Raytown School Districts reply to Mayor Sly Jame’s proposal

December 29, 20 12

Mayor Sylvester “Sly” James, Jr.
Office of the Mayor
29^1h Floor, City Hall
414 East 12thStreet Kansas City, Missouri 6410

Re: Winchester TIF Plan Proposal

Mayor James:

I write in response to your letter dated December 18, 20 12, regarding the Winchester TIF Plan. I appreciate your willingness to discuss the proposed Sixth Amendment to the Winchester TIF Plan and possible resolutions to the pending dispute. As I’m sure you can understand, the District’s taxpayers and patrons are extremely concerned about the fundamental unfairness, the potential precedent, and the significant adverse financial impact that the proposed Sixth Amendment imposes on the District. These considerations leave the District with no choice but to oppose the proposed Sixth Amendment. Your willingness to enter into good faith discussions regarding this issue is appreciated, and the District is interested and willing to resolve its dispute with the City and TIF Commission without court intervention on certain, specific terms.

One impediment to a resolution in this matter is the lack of a common understanding of the factual background. I would like to address several statements made in your December 18, 2012 correspondence that I believe to be inaccurate.

First, your letter mistakenly refers to Swope Park as being a “blighted area” but this statement is incorrect for a number of reasons. No one, not even the City’s “expert,” has identified the area of Swope Park to be added to the Winchester Plan by the Sixth Amendment as “blighted” or even a “conservation” area. Standing alone, the area to be added by the Sixth Amendment cannot meet the statutory definition of a “conservation” or “blighted” area. It is only when the area in Swope Park is added to the area that has already been found to meet the statutory definition that it can be considered a “conservation” area. Under this approach, the most exclusive neighborhood in the City could qualify as a “conservation” area, a result that clearly violates the intent of the TIF act. If the project in Swope Park is one that the City considers a worthy one, then the City should allocate the funds to make the desired improvements.

Your letter also states that public infrastructure improvements required by a 1992 Redevelopment Agreement with the Developer have not been completed. Based on our review of records we have received via Sunshine Law requests, the vast majority of public infrastructure improvements included within the 1992 Redevelopment Agreement have been completed or excused by the City. Further, the Developer has indicated to the District that: (a) it disputes the City’s representation that outstanding projects remain from the 1992 Redevelopment Agreement; (b) it does not intend to complete any further construction within the Winchester TIF; and (c) it does not intend to submit any additional reimbursable project costs. Accordingly, the Winchester TIF Plan has reached its termination. Missouri law specifies that amounts held in the SAF must be surplused immediately upon payment of all redevelopment project costs. Thus, your representation that the TIF Plan cannot be terminated unless the City and Developer enter into an amendment to the 1992 Redevelopment Plan is erroneous. If the Developer has certified that it has no additional reimbursable costs to submit, then the TIF Plan must be terminated regardless of any dispute between the City and the Developer concerning the Developer’s obligations under the Agreement.

The District will require additional information to further evaluate the proposal set forth in your December 18, 2012 correspondence. Several terms and aspects of the proposal are unclear. Primarily, it is unclear if your proposal contemplates that the Winchester TIF Plan will be terminated in the near-term, or whether the Plan will continue so that funds can be diverted to Sporting KC. In order to evaluate your proposed agreement, the District will need to have clear answers to the following questions:

Remaining Public Infrastructure Improvements

•           Specifically, which public infrastructure improvements contained in the 1992 Redevelopment Agreement does the City contend remain outstanding?

•           What is the estimated cost of each of the outstanding public infrastructure improvements? Has the City received any bids for these improvements?

•           Outside of the outstanding public infrastructure improvements, does the City believe that the Developer will submit any further reimbursable project costs? If so, what it the total amount of those reimbursable costs and when will they be paid?

Termination of the Winchester TIF Plan

•           If the 1992 Redevelopment Agreement is amended, when exactly will the TIF Plan be terminated? Will the Plan be terminated in the near term, or will it continue to the 23^rd year?

•           Does the City contend that there are any conditions precedent to termination of the TIF Plan, other than amendment of the 1992 Redevelopment Agreement to remove the outstanding public infrastructure improvements? Sixth Amendment to the Winchester TIF Plan

•           Will any amendment be executed to the TIF Plan? How does the TIF Commission expect to divert funds to Sporting KC for property located within the proposed Sixth Amendment Redevelopment Area without an amendment to the Plan?

•           What specific portions of the Sporting KC Redevelopment Project will remain?

•           Will Sporting KC receive any funds that are currently held in the SAF? How will the District ensure that no District taxpayer dollars are diverted to the Project? Future PILOTS

•           What is the exact (or estimated) date that PILOTS attributable to the Raytown School District will cease to be collected?

•           Will the City TIF Commission alter its proposal if the City/County do not agree to contribute an amount of funds to the Sporting KC project equal to what their PILOTS would have been if the TIF Plan is not terminated?

Capital Contribution to the District

•           Upon what basis is the City offering a $1 million capital contribution from the SAF?

•           Being that the TIF Plan is near termination, how could any of the District’s capital improvements be “necessary and as a result of the TIF Plan”?

While I have several questions concerning the terms of your proposal, as outlined above, I generally understand the proposal to be that the TIF Commission will terminate the Winchester TIF Plan in the near-term, that no further PILOTS will be collected that are attributable to the District, and that the TIF Commission will make a capital contribution to the District of $1 million from the SAF to be used for improvements that are necessary and a result of the TIF Plan. The District is unable to accept these terms, in that: (1) the District is entitled to a much larger payment from the SAF under Missouri law; (2) the District is not willing to accept any conditions or restrictions on its receipt of funds from the SAF; (3) there is no guarantee that funds paid by the District’s taxpayers will not be diverted to the Sporting KC project; and (4) the proposal makes no provision for sewer, sidewalk, and street improvements within the Swope Ridge Neighborhood Association, as was promised by the TIF Commission.

As a bottom line, any agreement between the District and the TIF Commission would have to include the following terms:

Amendments to the Winchester TIF Plan: As of the date of execution of the Agreement, the TIF Commission and City Council will not approve any Redevelopment Project or any Redevelopment Project Area via an amendment to the Winchester TIF Plan without express approval by the Raytown Board of Education. [OR, the TIF Commission and City Council will not approve any Redevelopment Project or any Redevelopment Project Area via an amendment to the Winchester TIF Plan that depletes the District’s proportionate share of the SAF, that causes the District to lose tax revenue due to the collection of PILOTS, or that has an adverse financial impact on the District.]

As of the date of execution of the Agreement, no funds attributable to the Raytown School District will be distributed for projects outside of the Redevelopment Areas specified in the original TIF Plan and the first five amendments thereto.

Future PILOTS: As of the date of execution of the Agreement, no additional PILOTS will be collected pursuant to the Winchester TIF Plan that are attributable to the Raytown School District.

Payment of Funds Currently Held in the SAF: Raytown School District will receive a lump sum payment of $3 million, such amount representing 75% of the amount held in the Special Allocation Fund that is attributable to the District.

No conditions will be placed on the District’s receipt or use of the $3 million capital contribution, including, but not limited to, a condition that the capital contribution must be used for capital improvements to the District that are found necessary and as a result of the TIF Plan. No restrictions will be placed on the District’s receipt or use of the $3 million capital contribution, other than those restrictions generally applicable to the District’s receipt and use of local property taxes.

Completion of Sewer, Sidewalk, and Street Improvements within the Swope Park NeighborhoodAssociation: The City will agree to complete all sewer, sidewalk, and street improvements promised to the Swope Ridge Neighborhood Association, in the form and manner described in the original and first five amendments to the Winchester TIF Plan. Such  improvements will be funded from the SAF, in the same form and manner as previous

reimbursable project costs have been paid. The Raytown School District will contribute only its proportionate share to the sewer, sidewalk, and street improvement

Mutual Release of Claims: Release Kansas City and the Raytown School District will release each other olelaims: from any claims concerning or related to the Winchester TIF Plan, including any claims concerning amendments to the TIF Plan, collection of PILOTS and/or EATS, and management of or payments from the Special Allocation Fund.

 The Raytown School District will not release any claims concerning any other TIF Plan.

 The District is not willing to deviate from the above-listed terms. The District’s position that the TIF Commission has no authority, at this stage of the TIF Plan, to execute the proposed Sixth Amendment or to distribute funds currently held in the SAF to a private entity for improvements to land outside existing Redevelopment Areas is clearly supported by Missouri law.

Your letter also raises the issue of payment to the District pursuant to the Blue Ridge TIF Plan. I understand that it is your position that the City is not contractually obligated to pay the District amounts due under the Tax Revenue Distribution Agreement approved by the City Council on February 24, 2005. Even if we assume this position is correct, it ignores the fact that a number of legal theories are available to the District in a situation that is recognized by all parties as a manifest injustice. Aside from the claims against the individuals and entities associated with the City, like the EDC, there are a number of theories to pursue the City itself that are neither contractual, nor for which the City and its officials will have immunity. Pursuit of these claims promises to be particularly damaging publicly to the parties involved, but my Board of Education and I believe strongly that the taxpayers of the District have been wronged in a way that must be remedied, even if it involves extraordinary measures.

Please inform me when the District can expect to receive the additional information that it requires in order to evaluate your proposal. Additionally, please let me know if you believe that an agreement can be reached which includes the above terms. The District sincerely desires to put an end to the financial uncertainty surrounding the Winchester TIF and to develop a mutually agreeable resolution with the City and the TIF Commission.

Respectfully,

Dr. Allan Markley Superintendent of Schools