The Missouri State Auditor’s Office is auditing the city of Arnold and two transportation development districts following complaints about the proposed Arnold Parkway road project that has since been scrapped.
A Nov. 7 letter that state Auditor Scott Fitzpatrick sent Arnold Mayor Ron Counts said the Auditor’s Office had received multiple complaints from its Whistleblower Hotline about Arnold’s oversight and operation of the Arnold Retail Corridor Transportation Development District (ARC TDD) and the Triangle Transportation Development District (Triangle TDD).
The letter said the Auditor’s Office investigated the complaints and determined they are credible.
In the letter, the Auditor’s Office identified the following three potential issues that possibly could constitute improper government activity, adding that there could be more issues.
The following are the three possible issues:
■ Ownership of property located outside the boundaries of the TDDs.
■ High-level city officials serving as TDD officers.
■ Financial statements filed with the SAO (State Auditor Office) indicating the TDDs have paid off their debts and should be closed but remain open.
During the Nov. 7 City Council meeting, Arnold city attorney Bob Sweeney said the issues the Auditor’s Office identified in the letter are similar to a long list of allegations made by the Water Tower Place Shopping Center owners in a lawsuit it filed against the city in August to stop the road project and dissolve the ARC TDD.
Sweeney also said the claims in the lawsuit and in the letter from the Auditor’s Office are inaccurate and repeated by people without knowing or caring to know the facts.
“The three allegations are factually and legally incorrect,” Sweeney told the council.
City Administrator Bryan Richison said Arnold received the letter on Nov. 6 during a meeting with staff members from the Auditor’s Office.
He said both TDDs and the city are being audited.
Richison also said the city has provided the entire set of corporate records for the ARC TDD and Triangle TDD to the Auditor’s Office.
He also said that to his understanding, the city will not be charged for the audit.
The Auditor’s Office did not respond to phone calls or an email from the Leader.
On Aug. 8, Arnold officials announced plans to have a 2-mile, two-lane road built between Hwy. 141 and Richardson Road to connect the city’s two main commercial districts. The plan, which was projected to cost about $75 million, including the cost to acquire 38 homes, multiple businesses and a portion of the Water Tower Place Shopping Center, sparked outrage.
Arnold officials announced on Aug. 26 that the city was not going to move forward with the road project, and on Oct. 3, City Council members voted unanimously to end the project.
Sweeney told Arnold council members that the state auditor initiated this investigation without consulting the city or the law.
“This is demonstrated by a review of the allegations,” he said. “First, the auditor contends that the TDD and the city have engaged in ‘improper government activity’ because the TDD owns property ‘outside the TDD boundaries.’ This allegation is factually and legally inaccurate. The TDD at issue is allowed to own property outside its boundaries, but, in this case, actually does not own any property outside its boundaries.”
Richison said the ARC TDD already purchased nine homes and a business for a total of $2,321,000 while it was pursuing the Arnold Parkway project. Those properties are in the Key West Estates subdivision made up of Harrys Lane, Christy Drive, Big Bill Road, Ridge Drive and Lone Star Drive and is inside the ARC TDD’s boundaries.
He said 14 additional homeowners are interested in selling their houses to the ARC TDD, and he estimated the cost to purchase those additional homes at $3,413,000, adding that the ARC TDD’s 1 percent sales tax may generate enough revenue to complete the purchases by May 2025.
As of Nov. 7, the city had contracts to purchase six of the 14 homes for a total of $1,621,000, Richison said.
Sweeney said it is true city officials serve as ARC TDD officers, and he also said that is not improper government activity as the auditor suggested.
According to ARC TDD documents, the board is made up of Counts, Plunk, Community Development Director David Bookless and City Treasurer Dan Kroupa. City Administrator Bryan Richison is the ARC TDD’s executive director, but he does not vote on decisions made by the board.
“In fact, the city negotiated this (having city officials serve on the ARC TDD board) as a preferred arrangement than allowing the developer and business owners to control the tens of millions of dollars that the TDD would collect,” he said.
Sweeney also said it is crystal clear the TDD cannot be closed while there is litigation pending, while TIF payments are being collected and while legally identified projects exist, including the very first enumerated project, a new connecting road between Hwy. 141 and Michigan Avenue.
“The auditor could have discovered these facts by checking the public record. Instead, the taxpayers are footing the bill for a senseless paper chase,” Sweeney said.
In September, state Rep. David Casteel, who represents District 97, which does not include Arnold, sent a letter to the Auditor’s Office requesting an audit.
In the letter, Casteel wrote, “I have great concerns over the great powers given to any TDD allowing them to make decisions, tax, and spend significant amounts of taxpayer money with little transparency nor oversight. The ARC TDD is clearly controlled, not by stakeholders, but rather only the city and its interests. In reading the statutes, it seems unclear whether they have authority to continue collecting taxes after they have paid off their bonds.”
“There was such a groundswell on what happened in Arnold that the auditor’s office has decided to look into the matter to make sure there were no laws broken,” said state Rep. Phil Amato, who represents District 113 that includes Arnold. “I have had city council members tell me they were in the dark regarding the project for almost three years, and if that did happen, it was just plain wrong.”
Amato previously said when he had inquired about a special audit of the ARC TDD, the Auditor’s Office had responded with a “polite no.”
The ARC TDD was formed in September 2007 by Arnold and the Triangle TDD, which was formed in 2006, for the development of the Arnold Commons complex and the redevelopment of the Arnold Crossroads.
The ARC TDD collects a 1-cent sales tax, mainly from businesses in the Arnold Commons and Arnold Crossroads shopping plazas, but also some from the businesses in the Water Tower shopping plaza. The sales tax money was used to fund the infrastructure to support the construction of the Arnold Commons shopping plaza and renovation of the Arnold Crossroad shopping plaza, and the ARC TDD is required to make an annual contribution of $200,000 to Arnold to help pay off tax increment finance (TIF) bonds for the Arnold Commons and Arnold Crossroads developments.
The TIF bonds are not scheduled to be paid off until September 2028.
The ARC TDD may remain in place and continue to collect sales tax until 2048.
The lawsuit the Water Tower Shopping Plaza owners filed against the city in the Jefferson County Circuit Court was amended this month.
Water Tower Shopping Plaza owners claim Arnold violated the Sunshine Law.
Shopping plaza owners amend lawsuit against city, TDD
By Tony Krausz
A lawyer representing the owners of the Water Tower Shopping Plaza in Arnold has filed an amended lawsuit and answered a countersuit as part of the legal battle over the abandoned Arnold Parkway road project, according to court documents.
On Nov. 1, attorney Joseph Vincent Keady Jr. of the Stinson law firm of St. Louis amended the lawsuit the Water Tower Shopping Plaza owners filed in August against the city of Arnold, the Arnold Retail Corridor Transportation Development District (ARC TDD) and others aimed at ending the city’s plans to build the road, which would have connected Hwy. 141 to Richardson Road.
The lawsuit also called for the ARC TDD and Arnold Triangle Transportation Development District to be dissolved.
In the amended lawsuit, the shopping plaza owners claim the city of Arnold violated the Sunshine Law by not producing documents requested under the state’s open records law and added City Clerk Tammi Casey to the suit. The original lawsuit listed the ARC TDD, city of Arnold, Arnold Acquisition Co., Triangle TDD, City Administrator Bryan Richison, Ward 4 Councilman Gary Plunk, Community Development Director David Bookless, City Treasurer Dan Kroupa and Mayor Ron Counts as defendants.
Along with the alleged Sunshine Law violation, the amended lawsuit asks the court to have the defendants pay an appropriate civil penalty and the shopping plaza owners’ attorney fees and court costs.
“At this point, we feel the filing speaks for itself,” Water Tower spokesman Lance LeComb said. “For the time being, we are going to let this play out through the legal process.”
Richison said city attorney Bob Sweeney received the amended lawsuit on Nov. 8.
“The attorneys handling the case are still reviewing the new filing, so there is no comment at this time,” he said on Nov. 7.
Stephen Rovak of the Dentons law firm of St. Louis, who is representing the ARC TDD, filed a response and counter to the initial lawsuit on Oct. 2.
In the countersuit, Rovak said the Water Tower’s lawsuit “was filed as part of an ill-conceived but well-orchestrated plan to derail a project that had the prior approval of many key parties and relevant government agencies. It contains grossly incorrect information when accurate information was publicly available and would have been obvious to anyone bothering to review the open and public files of the Circuit Court of Jefferson County.”
The counterclaim calls for the lawsuit to be dismissed and for the Water Tower Shopping Plaza owners to pay damages in excess of $100,000.
The Water Tower Shopping Plaza answer denies nearly all the claims in the countersuit.
The amended Water Tower shopping plaza lawsuit said some documents related to meetings held this year by the ARC TDD and Triangle TDD boards had been produced, but no city documents requested under the Sunshine Law had been.
Rovak advised Arnold not to respond to the Sunshine Law request because the law firm, Husch Blackwell of St. Louis, which was seeking the records at the time, represented the Triangle TDD when it was created in 2007, according to an email Richison provided the Leader in September.
Rovak’s email also said the city should respond to a Sunshine Law record request from a proper party.
In September, lawyers from Husch Blackwell withdrew from representing the Water Tower Shopping Plaza owners, and Keady took over the case, court documents show.
The amended Water Tower shopping plaza lawsuit claims funds from the 1-percent sales tax collected by the ARC TDD, which includes businesses inside the Arnold Commons and Arnold Crossroad complexes and some businesses in the Water Tower retail complex, may not be used to build the Arnold Parkway road that would have connected Hwy. 141 and Richardson Road.
The project would have required the acquisition of 38 homes, multiple businesses and a portion of the Water Tower Place Shopping Center.
Arnold officials announced on Aug. 26 that the city was no longer moving forward with the road project, and on Oct. 3, City Council members voted unanimously to end the project. The council also voted that day to allow the ARC TDD to remain open and to allow ARC TDD funds to be used to buy homes from owners still interested in selling.
The Water Tower lawsuit claims money generated from the ARC TDD tax should not be used to purchase the homes.
The properties that would have been needed if the Arnold Parkway project had not been scrapped are in the Key West Estates subdivision made up of Harrys Lane, Christy Drive, Big Bill Road, Ridge Drive and Lone Star Drive.
Richison said the ARC TDD already purchased nine homes and a business in that area for a total of $2,321,000.
He said 14 additional homeowners are interested in selling their houses to the ARC TDD and estimated the cost to buy them would be $3,413,000, adding that the ARC TDD’s 1 percent sales tax may generate enough revenue to complete the purchases by May 2025.
Richison said as of Nov. 7, there are contracts in place to purchase six of the 14 homes. He said the ARC TDD will buy 1238 Harry’s Lane for $225,000; 1244 Harry’s Lane for $305,000; 2177 Christy Drive for $307,000, 2188 Christy Drive for $267,000; 2155 Christy Drive for $270,000; and 1234 Harry’s Lane for $247,000.
The total cost of the six properties is $1,621,000.
Richison said he is exploring financing options to purchase all 14 properties before May 2025, but had not found any as of Nov. 7.
The ARC TDD counter lawsuit said, “Triangle TDD’s projects are the ARC TDD’s projects, and the Triangle TDD must exist so long as the ARC TDD exists, as Triangle TDD provides the basis for governance of the ARC TDD, per Missouri statutes.”
The countersuit also said ARC TDD is required to make an annual contribution of $200,000 to Arnold to help pay off tax increment finance (TIF) bonds for Arnold Commons and Arnold Triangle, so it cannot be dissolved. The TIF bonds are expected to be paid off in 2028.
The amended Water Tower lawsuit also claims Richison and Bookless interfered with their business when the two Arnold officials warned the owner of the Local House Restaurant and Bar against leasing a building that would have been demolished if the proposed road were built. The suit asks the judge to prevent any future business interference.