CHICAGO – St. Louis’ commitment to issue debt to help pay for renovations to the city’s professional hockey stadium is now embroiled in multiple lawsuits and has pitted the city against its elected comptroller.
The St. Louis Board of Aldermen in February approved a financing agreement that calls for the Land Clearance for Redevelopment Authority of the City of St. Louis to issue $78 million of debt. It would provide $67 million for renovations at Scottrade Center, home of the National Hockey League’s St. Louis Blues. The other $11 million would fund reserves and cover issuance costs.
“The city agrees to cooperate in connection with the issuance of the bonds and to authorize and direct the mayor, the comptroller and other applicable officials of the city to execute all documentation necessary or appropriate to cause the issuance of the bonds,” read the approved ordinance.
Comptroller Darlene Green, however, has yet to sign off and has voiced her opposition over concerns of the fiscal impact on the city’s already strained balance sheet and concern it could drive further deterioration.
The financing plan relies on a series of revenue sources to repay the bonds including a 5% tax on ticket sales and $800,000 in revenue that will be freed in 2021 when bonds are retired for Kiel Opera House renovations. The plan also relies on general city revenue. With interest, the public subsidy totals more than $100 million.
Earlier this month, an alderman and two others filed a lawsuit in The City of St. Louis Circuit Court against the city, the authority, and the team seeking to block the funding. The three – Cara Spenser, James Wilson and former state representative Jeanette Oxford – argued that the ordinance violates the state constitution in how it benefits a for-profit enterprise.
The hockey team leases the stadium for $1 per year from the city under a 50-year deal struck in 1992 that allows the Blues to operate the facility and collect any profits from operations. The complaint argues that the lease agreement “clearly relieves the city of any duty to maintain, repair, or renovate the Scottrade Center.”
The plaintiffs argue that if the “cash-strapped city” goes through with the funding, it would deprive residents of essential city services. “The lease that defines the use of the Scottrade Center is not a public asset,” asserts the complaint. “Therefore tax revenue that constitutes an investment in the facility is not a public investment, meaning that it is simply giving away money. The ordinance thus violates the Missouri constitution.”
On the same day the lawsuit was filed, Green posted a statement noting that she had not yet signed the financing agreement and continued opposition for any package that relies on “new city debt or using the city’s credit or current revenues.”
“The comptroller has not approved the transaction to issue bonds for the renovation of Scottrade Center, as it would incur debt to the city's general fund for nonessential services and negatively impact the city’s credit,” read the statement. “The city faces a credit crisis having been downgraded twice in less than six months by Moody's Credit Rating Agency.”
The St. Louis Blues called the lawsuit “frivolous, disappointing and embarrassing to our city.”
The team also took Green to task for her position saying she “has a legal obligation to sign the financing agreement, as directed in the ordinance.”
Last week, the team’s ownership group, Kiel Center Partners, turned to the courts, filing a lawsuit in the same court system that seeks to compel Green to sign the agreement. Construction has begun and the the group has taken out loans to finance the initial costs as they awaited Green’s signatures.
Green was given by the court until Sept. 15 to respond to the complaint.
Green defended her position and her legal right to withheld support under the city charter due to her concerns that the package could damage the city’s rating.
Under the charter, the comptroller exercises general supervision over city fiscal affairs and “shall preserve the credit of the city.” The language, however, goes on to suggest that the approval for various actions is required by the Board of Estimate and Apportionment which Green and the mayor sit on.
Green wants to work with the team to “find an alternate financing strategy—one that would not draw upon the city’s general fund and take money away from essential city services or harm the city’s credit.”
Moody’s dropped St. Louis one notch to A3 in March and assigned a negative outlook reflecting “the city's weak reserve position that will remain challenged in the near term due to limited revenue raising flexibility coupled with the city's reliance on economically sensitive revenues and below average resident wealth levels.”