TIF suit ruling supports Monett

Thursday, May 5, 2011

Litigation over Monett's tax increment financing (TIF) program swung in favor of Monett as Judge Neal Quitno ruled in favor of the city against Barry and Lawrence counties and the Barry County Emergency Services Board. The judge granted summary judgment for the city on all the arguments, leaving no issues remaining to go to trial.

The counties and the Emergency Services Board had sued the city in 2009, claiming Monett's TIFs were formed improperly. They asked the court to dissolve the TIFs and release the taxing entities from any obligation to pay a portion of sales tax generated from sales in Monett back to the city.

The judge cited numerous legal precedents in making decisions on each of the issues in his 47-page ruling. He concluded the countywide sales taxes passed after Monett's two TIFs were established are subject to capture by the TIFs under state law, the issue which triggered the litigation initially.

Under the TIF formula, Lawrence County owes Monett $37,290.63 from its sales tax for the Justice Center, and the Barry County Emergency Services Board owes $91,158.96. These amounts are in addition to the sales tax paid back to the TIF before the litigation began, which has been withheld since the litigation started.

Facts in the case

Both sides asked for summary judgment prior to trial, claiming there were enough undisputed facts in the case to warrant a decision based on application of the law. Both sides had a different list of facts. Quitno found 84 facts that were not disputed by either side.

The judge found an additional 50 facts, most of which the judge included because the counties did not provide proof to the contrary. These covered the mechanics for how the TIFs were formed and bonds subsequently sold to pay for improvements to "blight" that kept the territory in question from developing.

Several factors affected the way the judge approached the case. Quitno indicated the burden of proof was on the counties as the parties that filed the suit. The city only had to show facts in the case as a defense. The judge found "no genuine dispute" to the facts necessary for a ruling.

Major decisions

The question of whether the counties could go to the court 13 years after the first TIF was formed and four years after the second then ask to have the TIFs voided raised an important issue to the judge. He referred to the 2000 case of Green v. the Lebanon R-3 School District which said, "It is one thing to interpret and enforce the requirements of the [law] but quite another to disrupt settled expectations years after a...violation has purportedly occurred."

"Respondents cannot now challenge the validity of the TIF districts where they have participated in the formation of the districts, accepted the benefits of the TIF districts in the form of increased tax revenue and acted as if the TIFs were valid for years after the TIF districts were created," the judge wrote. "The respondents' delay in bringing its claim has worked an injustice on the city."

Resolving the question of whether the new taxes were subject to Monett's TIFs even though the city did not discover the potential until 2009, the judge referred to the TIF Act, which cites specific exceptions to which taxes can be captured by a TIF.

"The E-911 Sales Tax is not listed in the exclusions under the TIF Act," the judge wrote. "Likewise, the Barry County Sales Tax and the Lawrence County Sales Tax are also not listed in the exclusions under the TIF Act."

Finally, the judge disagreed with the counties' assertion that state laws had been broken in the formation of Monett's TIFs.

"The city's TIF districts were validly created and complied with the requirements of the TIF Act," he wrote.

Quitno issued a summary judgment for the city on all counts and against the counties' counter claims. He ordered court costs would be assessed against the counties and that a separate hearing would be held on the city's request for payment of attorney fees.

Lead attorneys for Monett on the case were Christine Busyhead, now with the Kansas City law firm of Mitchell, Kristel and Lieber, and Mary Jo Shaney, from the Kansas City law firm of White Goss Bower March Schulte and Weisenfels. Lead attorneys for the counties were Ivan Schraeder and Thomas Scott Sterwart, with the Lowenbaum Partnership in St. Louis. Cassville attorney David Cole joined the case for the Barry County Emergency Service Board.

The judge's ruling in its entirety can be found on-line at www.cassville-democrat.com under special publications.

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