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Levee districts, many controlled by one law firm, charge millions to taxpayers. And bills keep rising

Levee districts, many controlled by one law firm, charge millions to taxpayers. And bills keep rising

MARYLAND HEIGHTS — On a small piece of ground in this corner of northwest St. Louis County, Dale and Carol Boggs have eked out a living for years on golf lessons and $10 buckets of balls.

Development, which was supposed to build out the Missouri River floodplain here and bring more customers, still hasn’t arrived. But the taxes in the Howard Bend Levee District — which pay down $23 million in district debt and hundreds of thousands of dollars in annual lawyer and engineering fees — keep rising.

The levee bill on the Boggs’ modest driving range and batting complex this year: $42,000, well above their regular property taxes. It’s also about $9,000 or one-quarter higher than last year’s, a hike the levee district blames on an ongoing legal fight with what was its largest payer, Hollywood Casino.

The Boggs haven’t even paid last year’s bill. Couldn’t afford it.

“There’s supposed to be some sort of formula,” Carol Boggs said of their repeated requests to have their levee taxes explained. “But they’ve always said, ‘Oh, it’s too complicated. You wouldn’t understand.’”

In a state bisected by the continent’s great rivers and their tributaries, levee districts have promulgated along the waterway banks as a way for landowners to pool resources and finance protection against the unpredictable Missouri and Mississippi. In rural areas, they protect the fertile floodplain that farmers covet. In more populous areas, they protect land ripe for development.

The districts, hardly noticed save for the few property owners that pay for them, can draw millions of dollars a year in taxes and pay big legal fees to the lawyers versed in the esoteric state statute governing them. One law firm, Kansas City-based Husch Blackwell, runs many of the levee districts in the St. Louis area, with St. Louis Husch partners David Human or Michael Tolles often at the helm. Husch Blackwell attorneys run at least 10 levee districts in Missouri, including many of those protecting the most recently developed swaths of the region.

And unlike most taxing districts, levee districts can bill government land within their boundaries — in effect, charging taxpayers across the state for legal, administration and levee improvements benefiting just a few landowners.

Critics say the districts’ assessment methods are opaque. State statute prescribes the courts to appoint commissioners, who value the benefits each parcel of land derives from the construction of the levee and other flood protections. And when levee districts have outstanding bonds, state statutes allow assessments to rise as much as necessary to cover the interest payments.

“It’s very subjective,” said Ray McCarty, the head of the Associated Industries of Missouri, a business lobbying group that fought against proposals pushed by Husch Blackwell in Jefferson City last year to make it easier for levee districts to incur more debt. “It could use some improvements there in terms of how they assess that liability.”

Warren Stemme, president of the Howard Bend Levee District, said in an email that tax rates are set at public levee board meetings and reassessments are made through the courts. Landowners are given two notices of the process and have the opportunity to appeal.

“The board of supervisors operates with the highest ethics, and the accusations of fraud and abuse are untrue and offensive,” he wrote.

Taxpayers pick up tab

Levee districts regularly charge assessments on tax exempt lands — those owned by cities, counties, even the state highway department.

In Howard Bend, taxpayers and utility ratepayers across the region are paying into the district. The Metropolitan St. Louis Sewer District has a massive treatment plant on the Missouri River there. Its assessment rose to $477,370 this year from $296,714 last year — a 60% jump.

St. Louis has a water treatment plant in the district and the city utility was charged almost $100,000 this year. So does Missouri American Water, a private company that provides drinking water to St. Louis County residents. It was charged over $200,000 last year and more than $350,000 this year. Though as a private utility it does pay taxes, like MSD and the city water utility, they are financed by ratepayers.

St. Louis County taxpayers will also be paying more into the Howard Bend Levee district. In a court filing late last year, the Howard Bend Levee District petitioned the court to allow it to charge $245,000 to the county for the protection it says it provides to Creve Coeur Lake Park, more than double what it charged county taxpayers on the land last year. County taxpayers’ overall bill from the levee district has nearly doubled from about $270,000 last year to almost $514,000.

“Circumstances have changed within the boundaries of the levee district such that lands owned by St. Louis County, Missouri (including but not limited to Creve Coeur Lake Memorial Park) which previously had not been assessed, now benefit from the protections provided by the levee district,” a November filing from the Howard Bend Levee District said.

Stemme, the Howard Bend president, said in an email that the district reassessed the county land after floods inundated the low-lying area last year, “with plans to provide stormwater improvements such as a pump station to reduce flooding impacts on the area, including Creve Coeur Park.”

The added taxes couldn’t have come at a more opportune time for the decade-old district. It’s struggling to afford the new pumping station and other infrastructure. Ratings agency Fitch this year downgraded its debt to junk status. It’s fighting not only with Hollywood Casino, which has sued the levee district and refused to pay levee taxes for 2019 and 2020, but also with Maryland Heights.

Because of its lawsuit, the levee district hasn’t received Maryland Heights’ 2019 levee taxes, and it’s unlikely to receive the 2020 bill until the litigation is resolved. The bill to Maryland Heights taxpayers this year was almost $200,000 — a 58% jump from the $123,000 it was billed last year.

The district says the lawsuits and the loss of tax revenue from the two big payers are behind this year’s skyrocketing rates.

“My assessments increased the same as other property owners because of the casino’s selfish attitude,” Stemme said in response to questions from the Post-Dispatch. “While I am not happy about it, it was necessary. Why a billion dollar casino corporation thinks it is unfair to pay their share towards protecting the district from floodwaters is hard to fathom.”

The casino alleges its payments are governed by a 1995 contract that allowed for 20 years of payments to help finance the levee, and accuses the district of improperly co-mingling bond proceeds and using casino payments for costs other than what Hollywood agreed to fund. Plus, it says the casino is built above flood stage and doesn’t even benefit from the Howard Bend Levee.

‘Money grab’

Howard Bend isn’t the only levee district run by Husch Blackwell that has recently discovered public land where it can increase taxes. In southeast Missouri, the Bois Brule Levee District last year filed a petition to begin taxing land owned by Perry County, the city of Perryville and the Missouri Department of Transportation — land it had never taxed before.

“My understanding is the levee district’s law firm is pursuing these kind of proceedings in a significant number of other levee districts,” said Ivan Schraeder, the attorney representing Perry County. “The bottom line is it’s a money grab. You can’t say it any other way. When you go from zero to where they’re at at now, it’s a money grab. There’s just no other way to explain it.”

MoDOT is also fighting the Bois Brule Levee District’s attempt to raise its taxes, money that would come from all state taxpayers. A spokesman for the state agency declined to say how much money is at stake, citing the pending litigation. The Post-Dispatch has requested the records from the state agency and the levee district.

But MoDOT also has state roadways in Howard Bend, and presumably, other levee districts. Howard Bend charged the state agency more than $100,000 in 2019.

“You have got this small little levee district board assessing $100,000 against the state department of transportation,” said McCarty, head of the business lobbying group. “That seems kind of backwards.”

Tolles, the attorney representing Bois Brule, said the district had not reassessed property in “several decades.”

“The recent readjustment of benefits reflects current statutory requirements and the Missouri legislature’s intent that the benefits provided by the levee and drainage system be assessed equitably among all property owners within the District,” Tolles said in an email.

Yet unlike MoDOT and the Southeast Missouri governments, St. Louis County didn’t contest Howard Bend’s petition to increase its taxes. It helped initiate it.

County parks chief Tom Ott is on the levee district’s board. And, as the owner of Creve Coeur Lake Park, St. Louis County has clout to help shape the board. State law allows landowners to elect a levee district board based on one vote per acre owned. Maryland Heights last year proposed an agreement with the county to reshape the levee district’s board by getting the county to vote for a candidate of the city’s choosing, and the city, which has long hoped to develop the area, would then take over management of the district. But the agreement was drafted when former County Executive Steve Stenger was still in power, and the administration of current Executive Sam Page has balked at handing control to the city.

The casino, in its lawsuit against the levee district, recently filed motions to take depositions from Page and former County Director of Operations Garry Earls. Earls sat on the levee district board during former St. Louis County Executive Charlie Dooley’s administration and helped with Page’s transition after Stenger left. The depositions have been canceled for now, but they highlight the county’s deep involvement with the levee district over the years.

In the most recent board election this summer, the county declined to throw its weight around. The status quo remained. Some landowners question why local governments haven’t kept a closer eye on the situation.

“They should have been the watchdog along with Maryland Heights,” said Dale Boggs, the Golfport owner. “They should have been watching what was going on. Where was the money being spent? Where’s it gone?”

Levees and lawyers

In the late ‘90s, when the Chesterfield Valley was being developed following construction of the Monarch-Chesterfield Levee, Steven Kushner remembers being asked by a client — the owner of the former ice rink in the valley — to figure out how levee taxes had been calculated. His clients wanted to know if they were getting a fair shake, the retired real estate lawyer recalls. So he called the lawyer that ran the district: David Human.

“He stonewalled me, he didn’t give me anything,” Kushner said recently. “They use the imprimatur of the courts to give the process the appearance of legitimacy, and in fact it’s a very deceptive process that is performed behind closed doors by cherry-picked people.”

Further down the Missouri River, the owner of Davidson Logistics is fighting a petition from the Missouri Bottoms Levee District — also represented by Human and Tolles of Husch — to increase levee taxes on its property. The attorney representing the firm claims there’s been no reason provided for the increase. When the business has asked the district to explain, the response is only that the statute allows it.

Jack Spooner, the attorney representing Davidson Logistics, said Husch just won’t say what’s driving the increase.

“We still don’t know, and I may have to take a deposition to force them to explain exactly why they think they can increase my client’s taxes,” Spooner said. “The levee district operates like a vassal lord, and my client is a landowner in their personal fiefdom who they believe they can tax at their whim. A levee district can’t just come in and increase a landowner’s taxes without a reason.”

Human’s profile on Husch’s website says he has worked on more than 40 flood-protection projects. In the Howard Bend Levee District alone, Human’s firm has billed upward of $4 million over the last 20 years, according to district invoices. His brother, Dan Human, was for years the paid director of Howard Bend, drawing an annual paycheck of $60,000 until recently.

The influence of Human and other Husch Blackwell attorneys involved in levees extends nationally. They were part of a large lobbying effort in Washington to push levee deregulation, according to a 2018 ProPublica report.

And authorities have struggled to rein in districts accused of flouting rules. Husch partners have worked for an Illinois levee district, the Sny Island Levee and Drainage District, accused by Illinois officials and the U.S. Army Corps of Engineers of illegally raising the height of its levee. That, neighbors across the river in Missouri say, pushes more floodwater onto their land. Yet the levee district denies it, and legal maneuvering stymies action.

This year, Husch helped push legislation in Jefferson City that would have made it easier for some Missouri levee districts to issue more debt, meaning more legal fees and higher taxes for landowners in the districts.

“Levee districts have one mission: protect people and property from damaging and deadly floodwaters,” Tolles said about the legislative push. “We will always look for better ways to protect families that are protected by levee systems.”

McCarty, head of the business lobbying group, suspects Husch and their lobbyists will be back next year with another levee district proposal to let their districts take on more debt.

The simple fix, McCarty thinks, would be requiring semi-annual audits from the Missouri Auditor’s office or making it easier for levee district landowners to petition for an audit, similar to other independent special taxing districts, such as Transportation Development Districts.

“There’s a lot of money going to the people managing these districts,” McCarty said. “We would like to see maybe some more oversight and more auditing of these districts.”

Tolles, the levee district lawyer, noted that levee districts are already required to submit annual financial statements to the auditor, and all of their districts comply.

But the statements have limited information. They’re often just a page or two and don’t break down expenses into any detail.

Back in Howard Bend, Albert Stix Jr., whose family owns land surrounding the Creve Coeur Airport, may have had enough. It’s been 20 years since the district issued $21 million in bonds to build the levee. Though the district has taken on more debt, built other improvements and paid down about $12 million in principal, some $23 million in long-term debt remains.

Stix said the airport’s levee bills will increase by around $60,000 this year. When Dan Human ran the district, and Stix, a businessman who helps run a plastic bag company, would ask how the levee district taxes were calculated, the response would be: It’s complicated.

He’s tired of obfuscation and non-answers.

“A lawsuit looks increasingly like it might be the only option,” Stix said. “We’ll break the place. It’ll be insolvent and it will fail. But it appears it’s the only way we’re going to be able to effect any change. I don’t know what other option we have.

“And it might be too late,” he added. “They’ve wasted so much money over the last several decades, it’s not like they can get it back.”

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