The city of Arnold has filed a lawsuit against the State Auditor’s Office, claiming it is overstepping its authority while auditing the city and two transportation development districts.
The lawsuit was filed on April 2 and asks a Jefferson County judge to grant a temporary restraining order, preliminary injunction and permanent injunction to deny State Auditor Scott Fitzpatrick’s office from receiving unredacted closed meeting minutes.
The lawsuit says the release of information from closed meetings would disclose confidential information about employees, real estate negotiations, labor negotiations, competitive bidding materials, sealed bids or documents related to negotiated contracts that are not executed and other sensitive topics.
Furthermore, the lawsuit says the Auditor’s Office has not cited any authority to request unredacted closed minutes, and the information in the closed minutes have no relevance to the auditing of the political subdivisions.
“The city has a clear, unequivocal, specific right to protect certain information from dissemination that could potentially have a negative impact on protected classes, proprietary information or which could allow the perpetration of fraud upon the taxpayers,” the lawsuit says.
Fitzpatrick said on Monday that he will file a countersuit if Arnold officials do not comply with a third subpoena to Arnold to obtain information for the audit.
The city’s lawsuit says the Auditor’s Office is seeking unredacted minutes from closed City Council meetings held on Sept. 5, 2024; Aug. 15, 2024; Aug. 8, 2024; Aug. 1, 2024; June 13, 2024; May 2, 2024; Oct. 19, 2023; and Oct. 6, 2022.
The Auditor’s Office previously issued two subpoenas to Arnold, with one requesting information about the Arnold Retail Corridor Transportation Development District (ARC TDD), and the other requesting an interview with Mayor Ron Counts on Tuesday.
“The people of Arnold should be outraged by the efforts of city officials to prevent our auditors from accessing records detailing how millions of taxpayer dollars have been used by these TDDs,” Fitzpatrick said on Monday in a written statement. “The fact the city is wasting taxpayer money on this type of baseless litigation is absolutely absurd. Missouri's constitution, laws and even well-established case law make it clear that city officials can't hide behind redactions in an attempt to obfuscate the truth.
“This behavior is indicative of an out-of-touch bureaucracy that has something to hide from the people,"
Arnold City Attorney Bob Sweeney said city officials have provided thousands of pages of documents, spent many hours responding to information requests and dozens of hours in face-to-face meetings with Auditor’s Office representatives.
“We are simply questioning why the auditor would need closed/confidential information unrelated to the TDD or the city’s financial operations, not the audit itself,” Sweeney said. “What the taxpayers of all Missouri should be ‘outraged’ about is how the auditor and his staff are wasting time and money doing the political pandering of a few local elected officials.”
The Auditor’s Office announced the audit on Nov. 7, stating in a letter sent to Counts that the office had received multiple complaints from its Whistleblower Hotline about Arnold’s oversight and operation of the AARC TDD and the old Triangle Transportation Development District. The letter said the Auditor’s Office investigated the complaints and determined they were credible.
The audit started months after the city proposed using money from a 1-cent sales tax collected by the ARC TDD to fund a controversial road project that has since been abandoned.
When Arnold officials announced the now-defunct project, they said they wanted to build a 2-mile, two-lane road between Hwy. 141 and Richardson Road to connect retail districts along those two roads. The plan 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.
The road project was met with instant backlash, including requests for the audit from state Rep. Phil Amato, who represents District 113 that includes Arnold, and state Rep. David Casteel, who represents District 97, which does not include Arnold.
Amato also said he met with representatives from the Missouri Attorney General’s Office to discuss his request for the Auditor’s Office to investigate potential Sunshine Law violations while the city planned the abandoned road project. He said he was given a polite no by both offices.
In its Nov. 7 letter, the Auditor’s Office identified three 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 state Auditor Office indicating the TDDs had paid off their debts and should be closed but remained open.
When the audit was announced, Arnold City Attorney Bob Sweeney told City Council members that the issues the Auditor’s Office identified in the letter were similar to a long list of allegations made by the Water Tower Place Shopping Center owners in the lawsuit they filed against the city in August 2024 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.
“What you will not find in the auditor’s release is that neither the city nor the TDD have violated a single statute, that no fraud was found (because there was none) or that there was any mismanagement of public funds,” Sweeney said on Monday. “In fact, the TDD operation was so efficient and effective that bonds were paid off years ahead of schedule.”
The sales tax money from the ARC TDD was used to fund the infrastructure to support the construction of the Arnold Commons shopping plaza and renovation of the Arnold Crossroads 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 1-cent sales tax is collected 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 ARC TDD may remain in place and continue to collect sales tax until 2048, according to documents when it was created.
Fitzpatrick said Arnold’s lawsuit is a futile effort to delay the completion of the audit, which he said will provide information about how tax dollars have been spent.
“Given that city officials have demonstrated they have little to no understanding of the law pertaining to the administration of the TDDs they created, it comes as no surprise they have an equal lack of understanding of the legal authority my office has to conduct audits and obtain documents relevant to those audits,” he said in a statement. “After we decisively win this legal challenge, I will expect full compliance from the city so we can complete our audit and shine the light of transparency on the actions of the city and their TDDs.”