Metro Districts; Epicenter of New Political Chasm

For literally decades the Loveland City Council took a devil may care approach to Metro Districts (special taxing districts) approving many different taxing districts in Loveland with little concern for voter retribution.

All that is changing with the recent survey by Thompson School District that their number one obstacle to passing a bond measure in 2017 are the residents in such districts whose property taxes exceed the statewide average in Colorado.

Read our story and please feel welcome to contribute to the conversation.  Do you live in a Metro District and will you support the Thompson School District’s third attempt at passing a mill levy override or special bond for school infrastructure?

 

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26 Responses to Metro Districts; Epicenter of New Political Chasm

  1. John Lewis says:

    How Should Growth Happen?

    On July 11th, I attended the Special Meeting of the City Council because I’m interested in the progress with the Unified Development Code and the panel presentation on Metro Districts.

    As a member of the Planning Commission in the 1990s, I remember Greg George touting a new philosophy and ordinance that would give Loveland quality growth as a result of adopting a PUD ordinance. It was rather humorous to hear him at the Special Meeting downplay PUDs in favor of the optional Complete Neighborhood Overlay. He basically said that if you give the planning department a good dog and pony show with pretty pictures they will let you build it without the usually entitlement review process. The example in the Complete Neighborhood Overlay presentation is a section of the mixed-use, master-planned Stapleton development in Denver. House prices and rent rates in Stapleton are close to the highest in metro Denver. Is that what Loveland wants?

    The Metro District agenda item was very impressive with several attorneys, consultants, and the chief financial officer from the Thompson School District. Most of the panel participants make money from the formation of Metro Districts, managing them, or lending the money. The representative from the School District injected some reality by talking about the competition for tax mills and the increase in traffic on our arterials from distant metro districts.

    It was entertaining to hear the representatives talk around Leah Johnson’s questions about affordable housing. Metro Districts will not produce affordable housing and they are also not smart growth. They are a business model that puts the financial burden to develop infrastructure and amenities on the backs of the residents for a long, long time. As a result, the property taxes of home owners in a Metro District can be 2 to 3 times greater than for home owners in a straight zoning situation and even for those in an active HOA community. Thompson River Crossing Metro District home owners are paying taxes for the 7% interest on a 30 million dollar bond and, it’s my understanding, that none of their taxes are going to pay off the principle.

    What’s the solution? For affordable housing, the only solution is inclusionary zoning and workforce housing as a percentage of the number of dwelling units. Deed restrictions also have to be for greater than 30 years and must be recorded. Sales of restricted homes must be onerous on the seller.

    In addition to enforced affordable housing requirements, the foundation of any comprehensive plan and Unified Development Code must be smart growth. Unfortunately smart growth commonly is only talked about after the cows have left the barn. I remember the conversations around smart growth practices after the roaring 1990s. I remember a few of our elected leaders who admitted that they did not know what smart growth is. I suspected that they purposely didn’t want to know.

    Currently, several member of our city council avoid talking about smart growth as well. Unfortunately, we can’t rely on the planning staff to educate our city leaders even though the planners have completed several classes in smart growth and zoning techniques in their graduate programs.

    John Lewis
    Loveland

    • Jeremy Jersvig says:

      Mr. Lewis,
      Have you read the new Create Loveland comp plan yet?

      • John Lewis says:

        When I hear “smart growth” come from the lips of our city leaders, we have a spiritual function plan on top of the comp plan.

        • Jeremy Jersvig says:

          Ok. Did you read it?

          And would you explain “spiritual function plan” please?

          • John Lewis says:

            Does it mention “smart growth” ?

            I was on the planning of the Comp Plan.

            Again, show me where it mentions smart growth.

          • Jeremy Jersvig says:

            Stakeholder comittee? Then you know the make up of the plan. Smart growth is just a buzzword, using it only cheapens the message and can cause confusion, kind of like saying “affordable housing” these days.

          • John Lewis says:

            Smart Growth and Affordable Housing are NOT

  2. Tony Benjamin says:

    The horse is out of the metro district barn in Loveland. City Council recently approved two more such “special” designations (Lee Farms and Hunters Run West — both large housing developments) before fully understanding the long-term taxation, service, governance and policy impact/implications. That’s the gentle explanation. A harsher view would be that the council members knew, but ignored all the red flags a-flying until public concern caught up with ’em. Either way: What has been created is a two-tiered taxation system that benefits developers, while whacking homeowners and shoppers. TB

  3. Admin says:

    You both are starting with the assumption that Loveland’s City Council understands and secondly regulates how metro districts are formed. As a video clip we posted from the meeting illustrates (regarding Centerra), even the notion the council should build protections into these plans is lost on some members of the council.

    https://youtu.be/Tpl0PACoJpc

    However, Mayor Pro Tem Fogle has done an admirable job inserting the consumer protection of full disclosure when lots or homes are advertised; or at least trying to get staff to comply with council’s previous directions to do so as evidenced from a recent meeting.

    John Lewis, we fear that ‘affordable housing’ and controlled growth may be incompatible objectives especially when the control is overly burdensome in builders.

    Among the best speakers was Brian Matise Esq. featured in the video clip. As one councilor told us, “everyone up there had butterflies in their stomachs” when he was talking about council’s obligation to provide oversight of metro districts. At over $186,000,000 of debt that can no longer be repaid in the time promised (25 years) the city will be facing a serious crisis. McWhinney has created an unfortunate situation where the public debt they used to finance their private developments will easily outlive the value of those developments to the city or anyone else.

    • Jacki says:

      John Fogle’s comments regarding disclosure to potential home buyers, that the property they are interested in is in a Metro District, does not go far enough. Real disclosure to potential buyers must include current financial statements, debt, maturity dates of all loans, deferred maintenance issues and any known plans regarding that Metro District. How to do that and not harm the existing property owners hoping to sell their properties, is a problem that must be acknowledged.
      I hope that the money draining pit that we now face from Centerrs’s failure to adhere to the original MFA, with past City Council’s approval, will be the wake-up we need to prompt current and future City Councils to provide actual oversight and good judgement that protects property owners in Metro Districts and the citizens of Loveland.
      Having said that, I view the decision to hold an annual Winter Wonderlights event at Centerra for the five weeks before Christmas and one week after Christmas as the latest attempt to prop up Centerra at the expense of small businesses in Loveland and surrounding communities. Centerra benefits from sending event goers to a shopping mall during the Christmas shopping season with it’s 1% Retail Sales Fee on every dollar spent and it’s 1.25% PIF on every dollar spent in Centerra. Loveland loses as it receives a meager 1.75% in sales tax Vs the 3% in sales tax collected by small businesses. Shoppers lose as they pay more in taxes and fees charged at Centerra than elsewhere in Loveland.
      So desperate are they to jump to the aid of Centerra that they are willing to ignore the fact that Johnstown is now a serious competitor for sales and lodging tax at I-25 and Highway 34. Johnstown will reap the benefits of their folly.

    • John Lewis says:

      All growth is controlled growth; just depends on who controls it. There is no such thing as a free market in housing and building.

      Affordable housing has to be plugged into development plans for the benefit of the community. Diversity of housing at various price points is very important for a sustainable community. Affordable housing can be done if we reduce the square feet. What’s wrong with a 1000 sq. foot 3 bed 1 1/2 bath with a 1 car garage? That can be built and sold for under $200,000. If it’s on a 99 year lease, it’s more like $156000.

      These ideas have to be codified and a percentage of the $300 to $400 homes.

    • John Lewis says:

      You make a very important point (i.e. “private developments (the size of Centerra) will easily outlive the value of those developments to the city or anyone else”). Brick and motar stores located in the
      Prominade Shops and Centerra will be gone in 25 years. 99% of the purchase transactions will be done on-line with delivery services (UPS, USPS, drones). Both the Council and McWhinneys are just kicking the can down the road.

  4. Dan R. says:

    I don’t see a problem with the metro districts as long as the homeowners know about it going in. I looked at houses in Thompson River Ranch, and chose to buy elsewhere due to the tax difference. However, there was nothing about it in the listings. I couldn’t figure out the discrepancy in tax rates, so had to have my real estate agent explain it. He knew what he was talking about, so that’s fine in this case except for the time I wasted looking at houses that were already out of the question. I was unlucky enough once to have a situation where my agent didn’t know what she was doing and I ended up with rather large unexpected monthly expense (not a metro district, but along those lines). Buyer beware, of course, but I can see someone ending up unknowingly paying for this if they limit the number and locations of houses they look at and have an agent like the one I unfortunately picked before. I think it should be law that it be very clearly spelled out in the MLS, with the details that Jacki laid out.

    As for the point of the story, I think the school district is pointing blame in the wrong direction. It is easier to claim that it is something other than your own actions causing people not to trust you with their money than to make an effort to correct the problem you created for yourself.

    btw, sorry to ask an unrelated question, but I was gone for a while and can’t find the thread here that was started at the time. Did the guy that girdled the trees next to Lake Loveland ever get busted for it?

    • Tony Benjamin says:

      Your real-life home-buying account, Dan, certainly sheds light on part of the problem with metro districts — especially as they apply to home ownership. It’s not just paying a tad higher sales tax; it’s a long-term higher property tax rate that goes on for decades. That you couldn’t easily figure out the tax-rate discrepancy is telling. It should be obvious to any potential home-buyer. That was council’s intent, but apparently needs more work. One other point: the future homeowners in Lee Farms (and perhaps others such as Hunters Run West) could end up paying double or more in property taxes, but also HOA fees. That actually is a high probability since the metro district bonding will pay for roads, sewers, water, etc. (the usual municipal infrastructure). But that may leave landscaping maintenance costs for common areas, pools, other recreation facilities (such as playgrounds) community functions and other capital expenses either 1) up to the metro board or 2) the creation of an HOA — with its attending fees — on top of the metro district cost. Still see this as an artful dodge by developers and city government. Until I hear a sound argument to the contrary. regards, tb

  5. John Lewis says:

    Warnings about special taxing districts is located on page 8 of 17 of the Colorado Contract to Buy and Sell Real Estate which says:

    SPECIAL TAXING DISTRICTS MAY BE SUBJECT TO GENERAL OBLIGATION INDEBTEDNESS THAT IS PAID BY REVENUES PRODUCED FROM ANNUAL TAX LEVIES ON THE TAXABLE PROPERTY WITHIN SUCH DISTRICTS. PROPERTY OWNERS IN SUCH DISTRICTS MAY BE PLACED AT RISK FOR INCREASED MILL LEVIES AND TAX TO SUPPORT THE SERVICING OF SUCH DEBT WHERE CIRCUMSTANCES ARISE RESULTING IN THE INABILITY OF SUCH A DISTRICT TO DISCHARGE SUCH INDEBTEDNESS WITHOUT SUCH AN INCREASE IN MILL LEVIES. BUYERS SHOULD INVESTIGATE THE SPECIAL TAXING DISTRICTS IN WHICH THE PROPERTY IS LOCATED BY CONTACTING THE COUNTY TREASURER, BY REVIEWING THE CERTIFICATE OF TAXES DUE FOR THE PROPERTY, AND BY OBTAINING FURTHER INFORMATION FROM THE BOARD OF COUNTY COMMISSIONERS, THE COUNTY CLERK AND RECORDER, OR THE THE COUNTY ASSESSOR.

    What’s the problem with this type of disclosure?

    1. The tax cert is not seen until the actual closing by the title company closer; the seller pays for it and the buyer never sees it.
    2. The assessor has the current taxes but what do you compare it to?

    The only true solution is for a new state law to require metro district consulting firms to provide a fact sheet to the buyer during the due diligence period of a transaction. It took a state law to require that HOA companies provide a fact sheet on the costs and liabilities such as special assessments that the new buyer will encounter.

    Last but most important is that builders contract to buy residential properties in their development and metro district don’t have any disclosures. Correct me if I’m wrong.

    • Jacki says:

      I agree that ideally improvements to Metro District disclosure requirements should come at the State level and therefore be uniform throughout the State. Perhaps Hugh McKean could be approached? However that route will take time and may not get done. In the meantime, couldn’t we do something in our own City? The City is the one granting Metro Districts their powers. Perhaps a mandatory disclosure form that Real Estate personnel or that sellers themselves must provide? One issue will be that many sellers and their Real Estate agents don’t know the answers to questions regarding the financial health and obligations of their particular Metro District. That is certainly the case in Centerra which is complicated by the fact that District 1 controls the finances and makes the decisions and debt obligations for all five Districts. In my opinion, Centerra is an example of the “worst case scenario”. I think we have to start there; educating current property owners of “The Good, The Bad and The Ugly” of Metro Districts – as Brian Matise laid out. Existing property owners and Real Estate personnel can’t explain and disclose what they do know or what they do not understand.

      • Tony Benjamin says:

        Good points and recommendations, Jacki. And you’re correct; reform at the state level would take a lot of time, and would probably be the focus of the powerful developer lobby. Metro districts require city approval. That is where the primary responsibility for public protection still rests. tb

  6. John Lewis says:

    On page 10 of most title commitments produced by the various title companies it says:

    Pursuant to C.R.S. 10-11-122, notice is hereby given that:

    A. THE SUBJECT REAL PROPERTY MAY BE LOCATED INA SPECIAL TAXING DISTRICT.
    B. A CERTIFICATE OF TAXES DUE LISTING EACH TAXING JURISDICTION SHALL BE OBTAINED FROM THE COUNTY TREASURER TO THE COUNTY TREASURE’S AUTHORIZED AGENT.
    C. INFORMATION REGARDING SPECIAL DISTRICTS AND THE BOUNDARIES OF SUCH DISTRICTS MAY BE OBTAINED FROM THE BOARD OF COUNTY COMMISSIONERS, THE COUNTY CLERK AND RECORDER, OR THE COUNTY ASSESSOR.

    That is almost identical to the disclosure in the Colorado residential contract.

    If a District is within the city limits, I believe the local jurisdiction should step up to help a buyer. They can already tell you a lot such as zoning, school district, representatives, etc.

    • Jeremy Jersvig says:

      Are you then suggesting a new level of government to handle real estate transactions between private parties?

      • Jeremy Jersvig says:

        We already have DORA and CDRE. How much more regulation do you want?
        Perhaps educating folks about metro districts, including comparisons to HOAs, would be a better option. The information categories that you listed are available to the public, just have to ask for it. Really, you just have to go online and type in an address.

        • John Lewis says:

          First time home buyers and buyers from outside Loveland have no idea of what can be learned about a property online either with the city or the county. Realtors don’t suggest this due diligence either.

  7. Admin says:

    One important motivator for larger developers to create metro districts is to hide certain costs in future taxes not immediately obvious to buyers.

    The time to make an offer to buy or even close a contract comes long after a decision is made to narrow choices of homes while comparing the asking price of each property. Therefore, the buyer needs the information when making that decision, long before making the offer to buy, whether the “cheaper” property isn’t really due to higher property taxes.

    By requiring the disclosure in all advertising of the property, you remove the perverse incentive to load the metro district with public debt for amenities traditionally provided by the developer or HOA in incentivize homebuyers. Offering lots of amenities with no obvious HOA fees is simply a marketing tactic to make the buyer think they are getting more for less.

    Higher property taxes used to create the development is simply part of the price of the property. Every time the property asking price is advertised the higher tax obligation needs to go with it so buyers can make apples to apples comparisons.

  8. John Lewis says:

    Metro District taxation powers does not insure that the new houses within the district will be priced lower than comparable houses in a PUD HOA situation. Builders are notorious for telling the Planning Commission and the City Council much lower price points to get their approval. Then when the spec homes are built, the prices are 10 to 20 percent higher than what they told our city leaders. It’s amazing.

    • Admin says:

      John, we agree the developer will price housing as high as the market will allow so it wasn’t an argument that metro districts create more affordable housing.

      Essentially, Loveland’s City Council needs to create a simple policy that if metro districts are necessary the funds can only be used for essential infrastructure like streets, sewers and sidewalks (as contemplated in the enabling statutes). The debt should not outlast the life of the improvements and only on rare occasions should the developer be allowed control of the district for longer than 1 year.

      The problem is McWhinney’s Centerra Metro Districts are breaking all those rules with the consent of this entire city council. So before they impose common sense reform on all new residential metro districts, they will need to get on their hind legs and allow residents and property owners of Centerra a voice in the governance of Centerra and start limiting McWhinney’s use of public debt for the sole benefit of improving any properties they buy while leaving the debt (now 186,000,000) to everyone else to pay back along with an underfunded o&m budget.

  9. Greg Snyder says:

    Capitalism is a self correcting model of marketing. If the government would keep its nose out of the process capitalism would work to provide the market to meet the demand. When Ray Martinez was the Mayor of Ft Collins he always fought to reduce the fees charged to developers for the street, water, and sewer in new developments in order to lower the selling price of the homes. The Progressive faction always protested that this was a “gift” to the developers because they are too blinded by their ideology to recognize reality. Our current Mayor Pro Tem is a part of this group who refuses to acknowledge what is. Forget Republican and Democrat as philosophical labels but instead focus on whether elected officials believe government is the solution or the problem. If they believe government is the solution they are Progressives and should be scorned as fellow travelers with Marx and Engels.

  10. Gary says:

    The Thompson school district has kept quiet about the negative impacts to their income created by metro districts and the use of tax increment financing. The school district expects the State of Colorado to replace the lost revenue through “backfill” (a term used to a method of providing tax dollars we pay to state to replace tax dollars that should have been obtained through local taxes.) The problem is that the state doesn’t provide 100% backfill. The Loveland City Council has been negligent by not writing into the metro district contracts some protection for the school financing losses. They have been so eager to support growth of all sorts that they won’t play hard to get with developers. Developers are able to pass many costs off to the entire community with the breaks created by metro district agreements.

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