Since June, Lawrence and Barry counties have ceased all payments reimbursing the city of Monett for sales tax revenues generated inside Monett's tax increment financing district. Lawrence County has hired Ivan Schraeder from the Lowenbaum Partnership law firm in St. Louis.
Schraeder has sent a letter to the city declaring that Monett's TIF was "invalidly created and/or amended incorrectly." No other details were provided. Schraeder indicated he intends to challenge Monett's TIF in court and seek to recover funds paid to the TIF in past years.
Barry County has not formally responded to Monett's request for payment. The Barry County Commission voted on July 30 to formally stop all payments.
The impasse began after the Monett TIF Commission sent demand letters asking for payment into the TIF from countywide sales taxes passed after the TIF was created. City Administrator Dennis Pyle discovered earlier this year the city was not being repaid from all existing sales taxes levied inside Monett's TIF districts.
According to Carl Yates, attorney for Monett's TIF Commission, state law declares all sales taxes passed before or after the creation of a TIF are subject to paying a portion of their revenues to the TIF. The two taxes passed after the TIF was created include the half-cent tax paying for Lawrence County's Judicial Center and the quarter-cent tax paying for Barry County's 911 system.
No response to Monett's demand letter has been received from the Barry County Emergency Services Board, overseeing the 911 system. Both counties have indicated they also plan to withhold all future payments of property taxes, also subject to capture by the TIF.
A special meeting of Monett's TIF Commission was held yesterday. At that time, commissioners voted to file a writ of mandamus against county officials. Mark Nelson, TIF commission chairman, said the writ will allege public officials and government entities have an "unconditional non-discretionary duty" to act in accordance with state laws, specifically the Tax Increment Financing Act and the Redevelopment Act.
The writ will ask the court to direct the public officials to perform their duty by paying money to Monett's TIF. A declaratory judgment will be sought from the court stating the obligations of the parties under the TIF Act and the redevelopment plans.
Yates said the city and the TIF Commission will file their petition. The court will direct officials for the county and Emergency Services Board to respond by admitting or denying the allegations. At that time the parties will be asked to raise any affirmative defenses, such as questioning the legitimacy of Monett's TIF, and the reasoning behind it.
Monett will ask that the money in question be placed in a special escrow account while litigation continues.
At Yates's recommendation, the TIF commission voted to hire Christine Bushyhead from the Kansas City form of White, Goss, Bowers, March Schulte and Weisenfels, as lead legal counsel. Yates said the writ of mandamus has been prepared and will be filed promptly after Bushyhead is on board.
Accompanying Yates to the TIF meeting was Mark Fels, who will also be working on the case, from the Springfield firm of Yates, Mauck, Bohrer, Elliff and Fels.
Attorney Schraeder is known for successfully challenging a TIF established in Shelby County. In that case, the town of Shelbina established a TIF and began collecting revenues without establishing a project or taking on debt to make improvements. The courts determined such a TIF was improper.
Nelson pointed out all of Monett's TIF projects have been for safety and infrastructure improvements. County representatives have served on the TIF Commission from its inception and never voted against any of the projects undertaken.
Yates said that similar litigation has taken up to two years to resolve. According to Pyle, Monett has enough money in its reserves and from local economic activity to pay its debts into fiscal year 2012. Beyond that point, the city would be in danger of defaulting on its bond payments, Pyle said.
The money involved is substantial. Lawrence County has been billed $12,389 from its tax for the Judicial Center, established in July 2007 and billed back to October 2007. The Barry County Emergency Services Board has been billed $193,255 going back to January 2006.
TIF payments now being withheld that were previously paid add up $14,890 for one month from Barry County. Lawrence County, which is billed quarterly due to the small portion lying in the first TIF district, owes $10,610 back to January.
Pyle calculated the taxes due in fiscal year 2010-11 would add up to $258,000 in property taxes and $172,600 in sales taxes. For fiscal year 2011-12, the amount would be $263,650 in property taxes and $177,800 in sales taxes.
Pyle based his projections on sales tax income being down 12 percent for the rest of this year, a figure he thought was "very realistic."
Over two and a half years, the first TIF district, running from Monett High School south on Bridle Lane to Highway 60 and west to Jack Henry, would be owed $964,050, Pyle calculated. The second TIF district, around the Lowe's store, would be owed $170,000.
The TIF Commission held its first closed session to deliberate legal action. Barry County representative Frank Washburn and Lawrence County representative Mark Cooper sat out of the room during the closed session over concerns about possible conflicts of interest. Washburn abstained from the vote to pursue the writ of mandamus. The vote was unanimous to recommend the city council hire Bushyhead.
"We don't have the authority to forgive taxes," Nelson said, explaining why back payments were being pursued from Lawrence County and the Barry County Emergency Services Board.
Petitions for action by the court would be filed in both Lawrence and Barry counties, Fels said.