The Joplin Globe, Joplin, MO

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April 8, 2013

Legal battle between Neosho, TDD has cost more than $250,000

Legal expenses likely to climb

NEOSHO, Mo. — The city of Neosho and the Neosho Transportation Development District so far have spent more than a quarter-million dollars combined of taxpayer money in their legal battle with each other.

There may be more to come.

The city has spent $55,228.10, according to documents obtained through a Missouri open-records law request by the Globe.

Invoices from the St. Louis law firm Cunningham, Vogel and Rost list amounts of $32,116.47; $988.47; $9,795.27; $11,158.14; and $1,169.75. The invoices began on Aug. 31, 2012, and ended on Dec. 31. The Globe request had included any expenses through February of this year.

City officials requested a formal open-records request when they were asked about the legal fees.

The TDD, meanwhile, has spent $205,551.68 on legal fees, according to information provided by Chairman Ray Stipp. The TDD didn’t require a formal, written, open-records request.

The legal fight has caused the Missouri Department of Transportation to halt plans for nearly $7 million worth of proposed TDD projects. The costs would be shared, with the TDD paying $4.5 million financed by a half-cent sales tax within the district and MoDOT paying $2.4 million.

The TDD began collecting the tax in January 2012 from sales within the district, which includes the Wal-Mart Supercenter, Lowe’s and other retailers.

The proposed projects are along a retail area of U.S. Highway 60. Only a project to install a traffic signal and make other improvements at U.S. Highway 60 and Kodiak Road has begun.

Legal challenges

The city last year in Newton County Circuit Court challenged the formation of the TDD, alleging that the district was formed under the wrong state statute and that the statute under which it was formed allows only residential owners within the TDD to be voters. The Neosho TDD, formed in 2010, is a retail area with no permanent residents.

Associate Circuit Judge Kevin Selby in November ruled against the city, saying that the city had waited too long to challenge the TDD’s formation.

The city also had contested an election in July 2012 of TDD board members, with the election decided by those who own property within the boundaries of the district. Property owners receive a vote for each acre of land within the district.

A judge in August ordered the TDD to redo that election, ruling that adequate notice for the election wasn’t provided. He also ruled that the Missouri Highways and Transportation Commission, which governs the Missouri Department of Transportation, shouldn’t have participated in the July election.

In that election, incumbent board member Jim Cummins defeated Steve Roark, who was backed by the Neosho City Council. Roark fell short by 58 votes, but city leaders took issue with the 93 votes that were cast by the state highway commission.

The TDD was ordered to hold the election again, without the highway commission’s participation this time. Roark was chosen in the second election.

Neosho Mayor Richard Davidson said that when the city’s attorneys concluded that the state law regarding the TDD contained the flaw, the city couldn’t pretend that it wasn’t there and had to take action.

“The right people didn’t vote for that tax,” he said, referring to the vote in September 2011, in which the property owners within the boundaries imposed the half-cent sales tax on shoppers within the district.

Davidson said the city offered compromises that would have limited the legal expenses for both sides, including restructuring the TDD as a community improvement district. A CID generally involves property owners in the district paying a fee that funds projects and activities.

“It’s unfortunate that we had to spend that amount of money,” Davidson said. “If the TDD had accepted some of the compromises, we wouldn’t have had to.”

Roark said the TDD board accepted one of the city’s offers, but the City Council wouldn’t allow the TDD to continue while the CID was being established.

Roark also said the TDD was defending itself from the city’s challenge.

“The city literally challenged the whole existence of the TDD,” he said. “It’s expensive to litigate. The city of Neosho, they also have incurred fairly significant costs. It’s too bad we’ve had to spend the money we’ve spent.”

Future legal costs

The legal battles apparently are not over. Both sides are considering filing — and may be facing — additional lawsuits.

The city is considering appealing the November court ruling that allowed the TDD to continue. It faces an April 18 deadline.

“There has not been a conversation on the appeal that doesn’t include the cost,” Davidson said. “We are conscious that this could be an expensive measure.”

The TDD board, meanwhile, is considering a lawsuit against any attorneys or firms that were involved in doing the work that set up the TDD initially, Roark said. Such a lawsuit would be filed to try to recover the TDD’s legal expenses.

Roark said that if there is a flaw in the creation of the TDD, the attorneys who were involved in its creation could be held responsible.

“We also believe we have a fiduciary responsibility to the taxpayers who pay the tax on this,” Roark said. “We could have avoided almost all of this.”

A third source of legal costs for both sides could be a taxpayer lawsuit proposed against the Neosho TDD. The Globe had incorrectly reported last week that an unidentified taxpayer was threatening a lawsuit against a TDD in another jurisdiction.

Joplin attorney Bill Fleischaker said he has been contacted by a person who has paid sales tax within the Neosho district about filing a lawsuit challenging the local TDD.

Fleischaker said because of his full schedule, he may not get to the lawsuit for a few weeks. He said he didn’t know his potential client’s motivation. He also said he hasn’t contacted anyone with the city or with the TDD about his plans.

Davidson has cited the lawsuit threat as the reason the City Council has delayed making a decision on appealing the November court ruling.

Next election

THE NEOSHO TRANSPORTATION DEVELOPMENT DISTRICT will hold an election for two members of its board of directors at 3 p.m. Tuesday, April 30, at the Neosho Area Chamber of Commerce office.

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