Neosho city attorney Steve Hays received correspondence last Tuesday notifying the city of a forthcoming taxpayer lawsuit challenging the sales tax implemented by the Neosho Transportation Development District.
Neosho Mayor Richard Davidson said the suit has not yet been filed, though Hays has indicated there is a strong possibility the City of Neosho would be named as a defendant on the lawsuit, due to their being a sponsoring entity of the TDD at its formation.
"The potential lawsuit further muddies the water of the issues with the TDD and the city and now puts the city in a potential situation where it could be named as a co-defendant in the taxpayer suit," Davidson said.
He said the suit comes from a single taxpayer, though he chose not to release the plaintiff's identity.
Davidson said the taxpayer's pending lawsuit is based on the same TDD issue the city raised last August, when it filed a petition with Newton County Circuit Court challenging the validity of the TDD based on the state statute it was formed under paired with who acts as voters within the district.
The district was formed under subsection 2 of RSMo 238.207, 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 238.202.2 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 238.202.2, that section does state that under a subsection other than 1 or 5, the legal residents of the district are the qualified voters.
Davidson said the taxpayer's lawsuit, like the city's, focuses on who acts as the voters within the district.
"In the Hancock amendment, as I understand it, if the wrong people vote to impose a tax, that tax could be challenged and we've said all along that there's a flaw in the statute defining who the rightful voters are in the TDD," Davidson said. "There are none because there are no resident landowners and by the fact that people other than resident landowners voted to impose that tax, that opened it up to a legal challenge."
Property owners currently serve as the voters within the TDD, which was formed in February 2011.
The boundaries of the district stretch from Waldo Hatler Drive to Industrial Drive, and from Kodiak Road to just east of Laramie Lane.
A half-cent sales tax has been collected within that district since January 1, 2012.
In November, Newton County Judge Kevin Selby ruled against the city's challenge, basing his ruling on the doctrine of laches, meaning the city took too long to bring the issue forward.
Page 2 of 2 - However, Hays filed a notice of appeal on Jan. 17, though the council has not publicly announced a decision to pursue an appeal. Davidson has said that move was procedural, simply protecting the city's right to appeal if it decides to do so.
The council was scheduled to discuss that potential appeal in a Wednesday morning meeting last week, however, the last minute receipt of correspondence alerting them of the impending taxpayer lawsuit caused them to postpone that discussion.
Council did not disclose at the time the content of the letter, and shared that information after a closed session meeting Tuesday night.
"As of tonight the council has not yet decided to withdraw its appeal or stop the appeal process," Davidson said. "We've got to continue to understand what this taxpayer lawsuit could mean to the city and we're not done with that discussion."