act presumes validity when bonds are issued. This court should defer to the legislature's intent."

In addition, Quitno said the county, 911 board and its witnesses "have limited or no knowledge regarding the claims they bring" about the creation of the TIF district. The county argued, "with 20/20 hindsight," over decisions made after memories had faded, based on a record Quitno found was not required by state law.

"This re-creation of events is precisely what the doctrine of laches seeks to prohibit," Quitno wrote.

Delayed objection issue

Scott examined in detail three sub-claims made by Barry County over delayed objections and stopping action.

* Barry County argued the factual record "is not extensive enough to determine the equities between the parties." Specific deficiencies in the record leading to the conclusion were not identified, Scott wrote. He cited two cases, from 1966 and 2008, where the facts involved compared favorably to the Monett case, and where laches and estoppel were found appropriate.

In addition, Scott noted Barry County quoted only one legal precedent for its argument. According to Scott, the county failed to mention that the 1959 North v. Hawkinson case in question did not argue whether the delay involved was excessive, and thus didn't directly apply to the Monett case. The county used a partial quote to argue "all the facts and circumstances" must be considered in a trial.

"We may agree with the partial quote in general," Scott wrote, "but nothing in [the North case] or the county's scant argument indicates why a trial was needed here."

* Barry County argued the court could not dismiss arguments between government entities based on a delayed objection and stopping action in a case. Scott agreed that public rights generally should not yield to those of private parties.

However, "There is little or no such concern in this dispute between public bodies," Scott wrote. Objection over stopping action "has been held to apply, particularly where, as is true here, the controversy is between one class of the public as against another class."

Scott cited three cases, from 1916, 1930 and 1931, where estoppel was invoked on cases involving school districts and cities, and two cases involving counties from 1894 and 1903.

"When a county offered 'no excuse whatever' for its long delay and inaction," Scott wrote, "our supreme court declared (in the 1894 case) that 'the neglect of the county in asserting its rights in a proper way for so great a length of time, to the continued prejudice of the rights of the defendant, cannot be excused.'"

Since the Monett case is between two public bodies, Scott determined the county's argument fails.

* Barry County also argued objections over delays and stopping action cannot apply in a case where legal remedies are sought.

"This is plainly wrong as to estoppel," Scott wrote.

He cited the 2004 Leonardi v. Sherry case that quoted Professor Dan Dobbs, whowrote the 1993 textbook "Law of Remedies," which states estoppel "operates as a defense to legal and equitable claims."

Courts routinely consider the excessive delay principle (laches) as a defense to claims for equal remedies. Scott found a twist in this precedent in the Monett case.

"Arguably, the 'rule' cited by Barry County and Professor Dobbs does not fit this case at all," Scott wrote. "Laches was found to bar, not the city's claim of legal relief, but the county's defensive claims."

By invalidating all of the arguments against Quitno's use of laches and estoppel to support summary judgment, Scott determined the appeals court did not have to consider the county's other claims. The arguments that Monett's TIF was improperly formed and that additional projects could not be added would not be considered.

911 tax collection

As a separate point, the issue of whether the Barry County 911 sales tax was subject to collection by the TIF received its own evaluation. The trial court ruled the tax for 911 services was subject to collection by the TIF.

Scott acknowledged a conflict on the face of the TIF law with special-purpose sales taxes. He referred to the main case on this issue, County of Jefferson v. Quiktrip Corp., from 1995, which went to the Missouri Supreme Court. In its ruling, the justices found the Missouri legislature made an exemption for some sales taxes, which were specifically identified.

Barry County 911 argued the TIF could not collect from the 911 sales tax, because the tax was passed after the TIF was created.

"Even if so, the reasoning of [the Quiktrip and the Bell-ridge v. Lohman case from 1998] remains persuasive," Scott wrote. "The legislature had seen fit to exclude certain specified taxes from the TIF allocation and thus presumably did not intend to exclude any others."

Sales taxes for 911 were not exempted by the state legislature, as Monett's attorney Mary Jo Shaney argued before Quitno.

"We are not persuaded by [the 911 board's] strained arguments not to follow Quiktrip and Lohman, especially in the absence of case law or legislative action suggesting a different view," Scott wrote. "We deny [the point] and affirm the judgment."

Monett City Administrator Dennis Pyle told The Times, "The city is very pleased with the ruling."

Barry County Presiding Commissioner Cherry Warren said the county commission would look over the ruling with its legal counsel and meet today (May 16) to decide what to do next.

Barry County and the 911 board still have the option to appeal the case to all nine judges on the Court of Appeals for the Southern District and to the Missouri Supreme Court.

Jon Horner, chairman of the Barry County 911 Board, said his board would go over the ruling with lead attorney David Cole, who presented arguments to the appeals court. The board next meets on June 24. Horner said a special meeting may be called prior to that.

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