The outgoing chief executive of Bi-State Development is criticizing St. Louis County Executive Steve Stenger for what he says was a missed opportunity to refinance tens of millions of dollars in MetroLink debt that could have saved area taxpayers $7.2 million.
“We approved it, the city (of St. Louis) approved it and we were never able to get a response to our request out of St. Louis County,” said John Nations, who announced last month he would leave his eight-year post as head of the agency that oversees the region’s mass transit. “It would have been a tremendous savings to the taxpayers of St. Louis County.”
The opportunity arose in early 2016, when Bi-State’s financial adviser, Columbia Capital Management, recommended refinancing the bonds used to build the MetroLink expansion to Shrewsbury. With interest rates lower at the time, the move would have saved $7.2 million over the life of the bonds, according to a February 2016 letter from the adviser.
Nations said St. Louis County taxpayers ultimately pay 87 percent of the debt through annual charges from Bi-State. City taxes cover the remainder.
By mid-2016, the St. Louis Board of Aldermen passed a resolution approving the move. Bi-State’s board also approved it that year. But the biggest payer on the debt, St. Louis County, never adopted a resolution despite two couriered letters Nations sent Stenger. The second, in December 2016, included draft language for a St. Louis County Council resolution needed to authorize the refinancing.
“I have tried to call Steve Stenger on a number of issues over the years — I didn’t get a returned call,” Nations said. “I resorted to writing letters to him to try to get through. … I have no idea why we never heard back. To us, this is a very obvious savings to the taxpayers which should have been implemented.”
It’s a parting shot of sorts for Nations, who in recent years has been at loggerheads with Stenger and his ally, St. Louis County Prosecuting Attorney Bob McCulloch, over MetroLink security. Nations’ comments on the missed refinancing opportunity come just weeks after he announced he planned to resign this fall — prior to his contract’s expiration — and only a few weeks before the St. Louis County Democratic primary in which Stenger will face challenger Mark Mantovani.
Nations says he has no position on either primary candidate. Nations, a Republican when he was appointed as head of Bi-State in 2010, is the former mayor of Chesterfield who resigned in his third term to run the transit agency. He was also a partner at law firm Armstrong Teasdale.
Stenger’s office declined to make the county executive available for an interview. In a statement, Stenger aide Tom Curran said Nations’ “departure, coupled with new board members, means Bi-State will be getting a much-needed fresh start in terms of overall operation and security.”
The statement pointed out that the county pre-paid some $135 million in debt from 2013 through 2015, a policy that was launched under Stenger’s predecessor, Charlie Dooley, but that Stenger continued in his first year in office.
“However, two years ago, we felt that it was in the best interest of our residents to retain and invest certain transit funding to improve security on MetroLink lines,” the statement continued.
Nations said that the extra money the county spent on security was “a completely separate issue” and that the refinancing would not have required excess payments.
“Less money would have been required for debt service in any event and even more money would have been freed up for security,” he said. “They have to pay the debt no matter what.”
Refinancing is not an uncommon move by local governments and other bonding authorities when interest rates fall below the levels they were at when the debt was originally issued. The action allows them to issue new debt at a lower interest rate and pay off the higher interest rate debt, saving money over the term of the bonds.
But with interest rates that have climbed higher over the last 18 months, the savings may no longer be available. With the Federal Reserve signaling its intention to continue raising interest rates, the window of opportunity may have closed.
In addition, the tax law signed by President Donald Trump at the end of last year ended a provision allowing early tax-exempt bond refinancing used by local governments. That, Nations said, means Bi-State has to wait until next year in order to refinance the MetroLink expansion debt.
“With the rising interest rates, I’m not in a position to say it even still makes sense,” Nations said. “It made sense at the time and it could have had a savings had it been done.”
Why didn’t he just take it to the County Council if a resolution was needed? Nations said Bi-State had always gone through the county executive’s office when it needed ordinances. “That’s the way it’s always been,” he said.
Nations said that the issue did come up during discussion at public hearings regarding MetroLink appropriations and that he had also spoken to Stenger’s aides about it.
“We have asked his staff about it on multiple occasions,” Nations said. “Whenever we did, we were always told it was under consideration, that it was being reviewed.”
County Council Chairman Sam Page, D-Creve Coeur, said he had found out only recently that the refinancing opportunity had been missed. Page leads a bipartisan council bloc that opposes Stenger on virtually every front.
Back in 2016, the council wasn’t fighting with Stenger all the time. Page wasn’t chairman then, and for years the county had been run by first bringing information to the county executive’s office. If it came up at a hearing “I’m sure we all assumed it would happen,” Page said. More recently, he has accused Stenger’s office of withholding information and misleading the council, which Stenger has called “preposterous.”
“But the actual request for legislation in the future should come directly to the council and should be more than just a presentation at a hearing,” he added. “We can’t assume that the normal pathways are going to work.”
Bi-State’s disagreements with St. Louis County over MetroLink security were well-documented last year. Stenger criticized the agency over what he said was a lack of cooperation. McCulloch, the county prosecutor, said last year he stopped prosecuting fare violations issued by MetroLink security officers in 2016 because of doubts about their legitimacy.
Nations said then that he had objected to the county’s 2016 contract proposal requiring Bi-State to pay it for police services even if the county didn’t pay Bi-State from transportation funds.
Even if Stenger’s lack of response on the bond refinancing was because of the differences regarding how MetroLink should be policed, Nations said, the only losers are county taxpayers who ultimately pay for the MetroLink debt. He added that Bi-State’s financial adviser who recommended the refinancing also worked for the county.
“It’s not a savings for Bi-State, it’s a savings for taxpayers,” Nations said. “We have the same financial adviser. It was the financial adviser who said this was a win for Bi-State, and more importantly, the county taxpayers.”