Two counties in Missouri stopped making their tax increment financing allocations to tax increment financing districts in the City of Monett in 2009, jeopardizing the payment on debt for public improvements already made.
Mary Jo Shaney, a litigation partner in the Kansas City law firm of White Goss Bowers March Schulte & Weisenfels, successfully defended before the Southern District Court of Appeals a trial court judgment upholding the validity of two of Monett’s tax increment financing plans (“TIF Plans”) and the Redevelopment Districts created under the Plans (“TIF Districts”). In addition to upholding the validity of the TIF Plans and the TIF Districts, the Court ordered the Barry County Emergency Services Board (“Board”) to allocate and pay economic activity taxes (“EATS”) based upon levies the Board imposed after the TIF Plans were approved and the TIF Districts were established. (The Counties had been withholding EATS and PILOTS.)
In 2009 at the trial court level, the City sued Lawrence and Barry Counties, and the Board, when they each failed to allocate TIF revenue as required by the TIF Plans and State law. The Counties and Board countersued, claiming that the TIF Plans and TIF Districts had been improperly formed in 1996 and 2005. The Board also contended it was not subject to the EATS allocation requirements because voters approved the Emergency Services tax after the TIF Plans were approved and the TIF Districts were created.
A unanimous appeals court held that laches and estoppel barred Barry County’s challenges (Lawrence County had voluntarily dismissed). The Appeals Court held that because TIF bonds had been issued, public improvements had been made with bond proceeds, because the Counties participated in and benefitted from the TIF Districts, and because of the delay in bringing their claims it would be inequitable to enforce the County’s claims. The Court further held that “it is well to enforce the law, ‘but it is quite another matter to disrupt settled expectations years after’ an alleged violation.”
In response to the Board claim that its taxes were approved subsequent to the formation of the TIF Districts, the court drew on the Missouri Supreme Court decisions in County of Jefferson v. Quiktrip Corp. and Village of Bel-Ridge v. Lohman. In these cases, the Supreme Court emphasized that only taxes that are expressly excluded under Section 99.845 are taxes the legislature intended to exclude from TIF allocation. Emergency services taxes are not excluded under Section 99.845 and, therefore, were subject to collection and allocation pursuant to the TIF Plans.
We congratulate our partner Mary Jo Shaney who has successfully tried economic development cases over the years. She is in good company with her partners Mike T. White, Jim Bowers, Aaron March and Patricia Jensen who work with and defend economic development incentives and the creative use of economic development tools in Missouri and Kansas.
A link to the decision, State ex rel., City of Monett, Missouri v. Lawrence County et al., is attached here.