The Neosho Transportation Development District issued a strongly worded response Friday to the Neosho City Council's recent vote to rescind a cooperative agreement between the city and the TDD.
Council members voted Tuesday, on final reading, to rescind a cooperative agreement between the two entities, originally entered into in April, based on the city's view that the TDD is invalid.
However, the TDD maintains that, based on case law, their entity is valid, and furthermore, alleged that the city's repeal of the agreement could put TDD funding in jeopardy.
The TDD obtained a $2.4 million contribution commitment from the Missouri Department of Transportation as part of a cost-share program, which they say is at risk of being lost due to the city's recent action.
However, Richard Davidson, Neosho mayor, said it is the understanding of the city that the TDD is invalid, also making the cooperative agreement void.
"The current formation is not valid, that means the current agreement is not valid," Davidson said. "The current agreement is really a null and void issue. The bigger issue that we see for the financing is that the entity may not be a legal entity entering into contracts, that's a much bigger issue, we feel, between the TDD and their lending institutions."
Under the cooperative agreement, the city would have been responsible for maintenance on new roads created within the district.
Ray Stipp, TDD board chairman, said that cooperative agreement is needed for the cost-share agreement with MoDOT.
"We understand from MoDOT officials, our attorneys had discussions with them, and they indicate that that is a problem and it could impact the cost-share agreement that the TDD has with MoDOT," Stipp said.
The City of Neosho and the Neosho TDD are set to meet in court on Friday, Nov. 30, when they expect an answer to the city's petition questioning the TDD's validity.
The hearing is scheduled for 1:30 p.m. in the Division III courtroom before Associate Circuit Court Judge Kevin Selby.
The City of Neosho filed a petition in August with the 40th Circuit Court, alleging the invalidity of the TDD based on who acts as the voters within the district.
The TDD was created in February 2011, at which time Steve Hays, Neosho City Attorney, acting not on the city's behalf, but on the behalf of the TDD, filed the petition to create the district.
The district was formed under RSMo 238.207.2, which requires the petition of a single local transportation authority, which the City of Neosho acted as.
A TDD could also be formed under subsection 1, which calls for a petition of 50 or more registered voters or all owners of real property within the proposed district, or under subsection 5, which requires the petition of a local transportation authority, supported by joint resolutions of two or more transportation authorities.
However, RSMo 238.202 only identifies property owners as the legal voters in the district under subsections 1 and 5.
Though subsection 2 is not specifically named under RSMo 238.202, that section does state that under a subsection other than 1 or 5, the legal residents of the district are the qualified voters.
In the TDD's recent statement, they said that Hays was responsible for that filing.
While Hays did file the paperwork, he noted in an earlier interview with the Daily News that he was among numerous attorneys, including those representing MoDOT, who reviewed the language of the petition on at least three separate occasions and believed forming under subsection 2 to be proper at that time.
"I'll take responsibility to the extent that I believed what every other attorney at that time believed who was involved," Hays said.
It was this past summer that the filing issue was discovered, at which time the city filed a petition questioning the TDD's legality.
Now, both sides are set to hear the answer to that petition in court on Friday.
If the judge rules in the city's favor, what happens to the tax monies the TDD has been collecting since January 1?
Davidson and Stipp both said they are unsure what would become of the collected funds.
"That would be a court decision I would think," Stipp said.
"There's been a lot of conversation about that but I don't think anyone knows for sure what could happen, so I wouldn't want to speculate," Davidson said.
The TDD collects a half-cent sales tax within its borders, which stretch from Waldo Hatler Drive to Industrial Drive, and from Kodiak Road to just east of Laramie Lane, and includes big box stores, such as Walmart and Lowe's Home Improvement.
TDD'S PREPARED STATEMENT
The Neosho Transportation Development District's board of directors released a statement Friday afternoon, addressing the City's repeal of the cooperative agreement, as well as numerous other issues. That statement runs in its entirety below.
"As a means of providing information concerning the issues surrounding the TDD we would like to provide the following chronology of events that have led us to where we are today:
"The TDD was formed in 2011 through efforts of the City of Neosho and in particular, City Attorney Steve Hays. The TDD paid Mr. Hays $30,925.21 directly for his legal work in preparing and filing legal documents necessary for its formation.
"The TDD also paid the City of Neosho $64,925.37 for its engineering and planning work for formation of the TDD before the TDD came into existence. These expenses were approved and paid after the TDD was formed in 2011.
"The board of directors of the TDD was elected in April 2011 after the formation of the TDD and was charged with planning, financing, and executing the plan for improvements that would provide for traffic congestion relief and safety improvements within the district accompanied by economic development benefits for the community. The board developed the plan and obtained a $2,400,000 contribution commitment (not a loan) from the Missouri Department of Transportation (MoDOT) under its cost-share program representing over 40% of the $6,900,000 project total.
"The TDD began negotiations with the City of Neosho for a cooperative agreement for maintenance of the new roads within the TDD as required by both MoDOT and the lender for the financing of the improvements. Ultimately those negotiations concluded with an agreement signed by both parties detailing the improvements to be made and responsibilities of each of the parties concerning maintenance of those roads among other details.
"The TDD cost-share agreement with MoDOT calls for MoDOT to perform all the engineering, bidding, and oversight of the construction of the new roads. MoDOT performed much of this work and approved a bid from a contractor for the first of the projects to be completed, a new traffic signal at Kodiak Road and Highway 60, originally scheduled to be completed by the end of 2012.
"The City of Neosho, a few months ago, discovered a flaw in their original filing with the court for the formation of the TDD. Rather than communicating this finding to the TDD board and jointly working for a legal solution, the City through the City Attorney filed a lawsuit with the court requesting that the TDD be abolished in spite of it having been declared valid on at least three previous occasions and numerous parties including the TDD board, MoDOT, and the TDD's lending institution having taken actions in reliance on this.
"The TDD board, in response to the suit, retained legal counsel to defend the validity of the district and keep the projects in place with MoDOT including the cost-share contribution of $2.4 million. TDD legal counsel developed several strong legal arguments consistent with a Missouri Supreme Court decision that we believe supports the TDD continuing as a legal entity in spite of the flaws associated with the City of Neosho's original actions to form the District.
"On August 28, 2012, the Court ordered among other things that the TDD and the City of Neosho work together to solve the problem. The TDD board has complied with the Court's order and has offered to cooperate with the City of Neosho in formation of a Community Improvement District (CID) which would replace the existing TDD and would include existing projects previously agreed to and add projects the City wishes to have included. The new CID would be governed by a board appointed entirely by the City of Neosho.
"The TDD board felt progress was being made in these negotiations with City officials so that both the TDD and City of Neosho officials could jointly recommend this solution to the Court as we had been instructed to do. However, without prior notification to the TDD, the City Council recently rescinded both its original letter of support for the TDD and, importantly, the authority for execution of the cooperative agreement signed earlier this year by the Mayor. One of the requirements of the cost-share agreement with MoDOT and with the TDD's lender is that a valid cooperative agreement exists between the City of Neosho and the TDD to address issues including future maintenance work on the road improvements. The TDD Board is concerned that this unilateral action by the City Council could cause substantial harm to the TDD as well as result in the loss of the $2.4 million cost-share funds from MoDOT. Further, in our opinion, it raises questions about whether the City Council is negotiating in good faith to resolve the issues as directed by the Court.
"These events have resulted in the TDD board scrambling to provide assurances to MoDOT and our lender that if the Court rules that the TDD may continue, we will be able to ensure that the City abides by the legal agreements it previously entered into with the TDD.
"The TDD board members believe that there is a very strong legal basis supporting the continuance of the existing TDD which will allow the parties to work together to take all necessary actions to complete the planned road improvements. The Court hearing on this issue is scheduled for November 30th."
Submitted by TDD board members:
In response to the TDD's statement, Richard Davidson, Neosho mayor, also provided a statement on behalf of the City of Neosho. That statement runs below in its entirety:
"The city council remains committed to work toward a resolve that creates a legal entity that can move forward with the projects in a manner that balances the benefits of economic development with the needs for proper oversight and accountability to the taxpayer.
"The TDD board's latest proposals were received via email late Wednesday evening. Given the holidays, the city will take time early next week to review and evaluate those proposals. After that review, we will continue our commitment to respond directly to the TDD's representatives in a timely manner with our comments and ideas to finding an lawful and acceptable resolution."