It seems that the battle is over.
All those fighting to protect the city’s challenged budget and declining credit rating have laid down their swords, and the St. Louis Blues and Kiel Center Partners will finally get the $67.5 million in taxpayer money – or $105.9 million with interest over 30 years – for making improvements at the Scottrade Center, the home of the Blues hockey team.
On Friday, January 5, Comptroller Darlene Green released a statement announcing a settlement that resolves the lawsuit that Scottrade’s owner Kiel Partners filed against her in August, after she refused to sign off on the deal’s financing agreement and bonds because it would hurt the city’s credit rating. A judge ultimately ordered her to do so in November.
Green said that the agreement is in the “best interest of city taxpayers.”
“I am pleased that all parties were able to come together, and grateful for the hard work of my staff and others who made this agreement possible,” Green said. “It is my hope it will mitigate impact on the city’s general fund and credit rating.”
Kiel Partners also rejoiced in the agreement.
“We are pleased to have resolved all the issues necessary to allow us to complete the financing and construction of our Phase I improvements to Scottrade,” said the Kiel Partners spokesman.
So what was the agreement? What changed? Not much.
Alderwoman Cara Spencer of the 20th Ward said the new agreement takes pressure off the city’s credit rating by allowing the city to use additional revenue sources to pay back the bonds, rather than just the city’s general revenue fund.
In the settlement, it states that these revenue sources could be “incremental city tax revenues generated from the Scottrade Project” and “parking revenues contributed from the Parking Commission of the city.”
A representative with the Comptroller’s Office told The American that the incremental tax revenues meant “a revenue stream that the Blues hope to attract by doing the renovations.”
But that’s not new. It says so in the agreement itself: “The parties understand and agree that the provisions of this agreement do not change or alter the terms of the financing agreement or any other agreements pertaining to the Scottrade Center that were subject of the lawsuit with the sole exception of the revised indenture terms.”
And then in bold and underlined print, it states, “which simply confirm the City’s existing right to offset the general revenue payments with other revenue from other sources.”
So Green, who had been putting up a good fight all year, finally decided to bow down rather than appealing the judge’s decision.
Spencer, along with two city residents, also threw in the towel in their lawsuit against the Blues, which claimed it was illegal to use public dollars to help private companies. She feared they would have to pay legal fees if they lost.
Upon hearing about the comptroller’s settlement, Spencer said that she remains disappointed that the city is backing these bonds.
“We don’t see that for the coffee shops in my neighborhood and the convenient stores,” Spencer told The American. “Doing it for one of the largest for-profit entities in the region puts the general revenue fund at significant peril at a time where our net position has continued to decrease and our credit rating is continuing to decrease. This is not the time to be backing bonds with the general fund.”
Team TIF warns
As far as the “net position,” Spencer was pointing to the FY 2017 Comprehensive Annual Financial Report (CAFR) that Green recently released.
It showed that the city’s net position, which looks at its investment into capital assets, has seen a dramatic decline. In 2013, the city’s net position was valued at $1.32 billion. As of June 30, 2017, it had halved to $646.5 million.
Team TIF St. Louis, a grassroots watchdog group of the city’s economic incentives, recently released a report about Green’s findings.
“This declining position is especially concerning, as the comptroller notes that the Scottrade bonds hadn’t been signed,” the group states, “which would have added another $64 million in obligations to the city’s books.”
Some of the dramatic decline could be attributed to the large debt load that was taken on in order to win the NGA site selection process, Team TIF stated.
But the group’s main takeaways are that some of the revenues from the two new sales tax increases that would have be put towards community development will now be going to keep the city afloat and balance the budget. And the decline in the net position could cause more downgrades from rating agencies, making it more costly to borrow in the future.
“It is safe to say that the city’s fiscal troubles are not only continuing, but appear to be escalating,” Team TIF states.
Did you say parking revenue?
Yes, parking revenue and the Parking Commission were named in the settlement as “additional revenue” sources that the city could use to pay back the bonds. This very interesting.
Let’s go back the August 24 Political EYE titled, “All kinds of messed up on the Scottrade deal.” That was a lengthy review of the squabbles between the Green, Mayor Lyda Krewson and City Treasurer Tishaura O. Jones. The argument began in the spring with Jones saying she would be willing to use her bonding authority through the Parking Commission to help the deal. But one of her conditions was that the Blues agree to a Community Benefits Agreement (CBA), which was one of Jones’ most widely supported ideas during her mayoral campaign. Basically, if the public is going to dole out money for stadiums, then those sport teams’ owners need to give something back to the community – other than promises of new revenues from area hotels and restaurants, etc.
Linda Martinez, the mayor’s director of economic development, supposedly told Jones that there would be no CBA. A spokesman for Krewson told The American that was because the deal was already done and signed into law. (Interestingly, Martinez was the attorney who represented the Blues when they signed the original lease in 1992.)
Well, now the deal again includes the Parking Commission chipping in to take the weight off the city’s general fund. But this time, there’s no involvement from Jones at all and no CBA.
Jones told The American, “I’m intrigued by the fact that my office has not been a party to any of the negotiations of this settlement.”
The American asked Green how she was going to secure the parking revenues, and she has not yet responded.
Another thing that stifled the conversation about using the Parking Commission as a bonding authority was a lawsuit filed a year ago by James J. Wilson, the former city counselor under Mayor Vincent Schoemehl Jr. His suit questions whether the Parking Commission is constitutional. The city counselor then filed a motion this summer that supports some of the claims in the suit.
Jones basically said that the city had tied her hands legally to help secure the deal. In an August 9 letter to Green, Jones stated, “We are confounded by the request to help Scottrade Center renovations through state statutes that the City of St. Louis interprets as unconstitutional and board bills that are in direct conflict with state law.”
Now in the settlement, the Parking Commission is being named as a potential aid to the city’s credit rating – even though the city has joined a lawsuit to dissolve the Parking Commission.
And it gets messier: Wilson’s attorney, Elkin Kistner, is also Green’s attorney.
Another worrisome facet to this deal. Judge Joan Moriarty initially found that Green had a “ministerial duty” to sign the financing agreement. As part of the settlement, the judge vacated her decision. Still, never before has a judge ordered a St. Louis city comptroller to sign a financing agreement as Moriarty did on November 27. The comptroller complied on December 5 at the judge’s threat of holding Green in contempt of court. (The settlement outlines these actions.)
This should scare all taxpayers. Though Judge Moriarty agreeing to set aside her original order “allows for a clean slate and a new day in court if Comptroller Green or any future comptroller finds an expenditure imprudent,” as Green’s spokesman stated to The American, which means “Comptroller Green is now and remains the city’s checks-and-balance when it comes to our finances and the city’s credit,” the fact remains that a judge ordered a comptroller to sign an agreement and got it signed. That’s scary.
