Platte County washes its hands of Zona Rosa shopping center

Platte County, Missouri, will formally withdraw from the public financing of a shopping center that sparked multiple court battles after its sales tax revenues faltered and the county chose not to honor an appropriation pledge it had made to back bonds issued for the facility.

Today, the Zona Rosa Town Center is a patchwork of gleaming chain stores ? Gap, Ann Taylor Loft, Victoria's Secret, Hot Topic ? and darkened doors beside boarded-up windows. It's in the suburbs about 14 miles north of downtown Kansas City.

Since 2017, the shopping center's sales tax revenues have underperformed, sparking a dispute over how to make up the shortfall in payments on $32.2 million of Series 2007 bonds issued by the Platte County Industrial Development Authority for the Zona Rosa project.

The Industrial Development Authority also issued Series 2003 bonds to fund infrastructure improvements that included two multilevel parking garages.

Those garages are part of an agreement finalized Monday between the county, the authority, two transportation development districts, UMB Bank, acting in its capacity as bondholder trustee, and Monarchs Sub, LLC, which became the owner of Zona Rosa in 2018.

"With today's agreement, the county government will withdraw completely from public financing of Zona Rosa," County Commissioner Joe Vanover said in a statement shared with The Bond Buyer. "The bank, the developer, and all parties agree that the county government did not default on the Zona Rosa bonds."

The county's decision in 2018 to disregard an appropriation pledge for the underperforming shopping center bonds prompted Moody's Ratings to cut the county's issuer rating to speculative grade. It remains at speculative-grade Ba3.

S&P Global Ratings assigned the Series 2007 bonds a AA-minus rating at issuance, based on the county government's pledge of support. In September 2018, S&P cut the Zona Rosa bonds to junk, ultimately moving them to D, for default, that December.

State courts agreed with the county's argument that, while the pledge required the county to submit in its annual budget a debt service appropriation, there was no requirement for county commissioners to approve it.

An April settlement extended the maturity of the Zona Rosa bonds by 30 years. The bonds originally had a 2032 final maturity.

In connection with the bond maturity extension, in early 2025, UMB Bank and Monarchs Sub, LLC settled their dueling lawsuits by extending the transportation development district sales tax for 40 years. As part of the March settlement, it was agreed that neither Monarchs nor the transportation development district would be responsible for paying any shortfall of the Series 2007 bonds.

Platte County hired an attorney and intervened in the settlement.

"For the last few months, we have been negotiating a way for the county government to get out of the public financing of Zona Rosa completely," Vanover said in the statement.

In the Monday agreement, signed by the Platte County commissioners and the special county counselor for Zona Rosa matters, the parties entered into an addendum to the settlement agreement under which all parties agreed the county did not default on obligations related to the Series 2003 and Series 2007 bonds.

And to free the county of any remaining financial or legal obligations to Zona Rosa, the ownership of the parking garages was transferred from the county to the transportation development districts in Zona Rosa.

A May 2019 Missouri circuit court decision and an August 2020 decision by the Missouri Court of Appeals for the Western District both found that the financing agreement did not require the county to appropriate or pay any shortfalls on the Series 2007 bonds.

Nonetheless, "for the avoidance of confusion," Monday's agreement says, the transportation development districts and the authority agreed to amend the original financing agreement to clarify that "the county is no longer a party to the financing agreement and has no ongoing obligations under the financing agreement, including with respect to Article II, the inclusion of an appropriation in the annual budget request and other appropriation provisions, or for continuing disclosure."

Consent of the bondowners to the financing agreement amendment "is deemed to have occurred" by virtue of an earlier Minnesota court decision, the agreement said.