TKC EXCLUSIVE!!! MORE REFINANCING PROBLEMS: KANSAS CITY HAS NO LEGAL OPINION ON TAX EXEMPTION FOR PRICEY P&L DISTRICT BONDS!!!

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This is kinda complicated but I'll do my best to explain everything as clearly as I possibly can . . .

At lunchtime I had a very interesting conversation with one of the most well-informed people I've ever talked to . . . This person put the P&L District problems in perfect perspective for me.

Here's what we already know:

  • The original financing of the P&L District was a boondoggle ripoff put together by a local lawyer and rubber stamped by the last council.

  • The variable rate debt on the bonds is crushing this town, might ruin Kansas City's credit rating and could cost millions in the near future.

  • To make it worse, Cordish & the P&L District don't like paying property taxes . . . While this is bad enough on general principle . . . Considering that part of the structuring of their debt repayment FOR THEIR TIF is based on their property tax valuation . . . That makes it even worse.

  • Now the City is looking to refinance P&L District Debt . . . TKC reported that fact first!!! . . . The Star confirmed this blog's initial report.

    But, as always . . . With anything related to Kansas City . . . There are huge problems with restructuring the debt.

    See, in order to get the tax exemption status . . . A legal opinion from a law firm is required . . . And here's my EXCLUSIVE:

    THE LAW FIRM THAT INITIALLY OFFERED THE LEGAL OPINION ON THE TAX EXEMPTION FOR P&L DISTRICT BONDS IS NO LONGER WILLING TO PERFORM THE SAME DUTY!!!

    • Good luck on getting them to say exactly why . . . But let's look at the structure of P&L District borrowing . . .

    Cordish wants bargain basement property taxes.

    The variable rate on the debt is killing Kansas City.

    And . . .

    NOBODY WILL OFFER A LEGAL OPINION TO REFINANCE THE P&L DEBT UNDER THE SAME TERMS!!!

    Why?

    Well, not only does the municipal bond market suck . . . It has been widely reported that the expectations for the P&L District are just completely out of line. Abouhalkah wrote:
    The Power & Light District is expected to generate a puny $4.8 million in tax revenues this fiscal year. That is far short of the $16.8 million in annual debt service needed to pay for its bonds.

    Fortunately, the city previously has set aside an additional $8 million for the bond payments. That leaves a net shortfall of "only" $4 million that will come from the pockets of taxpayers this fiscal year.
    In the very near future, during a global economic crisis . . . The P&L District is going to have to come up with almost $20 million in revenues in orderto simply service the debt. Good Luck.

    Word is, any law firm helping to draft a legal opinion for tax exemption status on these bonds would almost certainly face an IRS audit that would threaten their liability insurance. Once again, Kansas City isn't worth the risk.

    Clearly, this isn't just bad news related to the economy . . . THIS IS A KANSAS CITY FINANCIAL CRISIS!!!

    The plan to get out of this mess sounds shaky as well . . . Put simply . . . Kansas City can't refinance these bonds if the tax exemption status isn't there . . . It all looks like another, horrible showdown that will undoubtedly be interesting . . . Just don't forget that TKC told you first. Natch.