Monday night the Lakewood City Council will consider a draft Metro District Ordinance at 7:00 pm. It follows years of public comment about the Solterra metro district and Big Sky metro district abuses and a balanced study session over the past two – three years.
Although the draft ordinance offers a couple of significant reforms, for the most part the proposed ordinance will guarantee significant metro district abuses for years to come.
The ordinance is clearly based in part upon materials available from the developer metro district lobbying groups, the Special District Association and the Metro District Education Coalition (created and funded by all the major Special District law firms and consultants).
Our citizens group, Coloradans for Metro District Reform battled them last year in the legislature and defeated significant portions of their preemptive industry reform bill. They have a lot of money and influence.
But once the facts are presented in the open Colorado sunshine, the industry arguments wither away. Their reform bill last year was a superficial effort o provide more disclosure which provided very little disclosure and actually contained a disguised section to legalize one of the most abhorrent abuses.
That section was rejected in response to our efforts. We also succeeded in requiring disclosures to residents by email and regular mail instead of nailing a notice to a fence post in a field or publishing notices in obscure legal notice sections of publications like “The Hub”.
We are working on a comprehensive reform package for 2022.
The Lakewood Ordinance needs a whole lot of work. But the framework is there and with significant amendments it will work.
The initial question remains however, shouldn’t Lakewood simply prohibit metro districts for residential construction, period.
- The City of Longmont did just that.
- Other cities are considering it.
After five years of research and advocacy on metro district abuse and reform, the industry has yet to present the data and the math to dispute two points:
1. The $30,000 per lot that metro district financing allegedly pays for is already paid for with the cost of the developed lot.
- There is no need for metro district financing.
- The cost of the lot already pays for the infrastructure.
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- Traditionally, before metro district financing became so profitable (and popular) for developers beginning in 1982, the cost of the $30,000 per lot for infrastructure was paid for with the cost of the developed lot
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- the developed lot included the cost of the land, the cost of the infrastructure and profit to the developer
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- In Solterra, after the cost of the land and the cost of the infrastructure, the developer made $75 million in profit selling the developed lots to builders and homebuyers.
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- that was before any metro district money was paid
2. Even if the cost of the home is significantly discounted and does not already include the cost of the infrastructure (as yet no one has demonstrated that the cost of a home in a non-metro district is significantly less than the cost of a home in a metro district),
- the industry has failed to present the mathematical equation that supports the theory
- that adding the cost of two loans with two sets of interest,
- including interest on interest
- paid over at least 30 years
- is somehow less expensive
- than including the $30,000 in the cost of the home.
- The traditional way of financing infrastructure is cheaper.
- Metro district financing the is opposite of affordable housing.
If Lakewood does not outright prohibit metro districts for residential construction, as did the City of Longmont, with a little work we can have a metro district ordinance that will stop the abuse and protect future homeowners from the Solterra experience.
And to be sure, Solterra is just one of thousands of districts with the same blueprint for resident abuse. For five years I have researched dozens of metro districts in Colorado and debated the issues multiple times with the industry representatives. I have provided evaluations of districts all over Colorado for homebuyers, parents of new homebuyers, real estate agents and friends. (All at zero cost).
They are all the same. There are varying degrees of abuse, but the blueprint is the same. That is not surprising because the developer metro district attorneys (see the supporters for the Metro District Education Coalition) all use the same recipe with some variation.
And they all lead to the same result – taxing residents without representation based upon single party agreements by a developer with a confessed conflict of interest to pay themselves profits by issuing taxes with no accountability for how the money is spent.
Take Sterling Ranch, for example, On November 5, 2013, 5 employees and family members of the developer “voted” to give the developer authority to impose debt on future homeowners of $21.6 billion. For Solterra it was 8 developer employees who voted to impose $4.9 billion debt in 2006. In both cases the developer employees also voted to eliminate the right of the residents to ever vote on actually issuing the debt.
Every district is the same. The numbers may be different but the blueprint for abuse is exactly the same.
Reform is underway again in the state capital. But the most significant reform can begin right here in Lakewood.
Here is the summary of a critical analysis of the ordinance sent to the City this morning. A link to the full evaluation follows.
Executive Summary
For 11 years public elections in Solterra were cancelled by the developer.
• Residents were told they could not serve on the boards until Solterra was built out.
• That was false. Under Title 32 the moment a resident buys a house in Solterra they were eligible to serve on the board.
• During the reign of the developer the board put the residents into $29 million of bond debt, with interest growing every year for at least 30 years. The developer still demands another $30 million repayment.
• The residents had no vote.
• Requests to account for the $59 million were ignored.
• Subsequent research revealed that the Solterra developer was reimbursed for all the infrastructure costs and made a profit of at least $75 million, even before metro district financing applied.
• Research the past 5 years including detailed evaluations of dozens of metro districts has revealed zero metro districts in Colorado which do not employ virtually all the Solterra abuses. Solterra is not the exception. It is the rule. In Sterling Ranch for example, even worse abuses exist and the developer has authorized himself $21 billion of debt at the expense of the future residents – currently about the same number as Solterra.
• In Solterra it took a recall by the residents, a committee of 26 citizens, to recall the developer board – despite opposition which continues today. The metro district developer community has many friends including lawyers, managers, accountants and public officials who are well compensated or otherwise supportive of the metro district industrial complex that has evolved since the most recent overhaul of the statute in 1982.
• And the only purpose for residential metro districts is to pay the $30,000 average it costs to put the pipes in the ground and pave the streets and sidewalks.
• The industry still has not even attempted to explain why paying two loans and two sets of interest over at least 30 years is cheaper than the traditional way of including that cost in the cost of the developed lot.
• Neither has the industry even attempted to provide the data to show that the $30,000 cost is not already included in the cost of the lot and the homebuyer isn’t paying twice for the same infrastructure cost.
The Draft Ordinance
1. The proposed ordinance perpetuates the “big lie” by promoting developer control until build out. Title 32 requires the opposite and encourages residents to serve on the boards as soon as they have purchased a home in the district.
2. The ordinance leaves it up to the City Manager, instead of City Council after public hearing, to approve ballot issues (the Solterra ballot issue established authority for $4.9 billion in debt based upon the vote of 8 developer employees).
3. The ordinance leaves it up to the City Manager to provide the detail requirements for the model metro district service plan, model disclosure form and model district report form. These are critical details and documents which should be vetted in a public hearing and approved by the City Council.
4. The ordinance adopts the developer view, contrary to Title 32, that once a district is created, it can do anything authorized by Title 32. In fact, Title 32 says the district can only do what is expressly authorized in the Service Plan.
- The ordinance must make clear that the City is creating a limited government – limited by what the Service Plan specifically authorizes – defined by the plan when it is approved; not the developer later on. (I.e. providing sanitation services within the boundary of the district to only residents in the district).
- Limited government is not a blank check to do whatever you want to with a list of things you can’t do.
- Instead, limited government is restricted to a list of expressly stated things you can do. There is no blank check.
5. The ordinance lets the developer tell the City what material modifications are.
6. The ordinance ignores a key power provided in title 32 – conditional approval. The City can conditionally approve the district subject to 100% resident control which means the City can revoke the approval at any time for any reason if the developer abuses their power.
7. The ordinance artificially states the the ordinance only applies to future districts. Current districts must comply as well. No legal reason prevents the City from requiring current districts to do what new districts have to do – such as disclosures to new homebuyers and reporting until the district is 100% end user.
8. The ordinance does not provide for citizen initiative. The City can extend the City right to citizen initiatives to metro districts as part of the Service Plan.
9. The ordinance still allows multi-districts (there is still no authority in Title 32 for multi-districts).
10. The ordinance still acknowledges the existence of single-party conflict of interest agreements where there is no authority in Title 32 for such agreements and they are clearly against public interest. These are the agreements where the developer wears the developer hat and enters into an agreement with himself wearing the district board hat to impose financial debt obligations on the residents who never get to vote. There is no authority for these agreements. The legislature last year expressly denied the industry effort to have them approved through the “back door”.
Single party conflict of interest agreements must be expressly prohibited.
11. The basic financial controls are good but there are several areas that are fuzzy.
12. The use of a hired financial expert is always going to be problematic. It should be a staff person without affiliation with the developer community.
13. The disclosure process is good, but again the ordinance leaves the content up to the City Manager without public hearing and Council approval.
14. The ordinance prohibits master servant relationships which is good. But again, the ordinance essentially gives the developer permission to control the board until the developer has their money and are done building.
15. The ordinance uses “majority of end-users” as the definition of resident controlled boards. The developer has no more right to a seat on a district board than it does City Council. 100% end-users is resident controlled.
Here is the full evaluation sent to Lakewood this morning:
Here is a handbook on Metro District Abuse and Reform:
Handbook for Residents and City – County on Metro District Reform Final
Resident Handbook Exhibits 10 Final
Here is the Solterra Study on double charging for infrastructure costs:
Final Exhibits to Lot Analysis
Final Lots Costs Version 41 Detail
Here is the link to the agenda and board packet and attendance information for the hearing tomorrow night.
How to Connect to provide Public Comment:
By Computer: https://lakewood.zoom.us/j/95033268279
By iPad, iPhone, or Android device on the Zoom App, enter webinar ID: 998 6958 5479
By Telephone: 720-707-2699
Webinar ID: 998 6958 5479, #
Participant ID: #
Press *9 to Request to Speak, you will be prompted when to speak.
Press *6 to Unmute
https://lakewoodspeaks.org/meetings/256
John Henderson
Lakewood counsel members fail to pass ordinance to “reform” residential metro districts designed to continue to allow residential metro district abuse
Lakewood Council members who have accepted donations from the Developer Interest Community fail to recuse themselves from residential district metro district ban vote over counsel member Johnson’s continued exposure of conflict of interest.