Prairiefire is looking for guidance on how to pay down the first tranche of almost $65 million in defaulted debt, since the Overland Park development hasn’t yielded enough sales taxes to fully cover those obligations. UMB Bank, the trustee for Prairiefire’s sales tax revenue (STAR) bonds, seeks guidance through a legal petition filed in Minneapolis, where its Corporate Trust Services department is based. The bank on Jan. 30 asked a Hennepin County District Court judge to confirm how about $4.2 million in available funds should be applied to $14.9 million in bond principal and $1.75 million in interest that came due for Prairiefire in mid-December. Kansas’ STAR bond program is designed to draw new out-of-state visitors by helping municipalities finance commercial, entertainment and tourism projects. The bonds are covered by new sales taxes generated through the projects. However, in Prairiefire’s case, initial sales projections were overestimated. State auditors in 2021 said the project would take anywhere from 14 to 72 years longer than expected to retire the bonds. Prairiefire produced $389,459 in sales taxes to cover $16.6 million in total bond principal and interest owed as of Dec. 15, and UMB Bank transferred the $3.78 million entirety of the bonds’ reserve fund to help cover debt service. However, the bank raised conflicting provisions in its trust indenture with Overland Park on how those funds should be allocated toward principal and interest payments in the event of a shortfall. The provisions applied will affect which bondholders are due payments, and in what amounts.
Source: Kansas City Business Journal
