Judge hears seven hours of testimony as stadium funding proposition has its day in court
March 02, 2005 - By SCOTT MILLER
Attorneys for the Coalition Against Funding for Sports Stadiums alleged in court last week that secret documents may require the St. Louis Cardinals to pick up the tab if St. Louis County defaults on bond payments for the new ballpark.
Two key witnesses testified that was not the case, but the allegation sparked life in courtroom observers last week as Proposition A, a voter-approved amendment to the County Charter, had its day in court.
Even if the Cardinals did cover the cost, Proposition A still would pummel the county's top bond rating, a key aspect of the case, according to the seven hours of testimony.
Proposition A requires a ballot referendum on public funding for sports stadiums. The aim was to block payment of $45.7 million in bonds the County Council sold to subsidize the new $398 million Cardinal ballpark.
County voters overwhelmingly approved Prop A in November, and bondholder trustees quickly filed suit, claiming the measure is unconstitutional because it hinders the county's ability to repay debt and set its budget.
The measure also crushes the county's exemplary AAA bond rating, the highest rating possible, plaintiffs argued.
To prove their claims, bondholder attorney Ted Noel of Armstrong Teasdale brought three witnesses to the stand: Jim Baker, the county's director of administration and chief of staff; Michael Lause, an attorney specializing in government bonds who assisted with the Cardinals' stadium bonds; and Laura Radcliff, managing director of investment banking for A.G. Edwards.
Coalition members no longer are defendants in the case, but their attorneys still participated in the trial because they have a claim against the county.
They're asking the judge to force a ballot referendum on the County Council's $2.7 million appropriation to begin payment on the bonds, a request the council previously rejected.
While coalition attorneys did not initially cross-examine or call witnesses, they did give a blanket objection to all testimony, saying it was irrelevant because the appropriations hadn't gone to a vote so Prop A hadn't damaged the county or the bondholders. Circuit Judge Barbara Wal-lace upheld the objection while allowing the testimony to continue.
The plaintiffs contend they have been damaged by Prop A because the bonds have less value on the open market and the county's bond rating is slipping.
Not only is the county affected, but "I think it would have a negative impact on state agencies," Radcliff testified. "But it's across the board. (Prop A) would have a negative impact statewide, affecting school districts, universities and cities."
While the court rules Prop A's fate, the county's bond rating has been downgraded by one rating service and put on negative watch by two others.
If Prop A is upheld, ratings could slide even further, Radcliff testified, and no governmental entity has ever defaulted on bonds in Missouri. St. Louis County would be setting a trend.
Also, Prop A would drive up the county's interest rates, Baker testified.
"It would take more county tax dollars to do the same things," he said. "County taxpayers would be paying more money to get the same thing."
Coalition attorneys also argue that the county has no obligation to repay the bonds because based on the bond prospectus, they are annual appropriations bonds, not general obligation bonds, which would have required a public vote. In that sense, the bonds are not debt under Missouri Constitution guidelines and the county has no obligation.
Witnesses disagreed, saying the county still must list them as debt for practical accounting purposes and for public information.
"We are in fact required to list them as debts in our annual reports for the public to see," Baker said.
"The annual appropriations shall survive anything," Lause testified. "Once the County Council sets that budget, the Charter is very clear; when the budget is approved the appropriations are approved ... The county's obligations are firm. They're not to be impacted."
Lause also said the state approved the deal because it agreed to a collaborative funding effort between the state, the county and the city of St. Louis.
"State law trumps the County Charter if they are in conflict," Lause told the court.
And at this point, the county is not funding the stadium, he said, it is repaying debt so Prop A shouldn't impact the bond re-payments.
"We thought the financial assistance (for the stadium) occurred on Dec. 23 (2003) when all the bonds were issued," he said.
"So what we're talking about today is the county's ability to pay the bondholders, not the Cardinals," Noel added.
Baker later said, "None of that money is going to the ballpark. Any money that will be appropriated will go to the bondholders."
Bondholder attorneys also contended that voters already approved the stadium deal when they approved a county hotel-motel tax, which is not a burden to county property taxpayers.
"We didn't feel it would be appropriate for the county taxpayers to be paying for that expense," Baker testified. "(Business owners) were willing to have a tax on their businesses that they felt would positively impact business ..."
And, "(county residents) voted in 1989 for that hotel-motel tax," he added. "The statute makes it very clear that it was for sports facilities, not a particular sports facility."
If Prop A is upheld, Baker said, the only avenue for borrowing would be to ask voters to pay additional property taxes for general obligation bonds.
"It would shift repayments of debts to property taxes as opposed to other taxes," Baker said.
When hours of testimony concluded, coalition attorneys sent gasps through the courtroom, alleging the plaintiffs withheld "confidential" documentation that may require the Cardinals to pay the bonds if the county doesn't. They wanted the judge to recess the case to make sure all documentation has been submitted.
"We have been diligently trying to put this puzzle together and we don't have all the pieces even now," said Christina Hart of Kennedy Hawkins. "We have gone to trial in three months, which must be some kind of record. We've been forced to trial in three months for this very complicated case. All we're asking for is time to look at this."
Baker and Lause returned to the witness seat to say no such documents existed.
"If there is something, I haven't seen it," Lause said. "I have seen everything on the public side. Anything that would impact the county, anything relative to St. Louis County, I have seen it."
Hart also wanted the case dismissed be-cause the county, which is the only defendant, seemingly has sided with the plaintiffs.
"There has to be an adversarial dispute between the plaintiffs and the county," Hart said. "We believe there is no adversarial dispute. In fact, we believe the plaintiffs and the county have a mutual interest ... The county asserted no defense ... The county filed zero motions ... There was no cross-examination of the county in this case at all ...
"The county must obey the County Charter," she continued. "The county has made it clear that they have no intention to enforce (Prop A) because of fear it will damage their bond rating. There is no defendant in this case ... The time has come for a court order to put that referendum on the ballot."
Referring to the county's position, Noel responded, "I don't think there is anything in the law that requires someone to artificially deny something that is true."
The county believes it has an obligation to repay debt, Baker said, but it also must obey the County Charter with Prop A, which could hinder its ability to repay.
That puts the county in an awkward position, not knowing which obligation to follow.
Deputy County Counselor Bob Grant said, "There are distinct things the county wants the court to address, as evidenced by Mr. Baker. I just don't see what would be gained by dismissing this case."