Colorado lawmakers to consider metro district oversight reform bill

A new Colorado legislative proposal aims to increase accountability and transparency of metro districts, part of a yearslong effort to reform the more than 1,800 separate taxing authorities in the state.

Metro districts have existed in the state for decades, though they have been used much more in recent years, allowing developers to fund large housing projects and infrastructure by forming a governmental entity that is separate from a local government to get bonds that are repaid in future years by homeowners in the newly constructed subdivisions. The districts can issue unlimited debt to finance the public infrastructure.

The districts have been criticized for allowing boards often controlled by developers to approve millions of dollars in future taxes for hundreds of homes that would have to pay off the debt for decades. A 2019 Denver Post investigation showed that some of these bonds were designed to remain unpaid for decades, leading to debts that were significantly higher than the value of the homes leveraged to pay off those debts.

These issues have led to some changes, including by a new law passed last year, but reform advocates say there’s still so much more to be done.

Rep. Mike Weissman, an Aurora Democrat, has spent hundreds of hours studying metro districts and the debt residents are saddle with for years. It’s a topic that grabbed his attention before he was even elected to the state legislature in 2017, and this year, he’s sponsoring HB22-1363 with Democratic Rep. Andrew Boesenecker of Fort Collins in an attempt to create more oversight of metro districts. He’s already receiving opposition to the bill, which some groups worry is a “one-size-fits-all” solution and could have unintended consequences on other special districts.

The bill would give local governments more authority to review proposed service plan changes, set restrictions on where metro district board meetings can be held and allow local governments more authority to limit the scope of metro district services plans, “including limitations on excessively long or potentially conflicted debt issuance,” Weissman said. It’s set to be heard in the House Transportation and Local Government Committee on Tuesday.

“In recent years, I have heard more and more acute issues from residents, and it became clearly necessary to try to start addressing some of the problems,” he said.

Weissman acknowledged that his bill won’t address every issue he or metro district reform groups want, something he said has been years in the making and would be impossible to do in one bill. Another bill he cosponsored this year, SB 22-136, sought to address representation on metro district boards, but that failed.

But he hopes if this bill passes, local governments will be more actively involved in oversight of metro districts and that it would at least limit “certain abusive practices, like complex intergovernmental arrangements, very long term indebtedeness, and debt issuances that financially benefit entities connected to the issuance of the debt in the first place.”

“Right now in Colorado we are having a big debate about the cost of living, about the cost of housing in particular, and about property taxes. Part of property taxes is the rapid increase in property values,” he said. “But the other part of that is property tax levies (mills). … Metro district taxation has to be part of the conversation about the overall cost of housing and everything else.”

Groups like the Metro District Education Coalition, however, argue that the bill would have the opposite effect and that cities and counties can use metro districts to spread out costs over time, keeping them lower for residents. Executive Director Kristi Pollard said capping debt could lead to residents paying more money because the proposed law would shift the risk to investors, requiring higher interest rates or compensation, which would then get passed onto the residents themselves.

“That should be a city or county looking at what they think those terms should be, what the amount should be, and what the timeframe should be, so that they can take into account all of the needs and the capacity of the community in which they are governing,” Pollard said.

The bill would also prevent developers from buying their own bonds, which Pollard said could further contribute to higher costs for residents.

“Developers have to front money early on in a project in order to keep those costs as low as possible,” she said. “This would prohibit that from happening, which again, would result in the higher prices and those lots, both on an interest rate component as well as on upfront costs.”

For the Special District Association of Colorado, concerns about the bill include restricting the powers of existing special districts, not just newly created ones and could harm the abilities of special districts to serve their residents, “because an existing service plan may essentially be taken over and re-written by other local governments,” said Executive Director Ann Terry.

Weissman said he’s willing to consider amendments to the bill, clarifying the scope, because the focus is on metro districts, not all special districts such as those for fire protection or libraries.

Coloradans for Metro District Reform is supporting the legislation with amendments. Chairman John Henderson said he hopes that sponsors will consider including a provision in the bill that would not allow ballot issues to be submitted for approval unless they’re supported by a resident non‑developer affiliated board.

“Based upon this bill, this is just a beginning,” Henderson said. “There’s so much more that we need to do to address the substantive abuses.”

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