Coalition plans to appeal judge's ruling against efforts to block bond repayment
March 09, 2005 - By SCOTT MILLER
The Coalition Against Public Funding for Stadiums plans to appeal a ruling against its efforts to block the county's repayment of $45.7 million in bonds sold to subsidize the St. Louis Cardinals' new $397 million ballpark.
Circuit Judge Barbara Wallace ruled last week that Proposition A, a voter-approved County Charter amendment requiring a vote on public funding of sports stadiums, could not apply retroactively to affect the county's $2.7 million annual appropriations for the Cardinal bonds.
"The imposition of new restrictions on the county's ability to appropriate funds, i.e., submitting the decision to a public vote, alters and impairs the terms under which the bonds were purchased as well as the rights, obligations and expectations of the bondholders," Wallace ruled. "Permitting voters by referendum to alter the provisions of any appropriations-based financing after its issuance is a constitutionally impermissible impairment of the parties' contractual obligations."
The judgment should save the county's bond rating, and even though Wallace did not declare the measure null and void, County Executive Charlie Dooley told the Call she "ruled in favor of the county.''
"I don't think we'll be building another sports stadium for another 30 years," he said. "So it's kind of a moot question for now, don't you think?"
Preparing an appeal, coalition attorneys say the bond-purchasing terms were uncon-stitutional because they exceed legal debt limitations, such as a cap on government borrowing based on a percentage of the entity's assessed valuation.
"We believe all of these debt-limitation provisions of the Missouri Constitution — there are about four of them — have been violated," attorney Christine Hart of Kennedy Hawkins told the Call.
The county sold $45.7 million in bonds in 2003 to subsidize the ballpark. The bonds carry a 30-year life, and this is the county's first year of repayment.
County voters overwhelming approved Prop A Nov. 2 by a nearly 3-to-1 margin, and bondholder trustees quickly filed suit, claiming Prop A was unconstitutional because it impaired a government entity's obligation to repay debt. Plaintiffs wanted Prop A declared null and void.
Because Wallace's ruling settled the dispute over the county's repayment of the Cardinals' subsidy bonds, the centerpiece of the case, she did not judge Prop A's constitutionality.
Still, if Prop A applied retroactively to the county's repayment "obligation," it would violate both the U.S. and Missouri constitutions, she said.
"Proposition A cannot be construed to effect a retroactive invalidation of the ordinance cooperation agreement (between the state, county and city), project agreement, or the bonds, because under such a construction, Proposition A would impair the plaintiffs' contractual obligations in violation of Article I, Section 13 of the Missouri Constitution, which provides that 'no ex post facto law, nor law impairing the obligation of contracts, or retrospective in its operation, or making any irrevocable grant of special privileges or immunities, can be enacted,' and Article I, Section 10 of the United States Constitution, which provides, in part, that "no state shall ... pass any law impairing the obligation of contracts.'"
Coalition attorneys argued the county does not have a legal obligation to pay the bonds, only a moral obligation that can be broken, based on the bond prospectus of the Missouri Development Finance Board. Hart filed a counterclaim asking the judge to force a ballot referendum on the $2.7 million the County Council appropriated this year to begin repayment of the bonds.
Wallace dismissed the claim and the argument, ruling that only the County Council can make the decision to repay the bonds, not the voters.
"The county's obligations pursuant to the financing agreement are 'absolute and unconditional,'" the judgment stated. "At the time the bonds were purchased, the county was obligated to include amounts for repayment of the bonds in the budget proposals submitted to the County Council during the term of the project agreement, with the decision to appropriate said sums to be made solely by the County Council. Application of Proposition A effectively takes away the decision to appropriate from the County Council, whereas the parties' intent was that the County Council would be the sole decision maker."
Plus, Cardinal owners already have re-ceived the county's money.
"Proposition A cannot affect the development/construction of the ballpark project as the money has already been paid and at least partially spent," Wallace declared. "The financial assistance for the development of the ballpark project was provided on Dec. 23, 2003, when the loan was funded and the proceeds were irrevocably deposited into the escrow account. Any financial assistance for a professional sports facility was given by the county 11 months before Proposition A became effective. The yearly county payments of its debt obligations, as they existed prior to the passage of Proposition A, are not 'financial assistance' to the ballpark project as defined in Proposition A since no benefits will inure to the team owner. The county's payments are merely repayment of existing debt."
In the ruling, Wallace also cited the detrimental impact Prop A could have on the county's AAA bond rating, the highest rating possible.
During the trial, Jim Baker, county administration director and chief of staff, and Laura Radcliff, managing director of investment banking for A.G. Edwards, testified that the county's bond rating would plummet if Prop A impacted the Cardinals' subsidy. In addition, interest rates imposed on the county would rise, costing taxpayers more money for the same projects.
Coalition attorneys gave a blanket objection to all testimony as irrelevant because the stadium bonds hadn't gone to a vote, but Wallace found the testimony "credible" and "uncontradicted."
"A default on the bonds herein will most certainly negatively impact the county's credit rating, resulting in increased borrowing expense," she declared. "Other bonds on which the county is an obligor, as well as state issuances, may also be affected."