The City of Sedalia and Star Development Corporation presented their positions to the Sedalia City Council during a hearing Monday evening related to a possible breach of the 2015 TIF contract.
Star, of Liberty, came to the City of Sedalia in 2015 requesting assistance in developing “blighted” land through tax increment financing. Newly-generated sales tax revenue from the developments were intended to pay for construction and infrastructure costs. Star was interested in building on the land in front of the Econo Lodge and another open space behind the Galaxy movie theater, collectively adding to 5.1 acres.
The Sedalia City Council approved the district with a 6-2 vote during its Nov. 23, 2015, meeting, a decision that was controversial because of many opposed citizens and the TIF Commission’s 9-2 vote against the proposal in October 2015.
In August 2017, council approved an ordinance approving an amendment for a timeline change for the TIF contract with Star. The new project completion date was set at Jan. 31, 2019.
The project still has not been completed and on March 25, the city sent Star a letter stating it was in breach of contract and another April 17 to notify the company of the hearing.
City Attorney Anne Gardner opened the hearing by explaining the situation to council and why they were there.
“Part of what tonight’s hearing is to determine, if your decision will be if Star is indeed in breach of this contract and what is the cure if there is a cure available,” she said.
Curtis Petersen, of Polsinelli, represented Star. He highlighted in his opening remarks Star’s success in all areas of real estate, particularly retail. Petersen gave an update on some of the work Star has done, saying Star has invested approximately $2.5 million in the project.
Petersen then highlighted Star’s position that it is not in breach of contract due to adverse market conditions. He said Star continued to “diligently market” the open sites, but Star had not been able to find anyone interested and the company does not want to build until it has tenants.
Two years after its Sedalia TIF district was approved, Star Development Corp. has one commercial tenant secured and others in consideration for new land developments.
He argued that the adverse market conditions that were present when the city extended the deadline last time were still present.
“For that reason, we’re not at fault because the language of the redevelopment agreement as how it went in the letter literally anticipated this letter and says if that happens and the city will ‘Reasonably consider an extension based on those adverse market conditions,’” said Petersen.
Petersen also said Star went to city staff to unofficially request another extension Jan. 21, 2019. According to Petersen, staff said they did not feel Star would get another extension and recommended Star try to get as much done as possible and then approach council.
Petersen said they had been unable to start construction on the two multi-tenant buildings and turn lanes by Aug. 1, 2017, as the first contract stated, due to only getting KCP&L approval by spring 2017 to get power to the sanitary lift station. According to Petersen, it took until fall 2018 to get that station approved by the city, a length of time which they had never experienced. Recent “historic” rains had also pushed back construction. He said based on the contract, if there are excusable delays beyond Star’s control there would be automatic extensions.
Petersen then said the ordinance states even if Star was found in default, there is a process for curing it: Star had a 60-day period after they received the notice of default to address it. If it would take longer than 60 days, Star would work on the site and then approach the city to show work had been done.
Gardner submitted numerous documents for the record: several ordinances, the 2016 to 2018 annual review on project reports from the Community Development Department, three letters concerning the breach of contract between the city and Star, and 12 emails from the Public Works Department regarding issues around the sanitary sewer.
Gardner highlighted a section of an ordinance which stated that if the developer fails to complete the obligation under the contract in a timely manner, provided that the city had provided all terms of the contract and did not believe that any delays had occurred due to things not in control of the developer, the city could require the developer to appear before the city council to explain why the contract should not be terminated.
Another section stated that if the agreement is not completed within the time limitations set by the project, and then if it is not cured, then the developer is in default.
Gardner asked how Star would cure the issue when there is no cure since Star did not complete the project on time.
Gardner also asked council to consider that the Community Development reports showed the economic development that happened in the city “with or without Star’s participation.” On the sanitary sewer issue, Gardner said the final plans were not submitted to the city until Sept. 11, 2018, by Star so they were unable to approve them sooner.
Gardner also said the city did not receive a request from Star to extend the contract until May 7, 2019. It asked for an extension until May 2020 but this was after the city had sent the show cause hearing and breach of contract letters.
Joe Lauber, of Lauber Municipal Law LLC, which represents the city, said he had advised Petersen that the council most likely would not approve an extension at the time he was approached and to get more done before coming back. However, Lauber said he recalled that he advised them to come back to the city in November or December 2018 to ask for an extension.
Neither Petersen, Star, or Council, had reviewed several of the exhibits submitted by Gardner so the parties will meet again at a later date. The council then went into closed session for legal advice.
All members were present.