Lakewood is moving closer to doing something about the significant metro district abuse. Examples of metro district abuse include:
1. eliminating the right of residents to vote on tax/bond debt,
2. imposing debt to pay unaccounted for expenses by the developer (it turns out residents are actually charged twice for infrastructure costs) and
3. creating a profit center for the development community of loans and interest paid by taxes imposed by the developer.
On Thursday, December 10 at 6:00 pm David Skilling and the Development Dialogue committee will meet one last time to make recommendations to the city council about metro district reform. The agenda directs us to participate by:
“Please visit https://lakewoodspeaks.org to provide public comment during this meeting”
Here is the packet for the meeting:
Here are the recommendations the committee will address at the meeting on Thursday, December 10. My comments and additional recommendations are in red:
“Overview of Proposed Metro District Recommendations
• Potential Recommendation 1:
determining the type of disclosure requirements for the City to impose.
o Ensuring that disclosures are included in the MLS. This can include a simple one-page standalone document that requires signatures. This document should have brief and simple language regarding what a Metro District is for the homebuyer.
o The document should discuss the ultimate cost of that Metro District for the homebuyer. This can include real-life examples of Metro Districts and their costs. The homebuyers should understand their debt obligation.
o The disclosure should include how the Metro District board works and ensures that homebuyers understand that the Metro District board has control to increase the homebuyer’s monthly cost. The board election information should be included in disclosures as well.
o It is important for City Council to consider the exact type of disclosures they want to enforce and what enforcement will ultimately look like.
The disclosure proposed in the material submitted and linked here Metro Memo Lakewood June 11, 2020 2 (see page 6) contains information that can be placed on less than one page and all comes from documents that the developer prepares prior to the final approval for the creation of a special district.
• Potential Recommendation 2:
determining how to transition the power of the board from the development company to the Metro District’s residents.
o There can be an established timeframe for when this transition occurs. The committee has previously discussed that this transition should occur after one year.
o Another transition option is mandating the board shifts power to the residents after the
district achieves a certain percentage of resident controlled homes
o Possibility to mandate that the board must be 100% resident controlled within a certain timeframe.
This is a potential problem. The statutes currently make clear that as soon as a person has a contract to purchase a home in a metro district, that person can vote and serve on the board.
The abuse has been that developers regularly tell residents that they cannot serve on the board until the development is built out 75%. That is a false statement and deliberate misrepresentation to discourage residents from serving on the board.
By adopting a time frame the city will actually change the statute and make what the developers are doing legitimate.
Instead, the city should make clear that a metro district may not issue debt until the board is 100% residents and no debt may be issued without a vote of all the residents at a public election. In other words, only a 100% resident board may propose to issue debt and place the ballot question on a ballot and no debt may issue unless a majority of all the residents vote to issue that debt.
• Potential Recommendation 3:
ensuring Metro District board election information is effectively posted for the district’s residents.
o The districts residents should be mailed the election notice and possibly ballots.
o Posting election information in the local newspaper is not effective.
All communications must be emailed and posted on the metro district web site.
• Potential Recommendation 4:
determining Metro District standards for debt obligations.
o Developers should not profit from the mere existence of a Metro District.
o The interest applied on loans should be curtailed and monitored.
o Interest on loans should not be a profit center for developers. It is important to address how interest is charged and passed to residents.
Again, the most effective way to implement this recommendation is to prohibit any debt being issued until the board is 100% resident and only with a vote by all the residents.
If this restriction is not imposed, then debt should only be issued by a developer controlled board upon application and review by the city council. The city council must also impose disclosures as part of any application to issue debt which includes detailed verifiable invoices for money spent (and to be repaid with the bond debt), detailed verifiable records for how the income from selling improved lots was used and where appropriate a truly independent forensic audit of the developer’s finances regarding the funding for infrastructure costs.
• Potential Recommendation 5:
determining how Metro District debt will be issued to residents.
o The district’s residents should approve new debt.
o What issues should be approved by the board when it is resident controlled?
Yes. Thank you. See above for details.
• Potential Recommendation 6:
determining how City Council provides Metro District oversight.
o Currently, the City does not have resources to employ full time staff.
o Provide language allowing City Council to hold Metro Districts and their boards accountable.
o Possible resources for an independent financial advisor or consultant that assures the Metro Districts spend their money appropriately and evaluate service plans.
o At the time of application requiring the detailed proforma with comparison of market prices. Include a far more detailed presentation than what is currently required.
Yes, thank you. I would be happy to work with staff to come up with the details. If metro districts are to be allowed (Longmont no longer allows metro districts for residential development), they must be closely monitored until they are 100% resident controlled.
An “independent” financial advisor or consultant is problematic. The only individuals providing those kinds of services are working for and loyal to the development community. Better to have city employee or citizen board (made up of citizens elected to current metro district boards) provide oversight.
But most effective control is – no debt without 100% resident board and no debt without vote of all the residents to approve the debt. The money to fund the debt (taxes) does not arrive until the people with the money arrive (homeowners). Any vote to go into debt must wait until the people arrive – and until they control the boards.
• Potential Recommendation 7:
eminent domain requests are approved by City Council.
This is more of a concern by the city than the residents. But it provides another example of a power that metro districts have and should not have – as well as a power that the city can decide not to allow to metro districts. The city creating the metro district has the power to decide what the metro district can do and cannot do and should not be shy about asserting that power. They are creating a new government – a limited government – limited by the city.
• Potential Recommendation 8:
addressing whether multiple districts should be formed in one development project area.
o One option is to eliminate multiple districts.
This should be clearly stated. The statue does not allow multiple districts yet the developers routinely create multiple districts – including the most powerful district which is usually 10 square feet and controlled exclusively by the developer.
• Potential Recommendation 9:
holding a vote on whether to prohibit Metro Districts in the City.
o There can also be a vote for a monetary cap or to limit the size of districts.
This should be the first question. Longmont prohibits metro districts in residential development.
The development community has not met their burden in showing why metro districts are necessary.
Every developer pays for the infrastructure up front before the homes are built. They take raw land and turn it into a developed lot with water, sewer, internet and streets. As the attorney representing the development community has stated, the only purpose for metro districts is to pay the developer back for the cost of the infrastructure. But it is clear that the infrastructure costs are already covered in the money homeowners pay for the developed lot when they buy their home. (See Final CostNarrative.word4)
Until the developer can show that the infrastructure is not already paid for with the cost of the improved lot (in other words, what did that income pay for) they cannot show a need for a metro district.
And, they must also show that metro district financing is a more cost effective way of financing infrastructure than other methods, such as including the per lot cost (typically $30,000) into the cost of the improved lot which is part of the cost of the home.
Metro district financing includes a loan, with interest from the developer; plus a second loan with interest from bond investors to pay off the first (developer) loan and interest; plus millions of dollars for attorneys, district managers and accountants to “run” metro districts.
The simple arithmetic demonstrates that metro districts will always be more expensive and less cost effective in paying for new residental development infrastructure. Metro district housing is the exact opposite of “affordable” housing.
• Potential Recommendation 10:
further examining and deciding which recommendations to move forward from Section C. Financial Recommendations in Jay Hutchison’s previous memorandum.
o This includes recommendations C.1. – C.10.
• Potential Recommendation 11:
further examining and deciding which recommendations to move forward from Section H. City Council Authority to Review District Changes in Jay Hutchison’s previous memorandum.
o This includes recommendations H.1. – H.12.
• Potential Recommendation 12:
further examining preliminary recommendations E.2. and E.3. from Section E. Breadth of Services Provided by a District in Jay Hutchison’s previous memorandum.
Here is an outline of recommendations that the staff made originally and responses to that outline which reflect residents actual experience with abusive conduct in metro districts:
Metro Memo Lakewood June 11, 2020 2
Please consider the observations and recommendations in the response to the staff report linked above.
For ease of reference, here are links to the previous two sessions.
The first session was a good debate between representatives of the development community and residents who are familiar with the abuses of metro districts and favor significant reform.
The second session included a good discussion by the city council persons but during public comment degenerated into a commercial for Cardel’s upcoming application for the creation of a new special district.
Unfortunately, Cardel is one of the persistent metro district offenders. In their most recent metro district application to Jefferson County, they actually were already in a metro district.
But since the metro district they were already in was controlled by citizens, and not Cardel, they took themselves out of the district, and applied to create a new district that they controlled exclusively.
Why – so Cardel could eliminate the right of future residents to vote on bond debt and then impose bond debt and taxes on the unsuspecting residents with no genuine accountability for how that money is spent. See Deer Creek Villas Ballot
The service plan they proposed was a classic example of metro district abuse. See Service Plan Evaluation Deer Creek Villas 1
Here is the video of the first study session which included presentations and discussion from citizens who support metro district reform and from representatives of the development community who oppose metro district reform
Here is the video of the second study session which included observations and commentary by board members and was then dominated by representatives from the developer Cardel.
Metro districts are a potentially dangerous form of local government that taxes to pay developer profits with little or no oversight until the boards are 100% residents. These metro districts are draining billions of dollars of public tax revenue away from roads, schools, public safety and mental health and into developer profits. Now is an opportunity to do something and make a most burdensome local government accountable to the people.
John Henderson