In an anonymous statement emailed to Solterra Residents during the resident sponsored Town Hall Thursday evening, the Solterra Board responded to the work of residents pressing the case for the Board to return the right to vote on bond debt to the residents.
Here is a response (in bold type) to the Solterra Board statement, paragraph by paragraph:
There are a lot of questions relating to the potential bond issuance the FRMD Boards are considering this year. As the Directors serving on the Boards, and as fellow residents, we wanted to provide you with some important information about this matter and to correct misinformation that is being circulated in the community.
Response:
Unfortunately, much of the following “information” (frequently argument) provided anonymously by the “Solterra Board” is inaccurate and in some cases disturbingly deceptive.
And, consistent with the Solterra Boards’ express directive at the last meeting NOT to engage in any discussion and NOT to answer any questions regarding their decision to go further into debt and pay Brookfield another $10 million,
the anonymous statement ignores the first and primary question presented by the recall campaign:
why won’t the Board restore the residents’ right to vote on this new bond debt.
Why won’t they give us back our right to vote.
The Board’s “answer”: Complete silence.
1. There have been assertions that multiple agreements that were signed/approved at or immediately after the Districts were organized in the 2006 – 2008 timeframe (including the Master IGA between the Districts and the Loan Reimbursement Agreement with Brookfield) are “unenforceable”. John Henderson, a resident of the community who has been particularly vocal, recently published an article in the Rooney Valley News, in which he relies heavily upon a 2017 Colorado Court of Appeals decision to support those claims. If you follow his link, he is relying upon an “unofficial summary” of the Court’s decision. The “unofficial summary” is attached. The actual case he relies upon was overturned by the Colorado Supreme Court in 2019. A copy of that case is also attached. The Colorado Supreme Court flatly rejected the Court of Appeal’s decision and was very critical of its reasoning. It is unfortunate the community is being provided such clearly invalid law.
This “information” by the anonymous author on behalf of the board fails to address the facts that
a.) the agreements Brookfield relies upon are single party agreements signed by the same Brookfield employee
b.) on behalf of both the Developer and the Districts
c.) when the Developer has an expressed (in all the audits and Bond prospectus’) conflict of interest with the residents of the Districts.
It is a very simple matter. If the Board admits these facts, which are beyond dispute, then as a matter of law the “agreements” are unenforceable.
This “information” by the anonymous author on behalf of the board fails to address the fact that an agreement like this with myself to have my neighbor pay for my deck is unenforceable.
It is a very simply matter. If the Brookfield agreements with itself are enforceable, then so is my agreement with myself to have my neighbor pay for the construction of my deck.
This “information” by the anonymous author also falsely claims that the decision cited in the blog is only a “summary”.
The first three pages of the decision is a “summary”.
The remaining 27 pages cited and linked are the court’s actual decision – the same decision reviewed by the Colorado Supreme Court.
Here it is again:
https://www.courts.state.co.us/Courts/Court_of_Appeals/Opinion/2017/15CA1956-PD.pdf
And, again at page 19, the Court explained:
“Second, the evidence of bad faith is substantial. We recognize, as the District has pointed out, that in the early stages, special district boards are generally made up of the developer’s representatives. But the representatives, when serving in their capacities as board members, may not take actions based on their own self-interests as the developer. See Geudner, 786 P.2d at 436-37. . . . In other words, the Developer spoke for the District and the District acted for the Developer. . . . The District’s circumvention of the statute reinforces our view that the condemnation proceedings were undertaken in bad faith.”
The “information” provided by the anonymous author on behalf of the Board suggests that the Supreme Court rejected and reversed the Court of Appeals statement that “the representatives when serving in their capacities as board members, may not take actions based on their own self-interests as the developer. See Geudner, 786 P.2d at 436-37. . . . In other words, the Developer spoke for the District and the District acted for the Developer. . .
The Supreme Court did not say the Court of Appeals statement (and citation to prior authority) was wrong.
What the Supreme Court said was that it wasn’t wrong enough to hold that the developer/district board acted in bad faith in taking neighboring private property by eminent domain.
The Supreme Court’s decision did nothing to change the law that “representatives when serving in their capacities as board members, may not take actions based upon their own self-interests as the developer. See Geudner, 786 P.2d at 436-37.”
Here again is the Woodcrest Supreme Court decision:
“¶34 The division, however, held that the District acted in bad faith because it was run by Century employees, who condemned the property to meet the District’s contractual obligations, and only did so once negotiations with Woodcrest failed. Carousel Farms, ¶¶ 43–44. But Century and the District always sought to build public improvements and have the development annexed into Parker, and we already rejected the notion that the District and Parker’s desire to fulfill their contractual obligations predominated over the essential public purpose of the taking. Moreover, developer employees frequently comprise the sole managers of special districts in their early stages.9 Therefore, *411 neither of these two facts sufficiently demonstrates the District’s bad faith.”
If the author of the anonymous Solterra Board statement is not an attorney, these shortcomings “may” be excused. Misreading the “summary” page is “understandable”. And a non-attorney “might not” know that it is common for an appellate court to reach a decision reversing a lower court decision without negating everything else the lower court said in the decision.
A petition to the United States Supreme Court in the same case clearly articulated the metro district abuse at play in the Woodcrest case which adds definition to the issue we are facing here in Solterra:
“Once formed, a district is imbued with broad governmental authority. It can tax, issue bonds, and condemn property through eminent domain. Colo. Rev. Stat. §§ 32-1-1001; 32-1-1004. And despite its enormous powers, a district acts without any oversight or approval from any other governmental entity; the district is the government. App. 23. (“[T]he District functions as a public entity, not a private one.”).
Here is an article regarding the Woodcrest litigation:
And, yet again, the Solterra Board still won’t answer the very first question.
Why won’t they restore our Constitutional right to vote on the bond debt.
Once we get the right to vote back, we can get an independent audit, debate the issue and make an informed decision about whether or not we owe Brookfield any more money and how to pay it, if we do.
And whatever the residents vote to do, that is what we will do.
As the Colorado Court of Appeals stated in another decision, upheld by the Colorado Supreme Court:
“The purpose of requiring a district to gain approval from persons who own property within a district before it imposes a new tax is to allow the people who will have to pay the tax to decide whether the tax should be levied. See Huber v. Colo. Mining Ass’n, 264 P.3d 884, 890 (Colo. 2011) (“[TABOR’s] purpose is to protect citizens from unwarranted tax increases and to allow citizens to approve or disapprove the imposition of new tax burdens.“).”
¶61 The organizers’ contracts did not comport with this purpose because they were illusory.
¶62 Sham contracts are without legal consequence. [contracts to purchase land and use those contracts to “vote” as “electors”]
(The Landmark Towers case invalidated the vote by “electors” who were employees of the developer because their “contracts” to own property were sham contracts. This was also true for the Solterra “electors” in 2006. The legislature, at the request of the developers, later grandfathered in all other decisions by such “electors” to issue bond debt – even though they were sham contracts.)
But, again, we don’t need to sue Brookfield. We can simply undo what Brookfield did with a ballot issue repealing the 2006 ballot issue. We, the actual “electors” can pass our own law reversing Brookfield’s law.
Just like we can vote to recall the board.
http://solterracommunity.org/index.php/2018/04/21/return-the-right-to-vote-on-bonds-back-to-the-voters-here-is-how-it-happened-and-here-is-how-we-change-it/
2. Some members of the community continue to demand that the Boards hire outside consulting firms at tremendous cost to the community to perform a “forensic analysis” of the public improvement-related costs. Instead of incurring those costs, the Districts have chosen to utilize its significant “in-house” expertise in the areas of public improvements and construction costs and to work daily with the District’s civil engineer. With their expertise, the Boards have been evaluating, and are continuing to evaluate, what is owed under the various agreements.
Response:
The anonymous author states an independent forensic financial analysis will be a “tremendous cost”.
No. It won’t.
It will be less than what the Board spent on attorneys’ fees to prepare a frivolous lawsuit against our sewer provider.
It will be less than what the Board has spent on attorneys’ fees to fight against restoring our right to vote.
It will be less than the attorneys’ fees spent on fighting the Townhome residents over shoveling the snow on District owned property.
It will be less than the cost of hiring bond counsel to prepare the new bond to pay Brookfield $10 million.
It will probably be less than the budget for new furniture for the Retreat.
And it will certainly be a tiny amount compared to the savings by demonstrating what, if anything, is in fact owed to Brookfield.
The anonymous author says the “board” with its “in-house” expertise will decide what is owed.
No, they won’t. Action speaks louder than words. They haven’t for four years. Every time it comes up, there is another excuse.
And they are not independent experts. They have already opined that its not worth the trouble because of all the “interest” we “owe” on the Brookfield “loan”.
And they admittedly are not forensic experts with experience in uncovering fraudulent activity in construction projects.
The forensic construction auditors they interviewed over three years ago did have the training, education and experience that the board members do not have.
In fact, when this issue was last raised with the Board, the board members expressly stated that they were relying upon Guy Ford’s work – Guy Ford, the captive “engineer auditor” in Brookfield’s employ who essentially explained that what he did was take the numbers Brookfield gave to him and package them into a glossy report.
The Board’s “story” on this issue changes every time it comes up. It is past time to have an independent forensic financial audit of the verifiable cost of the land, cost of the infrastructure, cost of the lot and what the $29 million in prior bond proceeds actually paid for.
3. The new money that is being issued is pre-authorized debt that was voted on by the eligible electors in 2006. The right to vote on future debt that is not covered by the 2006 pre-authorization still exists. Any new, unauthorized debt would be subject to vote of the citizens.
Response:
This is a very disturbing attempt to create new terms and a false narrative about what happened in 2006.
This reference to “pre-authorized debt” voted on by the 8 Brookfield employees – who were in fact not eligible electors in 2006 – didn’t own property, pay taxes or live here – is the $4.9 billion dollars.
In the first ballot the 8 employees voted to eliminate the right of future residents to vote on issuing tax/bond debt. The 8 Brookfield employees voted to give that right to the board – themselves. And they voted to authorize a total repayment debt of $4.9 billion – repeated again in the bond prospectus.
So, what this anonymous author is not telling the residents, on behalf of the Board, is that the “pre-authorized” debt is $4.9 billion.
What this means is that the 8 Brookfield employees gave the Board – until the 2017 recall it was a Brookfield Board – gave the Board a credit card to issue bond debt up to a repayment value of $4.9 billion.
And under the statute, if we don’t vote to repeal the 2006 ballot, they have authority to issue up to $4.9 billion in repayment value debt for 20 years without getting permission of the voters.
By 2027 no bond debt can issue unless the residents vote in an election – UNLESS WE VOTE ON A NEW BALLOT ISSUE TO REPEAL THE 8 EMPLOYEES OF BROOKFIELD 2006 BALLOT ISSUE SOONER.
So, what this anonymous author is also not telling the residents is that the “right to vote” on “new” debt kicks in 1. ) after we have spent $4.9 billion or 2.) in 2027.
This blatant attempt to mislead the residents rises to the same level as Brookfield telling the residents they could not serve on the board and cancelling the public elections for 11 years “because no one wanted to run”. There is no excuse for this level of distortion and provides yet another reason to recall the current board.
4. The community should be aware that there is significant financial experience available to the Districts. There are two CPAs serving as Directors. John Wendling, the Chair of the Finance Committee, is a senior vice president in the UMB Investment Banking Division’s Public Finance Group, with 15 years of public financing experience (including municipal/special district bonds). The Districts also have engaged the services of a highly experienced public financing advisor, Jim Mann, who is a Senior Municipal Advisor with Ehlers Public Finance Advisors.
Response:
And the community should be aware that there is even more experience among members of the community who oppose paying Brookfield more money without a full accounting through an independent forensic financial audit.
And the community should be aware that there is even more experience among members of the community who demand that their right to vote on bond debt be restored.
In addition, the board has a duty to the residents – a fiduciary duty – to disclose whatever information or analysis so that the residents can decide for themselves – by a vote – as to whether or not we owe Brookfield any money.
Not only has the Board refused to go forward with an independent forensic financial audit, but it has consistently refused to disclose the data and analysis by Mr. Mann.
Indeed, what information the Board has disclosed is limited to information that they have retained Mr. Mann to provide advice on when to issue new bonds – with no attempt to consider whether or not any money is, in fact, owed.
And, the Board still refuses to restore our right to vote.
5. The financial analysis performed by the Districts’ Finance Committee and financial advisor indicates that, by refinancing (refunding) the current outstanding bond debt at a much lower interest rate, the Districts will be able to issue the additional 10 million in bonds without increasing property taxes.
Response:
There are two significantly independent events here.
The first is refinancing the current bond debt. We are all aware that now is an excellent time to refinance debt – including the bond debt that Brookfield imposed before they were recalled from the Boards.
The second event is what to do with the $5o0,000.00 savings. There are many choices.
1. Reduce our taxes and put that money into our personal savings.
2. Invest that money ($500,000.00 per year for at least 30 years) back into Solterra. There are several large expenses for which there is no savings – sewer pipe repair/replacement; gulch drainage correction and landscaping; new recreational facilities
3. After a vote by all the residents – pay Brookfield more money.
What is the hurry. There is no reason to rush into a decision about how to spend the $500,000.00 in savings.
Saving the money by refinancing has nothing to do with how we decide to spend that savings.
And that should be a community decision. And any decision to go into more debt must be a vote by all the residents.
6. Much of the significant “forensic analysis” that has already been performed has been at the direction of the Districts’ legal counsel and is privileged, which prevents its disclosure to the community and third-parties, including the developer. Release of that information could seriously compromise the Districts and any future legal position. Additional information related to the potential bond refinancing (refunding) and new money project will be available to the community in the upcoming weeks as the project progresses.
Response:
This is clearly not what is meant by an independent forensic financial audit of the verifiable cost of the land, cost of the infrastructure, cost of the lot and what the $29 million in prior bond proceeds actually paid for.
The board is a public body representing citizens – voters.
Public bodies disclose this kind of information routinely in justifying decisions – especially a $10 million plus another $10 million in interest – decision.
It is clear that Brookfield knows more than the residents.
Disclosing this information is necessary to the residents making a decision about the future of the Board and the community.
7. There also have been assertions that the Districts are required to conduct an election on a ballot to invalidate the prior voter authorized bonding if it is submitted by “petition” of the citizens. Unfortunately, that too is simply incorrect legal advice. There is no such petition process for special districts.
No, the clear explanation has been that because the Board refuses to place the issue on the ballot and because the right to citizen initiatives available at every other level of government – are not available to metro districts – the only choice the citizens have is to recall the board.
We have asked the Board to simply pass a resolution stating that no tax/bond debt will be issued without an election and vote by the residents. They said no.
We have asked the Board to place the issue on a ballot – should the right to vote be returned to the residents. They said no.
We have asked how many signatures would it take to put this on the ballot – they can do it at any time even without a request by the residents. Silence.
There is no other option but to recall the board.
If the board will return the right to vote on tax/bond debt to the residents, there may not be a reason to go forward with the recall.
We encourage the Board to continue, but not anonymously, to engage in open discussion on these issues.
Through the open discussion of all the issues,
with ample time for questions, research, answers
and time for the residents to decide what is in their best interest
there is no question that we will be able to make good decisions which will benefit the entire community.
We have started the process.
Lets finish it – one way or the other.
John Henderson
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