By Josh Letner
NEOSHO, Mo. —
When the Neosho City Council and the Neosho Transportation Development District reached an agreement on maintaining future TDD roads just days before a March 31 deadline imposed by the Missouri Department of Transportation, it appeared that one of the last hurdles had been cleared before work could begin.
But the discovery of a lone resident living within the TDD’s boundaries has not only stalled the $7.5 million in proposed improvements, but could also undo previous TDD votes.
City Attorney Steve Hays informed the council last week that unbeknownst to TDD or city officials, a registered voter was living within the TDD at the time the district’s first board was elected and also at the time that TDD members voted to impose a half-cent sales tax on purchases made within the district. The sales tax revenue is what the TDD is using to pay off a loan it took out from Arvest Bank to finance proposed projects.
The district’s boundaries were intended to exclude residential areas, Hays said, thus ensuring votes exclusive to people who own property within the 527-acre district.
But according to Hays, Rick Mitchell purchased the Neosho Inn, near the intersection of Business Highway 71 and U.S. Highway 60, in October 2010. Mitchell soon moved into the motel, which is located within the TDD. Hays said Mitchell also registered two vehicles that month and, in the process of doing so, registered to vote. Mitchell listed the Neosho Inn as his residence.
Mitchell said he did not participate in previous TDD votes, either as a resident or as a property owner, and that he was not even aware of issues relating to TDD votes until about two weeks ago, when he was approached by Hays.
“It’s funny because I’ve been here for a year and a half, and nobody has cared about me until now,” Mitchell said last week.
Hays told the council that the TDD was given the go-ahead before Mitchell moved in — so the formation of the district itself is not in question. But, the April 2011 election of TDD board members and the August 2011 vote when TDD members imposed the sales tax are now at issue because no one is sure what Mitchell’s presence means in connection with those votes.
Under Missouri law, a person who lives within a TDD can vote either as a resident or, if he owns property, as a property owner, but not as both. Mitchell didn’t participate as either.
If there are no registered voters living within the TDD, voting rights fall to the property owners. Each landowner gets one vote for every acre of land within the TDD. In the case of the Neosho TDD, the voting was done by mail. It was landowners who chose the first board members and who later imposed the half-cent sales tax, which has been collected since the first of the year.
The presence of a resident within the district raises questions that haven’t been resolved, said Robert Klahr, with Armstrong Teasdale, a St. Louis law firm. His firm has represented many TDDs across the state.
Klahr said he has always been concerned that nonresidential TDDs could evolve into residential TDDs, but there is no clear road map for the transition or for the rights of each group — residents and landowners — if and when that happens. He said he has never been involved in a case in which someone moved into a nonresidential TDD.
According to Klahr, Missouri statutes seem to suggest the creation of some sort of hybrid election, involving both residents and landowners, but he added, “I don’t know how it would function.
“Of all the TDDs we’ve done, we have made it clear to our clients that it is either one or the other.”
Hays also noted that neither the April election nor the August vote was contested within the 30-day period provided under state law, but he isn’t sure whether that would prevent a judge from overturning the votes if the issue were taken to court.
Hays said that if the election that formed the board was declared invalid, any action taken by that board, including calling for the August 2011 sales tax vote, also would be voided.
TDD chairman Gene Schwartz said everything is on hold until the board receives a legal opinion as to the status of its past votes.
But the search for a legal resolution ran into another snag last week.
The council, meeting in special session Tuesday, voted to deny a conflict (of interest) waiver requested by the law firm of Gilmore & Bell, St. Louis, which initially represented the TDD when it was organized.
Gilmore & Bell also represents the city of Neosho on other issues.
The waiver would have allowed the firm to offer an opinion on the legality of the two 2011 votes among the TDD landowners.
Mayor Richard Davidson said the firm’s long-standing relationship with the city is why the council voted to deny the firm’s request for a conflict waiver.
“We do a number of things with them and have in the past outside of the TDD,” he said last week. “It’s the council’s view that we did not want to further complicate that. We value Gilmore & Bell’s relationship with the city. They play an important role in a number of projects that we have ongoing, and we did not want anything to jeopardize that relationship.”
Because the city would not grant the waiver, the TDD will have to hire another firm to provide an opinion, which also will be presented to Arvest Bank before the district can go forward with its first project, the installation of a traffic light at Kodiak Road and U.S. Highway 60. The district had planned to seek bids on that project this month.
Becky Baltz, district engineer with MoDOT, said in a email to the mayor that the project and other work are on hold “until we find out if the issues are resolved.”
Shannon Creighton, an attorney with Gilmore & Bell, represented the TDD until she resigned on Nov. 1, 2011, citing a possible conflict of interest because of the firm’s long-standing relationship with the city.
Hays told the council that the TDD’s current attorney, Chris Williams, of the firm Williams & Campo, Kansas City, has declined to provide an opinion on the legality of the earlier votes.
Schwartz said he thinks Gilmore & Bell should issue an opinion because it was the TDD’s attorney at the time of the votes.
Also on hold is the election of a new TDD board. The group’s bylaws call for annual elections. One seat, currently occupied by Jim Cummins, will be open.
Davidson said the situation in Neosho highlights a shortcoming in the TDD statute.
“That does bring up a concern and a potential flaw in the statute itself that there is no clear direction of how a TDD formed by landowners can transfer to control by residents,” he said.
Mitchell said he was preoccupied spending $300,000 fixing up the motel and paid no attention to the TDD issues.
“If I pay attention to this then, I am not running my business effectively,” he said. “Had I been involved in this initially, that would be a different story, but this (TDD) is pretty much a done deal. There are just a few wrinkles to be worked out, and it looks like I’m the wrinkle.”
WITH ROUGHLY 250 ACRES, the city of Neosho is the largest single landowner within the Transportation Development District