CrossCurrents – Metro Districts

CrossCurrents – Metro Districts


Hello, welcome to CrossCurrents. Produced
by the City of Fort Collins and the Larimer County League of Women Voters. I’m Barbara Rutstein, the moderator for today’s program. The views expressed on this program are solely those of the participants and do not necessarily reflect the views of the City of Fort Collins or the Larimer County League of Women Voters. Today we will discuss Metro Districts: Who Pays, Who Benefits? According to a publication from the Colorado Department of Local Affairs, special districts are considered local governments. They are used to provide services that a city or county may not provide and are often for a single
purpose. We can think of a large water district, sewer, school, fire, hospital, and
library districts or they can be as small as a mosquito or weed control
district. They levy taxes and you can find the mill levy amounts for the
special districts on your property tax notice from the Assessor. Metropolitan
districts come under the same statute of special districts. Metro districts may
include some of the single purpose services but are mainly used for the
development of large commercial or residential developments. One of the main
purposes of a metro district is to provide financing for infrastructure
within the development. This includes roads, sidewalks, sewer, water, parks, and other amenities. The developer sets up the district boards that issue the bonds and those in the district pay off the bonds with increased taxes. The
controversy arises because the district boards are usually set up prior to the
construction and are made up of people connected to the development and not the
people who will end up paying the taxes in the case of resid
potential developments the new residents don’t realize often how much the metro
district tax can increase their property tax bill from one year to the next
because there is little or no public or resident input the operation and
maintenance of the district people believe there is a total lack of
transparency although there are over 1500 special districts in Colorado there
are relatively few in Fort Collins there are only 13 in Fort Collins but Loveland
has 26 Johnstown and Timnath each have 18 and Windsor has 52 Boulder has none
until the recent news articles I thought Metro districts were used only
for commercial development and I guess that’s partially true except in Fort
Collins they’ve recently approved something for residential development I
don’t think any have been built yet as they become more prevalent in a
residential in residential development more questions are being asked about
their use as a financing tool to help us sort out the benefits and liabilities we
have on my right bill ank Lee of White Bear anklet Tanaka and Waldron on his
right is Ross Kenneth Fort Collins City Council member on his right is Michael
Valdez the director of policy for special district for the special
district Association of Colorado and on his right is Jackie marsh the mayor of
the city of Loveland welcome to you and to our studio and viewing audiences now
I gave a brief description of what I think Metro districts are from my
reading but let’s try to make some distinctions I said what is a plan you
develop men and a homeowners association what are the differences is it just
financing so a metro district as you described is primarily used to finance
and sometimes own and operate public infrastructure that is necessary for a
project to develop usually that public infrastructure is determined through
development approvals at the municipality or the county where the
development is approved and so they’re focused on building improvements
sometimes operating and maintaining improvements the homeowners association
sometimes operates in the same space in the sense that the homeowners
association will often have amenities that are common amenities to the
development and will own and operate and maintain them homeowners associations
don’t usually get into the business of financing it’s certainly not financing
major public infrastructure so that’s there’s a clear distinction
there one is more of an operating entity the the district is more of a financing
constructing and operating entity a Planned Unit development it doesn’t
really fit within the space too well because what a Planned Unit development
does is reflect the development approvals that have occurred leading up
to the project being built and it will be a process by which the public
infrastructure that’s required for the development is determined it’s not in
and of itself a a method of financing or a method of providing public
infrastructure it really just defines what that public infrastructure will be
so a metro district probably has a plan you develop
often there will be a Planned Unit development that’s associated with a
metro district yes want anyone want to add any more yes Jackie I do so when you
think about a metro district it’s using tax exempt bonds therefore it’s
municipal bonds which means the development that is paid for with that
is public development so obviously your roads the public can drive on it if you
use Metro funds to build a park or a swimming pool those are then public when
you’re talking about an HOA which would be part of your you know PUD that is
private so it maintains the things that are private only for that community
whereas a metro district things that are paid for with metro
funds are public oh that’s a nice distinction okay go ahead Ross you thank
you and a Planned Unit development in contrast to an HOA or Metro district you
think Bill alluded to this but specifically it is a way that a large
contiguous area can be master-planned in a way that lays out the infrastructure
perhaps adjusts the zoning from what the zoning had been from the city originally
or from what was contemplated by the city’s master plan documents and so it’s
a way and in that the pretty pictures can be drawn about where things are
going to do but it really doesn’t have any specificity and it as to how things
get paid for or in fact what the actual buildings that would be built in the PUD
would look like and where they’d be located really it’s at a higher level of
street grid layout uses in terms of schools and housing and commercial and
so on and so is strictly a planning document and is independent of although
frequently contiguous with a metro district okay anyone else go ahead bill
Michel sorry Michel Valdez yes I just want to add just one clarification here
and that metropolitan districts are different in that what you’re saying is
that they’re going to do one or more of a number of different things that
special districts do so just give you a quick rundown so you have a better sense
the Metro district can provide ambulance districts buyer protection districts
health service districts Metro well we’re talking about Park and Rec
district sanitation districts water districts water and sanitation districts
health assurance districts mental health tunnel district I mean the idea here is
that what a metro district is going to do is more than one of these different
types of special districts and the other distinction with regard to HOA I think
mayor you mentioned is that it’s it’s a governmental entity is a governmental
entity as opposed to the private entity of an HOA now nowadays we’re seeing more
and more of Metro district we’re having an IgA an inter governmental agreement
with an HOA and one of the others performing a lot of those services trash
collection street cleaning those kinds of things are being done in a
coordinated fashion so they can work together nicely
at the same time but they are separate entities sure go ahead yeah thank you
know that reminded me of something so yes of entra district is a governmental
entity it has its own board has its own charter bylaws everything else that goes
with being governmental entity but it is not the governmental entity that people
generally associate with being their government and that’s one of the
concerns that a lot of people have and myself included with a PUD as it’s going
through the process and and developing there’s a long complicated process
actually with many hearings public hearings the residents know who to go to
to express their concerns about a PD they go to the City Council in our case
and they can many of them can go to the City Council as has been evidenced
recently with a metro district with homeowners particularly there is a lot
of uncertainty about where to go and where to learn about the information how
to get plugged in what to do about their taxes being too high and so I don’t know
where to turn they can’t turn to their city because the city says I’m sorry
that’s the Metro district they can’t turn to the county or the state and the
same answer will happen so that’s that’s a big difference is the form of
government and how people can engage with that government so in some sense
it’s the city within a city is that a fair characterization like a sub
government for portions of City right yes yes okay and I would add I would add
they are they are political subdivisions that is to say they’re they’re
governmental entities as your preliminary remarks indicated they’re
subject to many of the same rules that apply to cities and counties in terms of
the way they hold meetings the public nature of the documents that they
produce and and many other constraints that apply to governmental entities such
as municipalities and counties that lead to transparency and and availability of
information to people I think some of the issues that we’ve seen is that the
people don’t really know where to go to get that information always in that okay
I think we’ll get to the boards and the problems or the issues anyway
so why would a developer prefer a metro district to what I’ll call a non Metro
district Ross yeah thank you um because with the Metro district the financing of
all of the development comes in the form of bonds that are paid off later by the
taxpayers whereas if at least in Fort Collins if they’re going to develop in
the city of Fort Collins they have to find financing themselves to pay for
building the infrastructure paying the city impact fees for street oversizing
and electric utility and everything else that a metro district could conceivably
be eligible for so it is a developer it’s in a sense more accessible money to
a developer to begin and get the development going and to keep it going
over years and therefore in my opinion is also a growth accelerator because
without that tool developers have to find ways to finance based on market
conditions based on the their belief and their ability to convince a bank that
the development is going to build out that it is going to be profitable for
the developer and that the bank will therefore have some assurance of
repayment of that financing or the developer if they’re really rich I
suppose they might have deep enough pockets to do it themselves but anyway
it’s that access to money that is why I think a developer would want that it is
also a benefit to their bottom line because the financing costs are not
borne directly by the developer but are borne by the people paying the bonds
back ok any other comments that there’s a there’s a lot of benefit to a
developer it goes on many many levels for one they’re shifting the risk of the
development on to the homeowner say you have plans to build a hundred homes and
you only build 25 well to repay the bonds they were counting on a hundred
homes you only sell twenty-five those 25 people now need to pay for all of that
infrastructure formerly it would have been the developer that would have paid
for the land would have paid for the roads and the sidewalks and so the risk
is kind of on them to build slowly to make sure that they’re selling you know
that selling as they go so you transfer you
transfer that risk there’s also a lot of opportunity for them to you know have a
little bit of a conflict of interest Oh we’ll get to that okay yeah but it’s
jamming it’s well I guess I was on the City Council in the mid 80s and we never
heard of Metro districts and now we hear a lot about them so what prompted that
change go ahead Michael I’m happy to take that one but first let
me say a comment to Ross’s comment it’s just kind of an observation and that is
as first of all disclosure I’m a Colorado native okay I’m a car native
who says I don’t blame anybody for coming this state because there’s a
great place to live and raise a family and be here that said that the idea that
it’s a growth accelerator I think might be a chicken and egg issue for us
because so many people are coming to Colorado the need for housing is going
to be there regardless of how attractive we make it so I think we could probably
debate that for hours now with regard to the growth of Metro districts that
pretty much came about as a reaction to Tabor because as we see it what happened
is after Tabor came in a city would want to have more development provide for
more housing for the community and generally they would in the old days
before Tabor asked the people in the community can we afford this and they
just put a bond issue out there or they wouldn’t have to put a bond I sure they
would just say we’re gonna pay for this with Tabor you’d have to do a bond issue
you have to ask the voters can we spend more money that was not happening
so the Metro district entity became popular for the reasons we’ve stated it
already how attractive it is to a developer to say we can do this we can
provide the housing and the infrastructure built into the cost of
the home as opposed to adding cost to the purchase price of the house which is
the other way I think it’s going to work if you don’t put it into the Metro
district you’re gonna pay for it more an additional price on the sale price of
the home okay we will get there – my next thing that I
would like to discuss with you is it more logical to do that for commercial
developments than residential developments like Jackie could you
possibly have crossroads and Sentara and some of those big developments in
Loveland without a metro district developer has to decide that that’s how
they’re going to make money they’re going to build something that they’re
gonna lease out these spaces whether it’s retail I’m not sure which but the
same problems that affect a residential owner are gonna affect the the person
that’s leasing our owning that building who’s ever gonna be paying the property
tax and you know I did people and the audience can’t see this but I you know
did a little bit of I like to be factual I like to not just make a mistake
statement looking at one retail store in Loveland if you go back to 2015 2013 the
property value was 5.3 million their metro fees were 65,000 overall property
tax 181,000 fast forward to 2019 because that property value has increased it’s
gone from five point three to seven million dollars the mill levy just went
up five mills so not a huge increase in the mill levy but their metro fees have
gone from sixty-five thousand to ninety six thousand and their overall tax debt
has gone from 181 to 255 unless you’re doing something to increase their
traffic increase their sales they’re gonna just have to cut personnel or cost
I see okay okay now Ross looks puzzled I’m not puzzled I just wanted to comment
but okay I guess I have a slightly more nuanced view and yes I think with large
mill amounts that the same problems can happen with commercial as with
residential in terms of the escalating property tax I think though that in a
purely commercial development there’s probably a place for Metro districts
with small mill amounts 1020 Mills dedicated to the maintenance of parking
lots or roads interior to the property I think that in fact that was for
Colin’s policy before we changed it a couple of years ago and we did have a
couple of Metro districts built under that they operate well the parking lots
are well maintained they don’t become blighted the business owners are pretty
savvy about their property taxes and can understand and be easily participate in
the governance of the board as necessary and how those taxes get allocated to the
maintenance activities so I think in that specific case yes in the general
case though with large numbers of mills and particularly with properties that
include a strong residential component that’s where it starts to get
problematic again does everyone understand what we’re talking about when
we talk about mills everybody knows that yes do you want to explain that just for
a minute in case sure special districts metropolitan districts
their primary source of revenue will be property taxes real estate property
taxes which is expressed in terms of a mill levy which is in turn applied it’s
a number that’s applied to the taxable value of your property and there’s a
formula for determining what that taxable value is I want to come back to
a couple of points that were made earlier just to just add a little color
one one is that in terms of the the advantages for a developer and wanting
to use a metro district it’s really an advantage for the project as well as the
developer ross spoke about access to funds and it’s easier maybe maybe that
wasn’t your point but easy access to funds okay and it actually is a little
bit more sophisticated than that when a developer is initially breaking ground
on a project there’s no assessed value there there’s a plan for development to
occur there’s really no tax revenue that would be available to support going out
to the bond market and issuing bonds at that early stage so what happens in
almost every case is the developer is required to in fact go to his
construction lender the private lending side and persuade that private lender
that this is a good project worthy of that lender lending construction dollars
to initiate the project later when the assessed value
comes into play and you have the ability to go to the bond market then the
developer can be reimbursed for those costs and not have to rely on the
private financing the other difference there is that the private financing is a
short-term financing structure I don’t know if it’s three to five years it’s a
relatively short period of time that the construction lender is going to wait to
get those funds back so that puts pressure on pricing for the home that’s
being sold because so much money has to be recouped in order to pay back the
construction lender in contrast if you financed through a metro district that
has stretched out over usually a 30-year period and it takes some of the pressure
some of the pricing pressure off of of your of your project the other point I
want to make is is back to Jackies point it once upon a time it was true that the
risk of development was really being shifted to property owners because bonds
would be issued and maybe the homes didn’t show up and maybe the revenue
wasn’t there to pay the bonds what changed and this really came about and
after the 87 and 91 downturn in the economy when we had metro districts that
previously had not had any caps on their borrowing amounts or though the milites
that they were imposing or pledging to pay those mill levies were going through
the the roof and we had a very significant legislative reaction to that
to protect the the bond market in Colorado and what came about as a result
of that are militarist side you’ll see in jurisdictions across the state as
well as in some legislation at the state level that caps the debt service mill
levy frequently at 50 mils sometimes less and so the amount of risk that the
property owners have is capped whereas in the past it wasn’t so okay just a
couple of points okay okay well one of my questions is it seems to me that
we’re shifting is its cost shifting really from the price of the home to the
property tax so from the mortgage which may be at 3 or 4 percent
now to the bond market which maybe I don’t know nine or ten am I wrong
I I think you’re correct I that basically the infrastructure that’s
built with a metro district that is going on for twenty thirty years in the
form of payment for that is going on for twenty or thirty years in the form of
property taxes and in fact sometimes the home prices that they will sell at or
somewhat lower because some savvy buyers do you know that they’re in Metro
district you know not wanting to buy in a metro district so arguably some of
that money without a metro district would get priced in valued in with the
home and that’s a cost or a value that the homeowner could recoup when they
sell their home when it’s in the property taxes they’ll never recoup that
that’s gone forever the the other thing I wanted to point out that is that
although the developer certainly has a cost to build something that cost
doesn’t really impact the price at which they can sell at the market sets the
price at which they can sell it and so they might ask for a price that’s higher
but if the market says no I’m sorry a house like this in a metro district with
60 mils that’s only you know three hundred eighty thousand dollars and
nobody’s going to buy it for more than that so it doesn’t the pricing pressure
actually doesn’t apply very much to the consumer a lot has been made of a
wouldn’t this make the housing more affordable if it didn’t have to be
folded into the cost of the house reality is the market sets the price and
so what it really does frankly has increased the profit margin for the
developer and I’m not arguing that profit is good or bad I’m just pointing
out that that’s where the difference in that money goes okay bill I think that
what I hear from developer clients that we haven’t by the way I’ve been in the
business of the legal practice relating to special districts for about forty
years and I represent commercial districts I also represent a lot of
residential districts I’ve represented districts that have transitioned from
developer control to residential control and I provided advice to various
municipalities and counties around the state with regard to special district
policy so I see it from all side and I can appreciate the points that are
being made here the what my developer clients tell me is that the the cost of
development has increased so much over the years in particular with other fees
and charges not to mention just the pure construction cost that they find that
it’s very difficult to make a project pencil if they’re not able to use a
metro district to assist with the financing and if you think about it you
know you mentioned some statistics earlier according to the DL G there’s
twenty four hundred and eighty-one title 32 districts in Colorado of those and
some of those are single purpose districts some are multiple eighteen
hundred and forty one of those are Metro districts so they’re being used and
they’re being used in all of the projects that we see coming around or at
least people want to use them if they’re allowed to so there’s there’s some clear
demonstration of a benefit there and and the development community is using that
whether that is a policy outcome you want in terms of enhancing development
you know we can have different points of view on but that’s what I’m hearing from
from that group of people is that they need it in order to make these projects
possible right okay yes Michael I would add that you know I am here to defend
Metro districts without being defensive as bill pointed out there there utilize
across the state you know Denver Post had a number of articles coming out
saying what they saw were problematic with the Metro districts and and and
that’s all fair and I think it’s good for discussion but at the same time it
didn’t show the thousands of people who live in a metro district who are very
happy who know what they bought into know the taxes are and are comfortable
with that I bought into a metro district three years ago I knew going in now what
I will tell you and this is a little bit of a secret I know this is it going out
to millions of people and so you say secret an open microphone is never a
secret but we actually have been thinking about how we can improve
disclosures and make you know consumers more at the time you go to closing you
get all this information but at closing you get documents that are this high and
by then the moving trucks out front and you’re ready to go if you come across
the Metro district taxes in there you’re going okay what am I gonna do now
they’re gonna move you’re gonna sign on the dotted line having said that are
we’re working on a project with a couple legislators and it’s a big secret now
right that is to when you’re actually sitting down and you’re signing the
contract a better disclosure at that point you are buying in a metro district
you this is what your meal lab is gonna be this is what your library district
these are this is what your school districts these are your fire district
whatever it may be we want consumers be knowing more at a time they’re stunning
on the deadlines we that’s a good public statement against good consumer
protection and it’s about transparency I hear the word transparency at the
Capitol 50 times a day it’s almost like a bob newhart drinking
game for me okay you hear the word transparency and we
react to it so we’re big on transparency we’re actually utilizing some of the
transparency that came into law in 2009 to help get people with more information
know who the directors are know what the service plan looks like we can talk
about that for hours know what your new lab is gonna be know
what your debt service is gonna be again make sure that the person buying that
house signing on the dotted line knows more we do have a horse to water problem
Russ I agree how do we get people to know it we don’t want to put it in the
buy/sell contract it’s gonna be a separate document that we hope it has
big bold letters it says you are buying any Metro district know what you’re
doing going into this help them understand a lot better okay Jackie
wants to say something worse I do so when you’re talking about your
disclosures the things that it needs to include is the current debt how much is
owed what is the anticipated what is the maximum debt that could go to what is
the maturity date of the long who can change those things how did they get
changed how does it go from 20 29 to 20 47 that you’re gonna pay for you know
another 20 years on this but I would disagree that my research and our city
shows that in Metro districts are selling for the
same and actually a little bit more than non Metro districts and I break it down
I try to find similar homes similar lot size and I break it down to the square
foot how much is this home being sold for per square foot how much is this
home being and I try to compare bathrooms and all of those things so
that is kind of a graph randomly picked homes in Metro districts and non Metro
districts and various metro districts so the orange little trying of the diamond
shape shows you the average cost of a home in a metro district and the dot
below it the diamond below it shows you the average cost of a non Metro district
home so and I have several examples that I you know could show you of homes that
sold if anything they’re a little bit more per square foot and the places I’m
comparing to are very desirable areas like mariana butte dakota glen new homes
brand new homes oh they’re all basically new homes yes I’m only looking I’m not
not so much on this but on the charts that I’m looking at they’re all homes
that were built in 2019 sold 2019 some sold in early 2020 and so from the very
start they are selling for more than a non metro home and then I have one
example of a resale and this has been my argument before doing a lot of research
logically even if you have a developer that’s willing to lower the price
because there’s another fifty forty seventy thousand dollars of debt owned
if they’re willing to lower the price of the home good on them I haven’t found
that to be the case but good on them if they do the first time that home resells
is that homeowner going to go below market value to reduce it by the debt
that’s owned and i have one example of a home that sold in February of 2017 it
sold for five hundred and fifty two thousand in a metro district it was
resold three years later on January of 2020 had sold for 643 so actually in
seen about $90,000 they’re not reducing it that particular Metro district each
home was about 70,000 in additional bonds okay now the other slide is up why
don’t you explain that now so that is a slide showing what happens after you buy
a home and so the green is your property taxes when you’re not in a metro
district it increases as your property appreciates so you’re what you pay the
school district in the county in the city all increases the property value
increases appreciation the orange ones are the additional metro fees because
they to increase every you might keep the same mill levy but every time you
appreciate the value of the home your Metro fees also increase you know 40
mils on three hundred thousand is going to be a different number than 40 mils on
five hundred thousand so that’s the escalating metro fees you’re gonna pay
okay I think we have a question or two in the audience okay I have a question
to ask you especially to gentlemen to the left object there if I came here
from out of state and I went to a metro district you know and I went to the
sales office with the salesperson tell me it’s a metro district and explain
everything to me on how the rates could could be going up it depends Bill Ariel
I can’t wait no no no depends on what honesty no it depends on
the realtor I would guess I’m smiling but misspell it depends on the sales
office we have members of Societas that are law firms and they do an amazing job
with their clients and they’ve got a six-page disclosure that goes into exact
same things that the mayor just described our goal with this new idea we
have is to do it that equate quire that kind of disclosure so that you can infer
the state we’re gonna tell you you are buying in a metro district and these are
going to be your taxes and so there’s no there’s no it depends anymore our goal
is this so you’re from another state you’re from another town whatever it may
be you’re going to know what your taxes are when you sign the contract
my grandson bought a house in the Metro district and no one told him about it
okay morally and ethically is that right well
that’s again that’s we want to change that we want to change it so that yeah
obviously you haven’t changed it okay let’s go to the next question best
practice the point that I’m making out I would think it would be morally and
ethically to come up and say Johnny Jones I know you’re from out of state
let me explain to you what’s going on in a metro district it didn’t happen to my
grandson okay yes sure go ahead
time of disclosure has to be when somebody is making an offer on the home
it can’t come after they’ve made the offer and it’s been accepted they’ve
sold their home that they’re currently living in they’ve got a move date that
disclosure of how much your debt is the maturity date of the debt what it’s
going to cost you needs to be when you’re making an offer on that house
okay make sure because I did say that okay I want to make sure we’re clear
about this is that the idea for disclosure is going to be when you’re
signing the by sale contract that’s the moment we want because that takes it
from it’s too late at closing to find out so that’s what we’re that’s our goal
that’s our mission for transparency to your I’m sorry about your grants that
but the idea is that when you’re running on the dotted line to say I want to buy
this house you know what you’re buying into and that’s important okay Ross yes
and of course I would all rather have more transparency than less but one of
the other issues particularly with home buyers is that by the time they get
around to making an offer typically the home buyer has fallen in love with the
house and they’re not making a decision in the same basis that a business owner
might make when they’re buying a commercial property they are instead
saying well you know okay it’s a metro district maybe we can make things work
because the other problem is that not only is this six pages probably of
fairly dense legalese and again I would rather have it than not but it also
until the numbers start rolling in on the property taxes and what they’re
actually writing checks for or seeing their home mortgage payment go up
district these people have loans that require
them to have a have the mortgage company collect the property tax for them they
just either their home payments going up and up and up those forms were filed
somewhere with the closing papers and at that point they don’t know where to go
where to turn or what to do okay one more question okay hello I’m Jerry
Callen I’m also a licensed real estate broker
and I won’t comment on what was just shared because just in disparaging its
some differences here that need to be clarified but the question I’m raising
is last week when the mess what district is proposed in Fort Collins the
developer and I heard this before saying this promotes home affordability so the
question comes up how can we have home affordability when you add another layer
of tax to this and how can they qualify for this type of property then if you
add an HOA component to it all this factors in in your affordability so I
just need to understand how can Metro districts promote home affordability
thank you that was my next topic okay and I was going to Ross and we can start
because this was a Fort Collins metro just I’ve actually voted against I
believe recently at least all of the residential Metro districts that’s come
before council many of them have pitched a we will have some sort of affordable
housing component the concern though is that that comes even if so you say 10 or
15 percent of the units shall be built to be affordable to 60% ami so I’m sorry
I should use my define my terms for people making only 60% of the mean
income of the area which is a very low bar even if you have that that’s on the
backs of just all the taxpayers in that Metro district it’s a citywide policy
that’s being born only by a few property tax payers so there’s there’s a basic
fairness question there that I have concerns about additionally the
affordability when you add in the property taxes to the mortgage payment
to the insurance to HOA fees because many of these will come with additional
HOA fees the remainder of those the nine eighty-five percent remaining
non-designated affordable housing are going to cost more to the pocketbook of
the homeowner as they write their mortgage check okay yes Jackie I’m gonna
add to that and I think I’m on solid ground here we have a Loveland Housing
Authority which is you know charged with affordable housing my understanding is
they will not build in a metro district because by its very nature it can’t be
affordable because the ongoing costs are going to be higher so we did have a
development that went into what would have been a metro district and they
worked with the the Metro district to exempt that property from the metro
district so that they could build some affordable housing so they had to
literally get out of the metro district and get out of that debt yeah and let me
just speak to a couple of points you know the the prospect of using metro
districts to promote affordable housing is is not that common in in the state
there are some jurisdictions that that look at it from that point of view there
are other jurisdictions that look at it in terms of what sort of amenities are
being provided to the community that are worth the price that they want to pay
people are obviously making decisions to move into properties that have metro
districts which are going to have higher taxes than those that don’t and there’s
often a relationship between amenities and the special district being there
it’s not always the case but there’s there’s often a correlation there so and
the other thing in terms of disclosure you know the legislature has been taking
whacks at transparency measures for years they’ve established probably ten
different types of disclosures that are required as a matter of statute the
problem with that has been shown to be the cases that folks don’t know where to
go to find that information they need to be led along to gain access to that
information which is part of what Michael is talking about trying to
address we’ve seen that as a continuing problem despite the Legislature’s best
efforts to do so also local jurisdictions who have a lot
of control over the powers of Metro districts at the beginning through a
document called a service plan which is the Charter that describes what the
service what the district is allowed to do many jurisdictions concerned about
this very matter of transparency and disclosure have required enhancements to
that disclosure we looked at Fort Collins we looked at Loveland we looked
at Johnstown we looked at Windsor and all of those jurisdictions who have
special district policies have been focused on this issue trying to get it
right and and there’s still work to be done okay and one of the questions I had
is can the tax keep going up on a property tax on an affordable unit if it
keeps going up then it can work itself out and not be affordable anymore it
seems to me yeah and has once the bonds are paying
off has the allotment ever the tax ever gone down those of you who know Metro
districts I don’t think you’ve ever had one where the bonds have been paid off
so that sounds like I’ve had a number that’s interesting there’s the the
initial financing and this and then the refinancing which has occurred which has
been the subject of some publications indicating that you know debt basically
goes on forever most debt is issued with a 30-year term but sometimes you can
refinance that debt at a lower interest rate last year there was one point nine
billion dollars worth of metro district financing done in the state a good
portion of that was refinancing debt that was at a lower interest rate that
was going to save property owners and their property taxes so we have they
just lost my train of thought we had a situation where metro districts have
been able to lower the property tax rates eventually you have another
constraint that comes into play where in some service plans there’s a limit on
how long you can impose the mill levy there’s a few out there at 40 years
there’s a few out there shorter numbers of years so there’s ways to control it
that way and I’ve had a number of districts that have paid off their debt
and have lowered their melody as a result okay Ross
yes and and the answer is kind of it depends and certainly in Fort Collins we
haven’t had residential Metro districts long enough for any of that this to play
out for Collins does put a cap on the amount of time that a metro district may
be allowed to issue debt so theoretically that portion of the metro
district mill levy will go down to zero however there is frequently also an
operational component to the mill levy and frequently on that there is no
dollar cap it’s just a mill rate and so that will continue to go up and up and
up with the valuation of the home not related necessarily to the costs of the
metro district now that could be cured of course by getting people on the metro
district board if they know how to do that but that again is part of the
problem is how do people know that there’s going to be a metro district
board election how do they know that they’re eligible to serve and/or run how
often does the board meet as the board and take public comment does the board
have any email addresses that you can send emails to with your concerns do
they have phone numbers and in some cases yes but not guaranteed in all
cases and so the the the answer it depends on will the price go up and up
is kind of know though in the finite lifetime of a typical homeowner a
homeowner owns her home usually for something less than 20 years and if they
buy their house new in a metro district they will be paying almost certainly
metro district taxes on the whole mill levy allowed until they sell that home
and additionally a lot of times the affordable housing component comes with
and this is partly due to how tax credit structures are due done for affordable
housing with a limit of only 20 years of affordability so on top of that these
so-called promised affordable housing units frequently expire in fact
sometimes before the mill levy expires for paying off the the bonds so there
it’s really problematic and and I agree that not a lot of cities are doing this
around the state I really would like poor Collins not to be doing
using Metro districts as a tool to try to achieve affordable housing for those
and other reasons okay Michael yeah I want to address one of the points
you just made Ross with regard to how people know so I mentioned the 2009
legislation they went through on transparency it’s called a transparency
notice and basically the idea here is that you can go to
Dola Department local affairs website or our website and put in the address or
the district and you can find out all these things who the directors are what
their term is who’s up in the next election what the new levy rate is who
the contact at the district all kinds of disclosures that aren’t you won’t find
in any other governmental entity and that’s and that’s because the
legislature said it’s important we think it’s important too so in addition to
that one of the concerns that’s been raised in the media recently is that
people don’t know how to get on these boards and we want to make that more
obvious right now in law it says you have to publish and that’s great you
published a newspaper of general circulation not everywhere in the state
has a newspaper anymore let’s be candid about that so we have an idea again for
this coming session to say let’s help people know that they can now serve on
these boards so we’re gonna start to get to push that word out there as best we
can required on a website or your notices or your Billings your
newsletters regular mailings especial noticed people whatever it may be let
people know how they can get on these boards and they can become more citizen
directly than developer directed and so that’s another plan we have going
forward it’s again it’s a big secret don’t tell anybody go ahead I just do
want to point out that and I don’t think maybe meant to say it this way however
every city county and state elected official I know of does publish their
email address and phone number on a web page that is accessible so I don’t think
that that’s a difference in fact frequently my belief is that it’s easier
to find because you know most people know that they have a city government a
lot of people don’t know that they have a metro district and and again more
transparency be better I’d love to hear more and find ways because if we’re
going to have them we should at least make them better
my preference frankly though would be to have the state severely restrict the
residential come okay another question hello I’m Gary
Lindquist I’ve seen the acceleration and increasing on the rates of the property
tax collections from the mill levy and all on Metro districts go way beyond
what the county or the city or the state is allowed to assess in a matter of
property taxes due to Tabor and since it’s been stated tonight that these are
divisions of government how can they possibly be exempt from those same
provisions at the organizational stage for a metro district the developer is
the entity that organizes the metro district there are no property owners
yet there’s no nothing to move into so that’s just raw ground the the statutes
allow for the developer to have representatives that can vote at
elections that authorize taxes to be levied and debt to be issued and that’s
the step that authorizes the Metro districts to fix a mill levy that’s
limited in the service plan as I mentioned earlier with respect to debt
service not limited usually with respect to operations and maintenance but it
gives the that’s where the authority initially occurs for a metro district to
impose their taxes and as I said earlier there’s a cap on them on the debt
service melody in almost every district you know that’s been recently formed not
on the operation side one clarification on the operating no levy by the way is
that Metro districts are subject to the Colorado budget law which says that you
can create your budget based upon reasonable expectation of costs that
you’re going to incur both for debt service and for operating costs and you
can’t make those costs up you can’t just artificially inflate those costs they
have to be based in reality and so well there is no limit on an operating levy
there are statutory provisions that say what you’re supposed to be doing and
regarding in regard to establishing your operating
budget I’ve always made the argument that it’s foolhardy to limit the
operating levy because typically that’s required to take care of landscaping or
take care of open of parks and recreation and and and other amenities
and you don’t want to hamstring the future residential board from having the
necessary authority to raise the amount of money that they need to operate their
facilities okay my answer to you is that that the district board D bruce’s just
like the city of Fort Collins had an election and deeb roost but the problem
is that the board maybe five people from the developer and so that’s how that
happens it’s kind of interesting and that was these articles that were in The
Denver Post I know we have trouble with time is it really goes through all of
that a one thing I wanted to ask is what happens when all of these are built out
who takes over the street maintenance and the the lights in the parks are they
all proper proper I mean private or you said they were public so then the city
comes in and takes over so you’re looking at me so all answers and yes the
the roads are public infrastructure and so the city is responsible for
eventually for ongoing maintenance of those in fact it’s not it’s a fact
that’s not often appreciated to those who haven’t been deeply involved with
local government that building a street or a sidewalk is not actually an
investment it is actually a establishing a new liability for the city for
perpetuity or until you decide to tear down the street or sidewalk so it needs
to be done very judiciously and carefully now some of the Metro
districts can structure so that some of that maintenance can come out of that
Metro district service fee but eventually the costs are going to
overcome that the city will be forced politically frankly to help and the
general taxpayers will of course be bearing that part of the cost
well they’ll also be paying city taxes too at that point or so that doesn’t
seem wrong but it’s just if they’re built to city specification
– that’s right yeah so as I say it is it is kind of more fair if the city is
requiring roads for the city to take a part in its maintenance again because a
road is not an investment it is the liability and boat that does get back to
my concern though that in fact it was kind of stated that if these
developments aren’t penciling out at current market rates the Metro districts
are in fact acting as a growth accelerator that they’re accelerating
faster than the natural capacity in my opinion of the cities to keep up with
the maintenance requirements that they’re creating a future unfunded
liability for the councils and County Commissioners descendants and successors
and just compounds the other problems that come with rapid rates of growth I I
really just think that we should find a way to dial back on this growth
accelerator gasoline on the fire and come up with a more natural way for
growth to recede if it’s going to proceed yeah another question what
happens if the district can’t pay the bonds I can’t answer that it’s the city
liable no city’s not liable okay if the if the if the district is developed to a
level where the maximum debt service mill levy the captain Alevi doesn’t fund
the annual debt service on the bonds the bondholders been advised of that
limitation on the obligation of the property owners to levy taxes and the
bond holder has to wait to get paid okay now a question from the audience my name
is June drive and I am a in IE I live in a metro district Metro district that the
cap was initially set at 60 then 70 and it is now at 77 and there is 70 7.41 so
that’s just a comment but what I have a question on is the bonds um presently
the bonds that have been issued by my metro district are only being are only
being paid interest there’s no prints will be being paid the bonds have gone
from a 30-year bond to another like 20 years
30 years they’ve been extended and so now this just keeps keeps the dead you
know so anyway I guess the question is how do they get these bonds paid off and
also they’re issuing junior bonds which is a whole other thing that I do not
understand so the developer is issuing these okay who can answer that I think I
can okay talk about it Jackie and then we’ll let Bill talk so you know
sometimes when we’re we get to see the loan documents after we’ve approved
something they do show a period of time where it’s interest only we have one
district that has an 11 million dollar Junior bond that isn’t scheduled to
start paying principal until I think it’s 2040 Oh a long time that it’s good
and who’s getting the interest well I’d have to delve into it according to that
Denver Post article a lot of times it’s the developer themselves buying those
bonds there’s also the possibility that they do infrastructure and they don’t
seek repayment for 20 or 30 years and yet its pain say prime plus 2 or 3
percent so it’s accumulating the debt and they may not seek reimbursement for
a period of time ok bill I think that the structuring of bond issues can
happen in many different ways there are circumstances where developers will buy
bonds from a metro district and the issue there tends to be what’s the
interest rate and how long will it take to pay them back that happens one of the
ways in which you try to mitigate that issue and we see this in service plans
periodically is that there’s a requirement for a fairness opinion as to
the interest rate we also see in some in some jurisdictions a discharge date
where if that debt to the developer is still outstanding after a given number
of years it has to be torn up there’s a variety of ways to deal with
that situation I don’t know enough about your individual circumstances to be able
to dig down into the details but I think that there are some ways in which that
question can be managed bonds that are issued to the marketplace will generally
not just pay interest only for a long period of time it’s usually going to be
a developer obligation okay is there another question from the audience has
to be a short one and then we’ll I’m afraid have to end okay I’ll try to make
it short I’ve just I live in the metro district as well in Loveland and just
recently getting myself involved in Lorient about this but there’s you know
when you read the service plan there’s nothing in there about the homeowners
rights they don’t even mention homeowners but yet we’re the ones that
paid the whole bill for the development the other thing there’s no
accountability for the developer once I’m sorry okay so the question is this
who stands up for the homeowner in all of this metro district the city seems to
be protected the developer seems to be protected but the homeowner is going to
pay for this I don’t understand that Ross thank you first of all I would say
that unfortunately probably existing Metro districts we’re going to have to
get remedies from the state legislature however for Metro districts that have
yet to be formed I strongly encourage people to be paying attention this issue
and elect council members and mayors that are sympathetic to the concerns of
the way the Metro districts can cause these problems because the the biggest
tool that the city’s frankly have with the way the laws are structured is
before a metro districts even proposed in how it can set the limits and what
Fort Collins used to have a policy that only commercial or mixed-use metro
districts were allowed with a cap of up to 20 we subsequently changed it to 60
I’d like to change it back we need to find a council that will do that the
other factor of who stands up for them sadly it’s going to have to currently be
the homeowners in those metro districts that are standing up and trying to
become partially those governments and coming to City Council’s and coming to
County and coming to state legislators and
advocating for those changes okay I’m sorry we have probably one minute left
and I have to wrap up it’s been a wonderful discussion I thank you all for
coming I think it was really good I have lots more questions but we can’t get to
them I guess I should have asked for an hour and a half and that might have
gotten through more but I think we’ve gotten the basics so thank you to our
panelists to our studio and viewing audiences we hope you will encourage
others to watch this program and other crosscurrents programs they are
available from the League of Women Voters website and also on f:c TV
channels 14 and 881 they are also available on YouTube search for FC gov
comm and look for the link to YouTube thanks again for coming and tuning in you

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