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Hollywood Casino chief blasts troubled Howard Bend Levee District

Hollywood Casino chief blasts troubled Howard Bend Levee District

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Missouri Highway 141 closed

Workers with the city of Maryland Heights and the Levee District build berms out of gravel on Wednesday, June 19, 2019 to hold back flood waters alongside Missouri Highway 141. The highway is closed on both sides from Creve Coeur Airport Road to Creve Coeur Mill Road due to flooding from Creve Coeur Lake. Photo by Colter Peterson, cpeterson@post-dispatch.com

MARYLAND HEIGHTS — The head of Hollywood Casino warned Tuesday that the troubled Howard Bend Levee District, whose debt was downgraded to junk status this month, could end up in bankruptcy.

Michael Jerlecki, Hollywood Casino vice president and general manager, made the statement during the levee district’s annual property owners meeting. He said the district was making “failed business decisions.”

“Absent new leadership, I fear the district may end up in bankruptcy or receivership sooner rather than later,” Jerlecki said in a written statement.

The levee board, at the same meeting, told landowners that it might have to start charging 20% more in levee assessments to make up for payments the casino is refusing to pay.

Since 2019, the casino has been in litigation with the levee district, arguing the district was mismanaging money. Annual debt payments need to be made on some $22 million in outstanding bonds. To cover those, the levee district says it will have to raise rates, and the credit agency Fitch Ratings Inc. said the district has indicated some property owners could see increases of as much as 70%.

The financial uncertainty surrounding the levee district is the latest twist in the future of the low-lying land along the Missouri River, eyed for years by developers but left mostly untouched because of a lack of pump stations and stormwater infrastructure.

In January, the area was the subject of a spat between the city of Maryland Heights and St. Louis County after County Executive Sam Page blocked the creation of a tax increment financing district city officials and the levee board said would finance the pump stations needed to spur development. Maryland Heights has sued the county to try and overturn the decision.

Meanwhile, the levee district’s litigation with the casino prompted Fitch’s Aug. 14 downgrade from the low-end of investment grade bonds to debt considered “highly speculative.”

The levee district collected about $2.4 million in property assessments during 2019, and the casino made up about 31% of that. Many of the district’s top payers are public entities such as St. Louis County, the state of Missouri, Maryland Heights, and the Metropolitan St. Louis Sewer District. Maryland Heights, which represents about 4% of the district’s revenue, has also sued the levee district to retain its payments.

Both the city and the casino have accused the levee district of paying unnecessary administrative costs rather than focusing on paying down more of the debt, pointing specifically to Husch Blackwell attorney David Human, who manages the levee district.

“David Human and this board are now spending tens of thousands of dollars and more with (levee district engineer) Horner Shifrin and others recreating expense ledgers, land surveys, costs apportionments and reverse engineering documents attempting to justify where bond proceeds and all the other money went,” Jerlecki, the casino manager, said in his statement.

Human declined comment.

Levee district President Warren Stemme countered that the district has paid down $12.2 million of the $34 million in bonds issued since 2005 to finance a 500-year levee protecting the area. However, if it hopes to raise the value of the land to keep covering the debt, the district now needs millions more to pay for a pump station to get stormwater out of the area when it floods after heavy rains.

John Torbitzky, a lawyer with Behr, McCarter & Potter representing the levee in its lawsuit with the casino, said settlement discussions with the casino have been “unproductive.” The district has denied the allegations in the suits, but Torbitzky said the district is unlikely to receive any payments from Hollywood or Maryland Heights until the litigation is resolved. The coronavirus shutdown of the courts means civil trials won’t be scheduled through at least the end of this year.

“Realistically we’d be lucky to get this matter set for trial by the end of next year,” he said.

Editor's note: The name of St. Louis-based engineering firm Horner & Shifrin was misspelled in an earlier version of this story.

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