Visions of Special District Christmas Past –
with huge brightly decorated boxes of
unearned profits for developers and
unaccounted for debt for residents
carefully wrapped by special district attorneys
for their ravenous developer clients,
gleefully rubber-stamped for delivery
by our elected city and county representatives
carefully concealed from public view
by all the profiting special district elves
underneath the Christmas tree.
Visions of Special District Christmas Present – Colorado fresh air and sunshine welcoming a gift of information and analysis from the Denver Post, uncensored by, and uninfluenced by, the millions of dollars of developer sponsored election propaganda and Next Door manipulation/censorship.
Visions of Special District Future – Elimination of Special District Abuse through enforcement of current law and new special district ordinances adopted by the cities and counties restored to representing the citizen constituents not just the developer “constituents”.
Here are recent events that reflect three visions of Special District Christmas.
1. Denver Post Articles
If you haven’t seen them yet, here are a series of articles, the first three published online Wednesday and due to be published in hard copy on Sunday:
Colorado metro district debts can take homeowners decades to pay off
How developers use bonds, mill levies to ensure they are repaid
There is little transparency for metro district fees that are supposed to benefit the community
Carroll: In the Wild West of Colorado’s metropolitan districts, developers can take land by force
Guest Commentary: City officials must heed the red flags flying over Colorado’s special districts
Editorial: Rein in the unlimited taxing powers of developers
http://digital.olivesoftware.com/Olive/ODN/DenverPost/Default.aspx
These articles and commentary clearly describe special district abuse. And it is abuse in every sense of the word.
Governments literally owned by developers
Profiting from their own private property taxes
Forcing residents to pay unaccounted for and unearned billions of dollars in pure profits.
2. Jefferson County Commissioners Merry Special District Christmas – November 19, 2019
On November 19, 2019, the Jefferson County Commissioners, two of whose seats are up for election in 12 months, completely ignored the special district self-dealing conflicts of interest presented in the Red Rocks subdivision application. They voted to approve the application even though
A. The application depended in part upon the certain and uncompromised availability of sewer service.
B. The sewer is allegedly being provided by Mt. Carbon Water and Sanitation District. The same Mt. Carbon that went bankrupt in the 70’s and whose debts Solterra residents are paying with a 20 mill property tax.
C. The Mt. Carbon Water and Sanitation District is still bankrupt. Information presented to the Commissioners based upon Mt. Carbon’s own most recent financial audit show a total income for the year of $18,996 and total expenditures for the same year of $305,907.00. That is deficit spending – bankrupt spending – of $286,911.00 for just one year.
D. The same financial audit shows that this difference of $286,911.00 was paid by . . . The developer. In fact, the financial audit discloses that the developer bought all of Mt. Carbon’s water and sewer taps. In other words, the developer owns Mt. Carbon.
E. The developer owns the government that the Commissioners are relying upon to provide the certain and uncompromised public utility of sewer service.
F. And, the Commissioners were also presented with the fact that the board of directors for the Mt. Carbon special district are all . . . Principals and employees of . . . The developer.
G. And the board of directors for the special district created by the developer – RRC (Red Rocks Centre) – are all . . . The same principals an employees of . . . The developer.
H. Oh, and that prohibition in the special district statutes about imposing two special districts (with double the maximum taxing limit and power) upon the same residents – never mind.
The two districts boards (the same people and the same employees of the develoeper) agreed with themselves that they would not mind. So, the new residents will have two special districts (Mt. Carbon and RRC) with twice the taxing power and twice the taxing limit – all controlled so conveniently by the developer.
The Commissioners completely ignored these pulsating red flashing warning lights, completely abdicated their duty to ensure sewer was being provided for the site, didn’t even ask a question, and gleefully went along to get along with the special district elves.
Ho Ho Ho
Merry Special District Christmas.
Carefully wrapped and served on a silver platter by your very own
Jefferson County Commissioners.
3. The Courts
A. The Big Sky litigation
Big Sky Special District (really one person – Tom Morton) suing Green Mountain Water and Sanitation District to force Green Mountain to establish Big Sky (Tom Morton) as the new Master Meter profit making developer controlled sanitation district for all of Rooney Valley.
Still pending. There is a hearing Monday afternoon (December 9, 2019) at 3:00 pm at the Jefferson County Courthouse, Fourth Floor, Division 12 on whether or not to consolidate the five lawsuits filed by Big Sky and their merry band of dependent developers.
Here again is a sample of the briefs from two prior postings:
Big Sky Hearing Rescheduled To December 9, 2019 at 3:00 pm and Recent Briefs
B. The United States Supreme Court may hear an important Colorado Special District Case
A developer was not getting his way and wanted to own private land that the owner refused to sell. So, the developer created a special district and took it by eminent domain. Easy. Special District Abuse.
The Colorado Court of Appeals said not so fast. Two points. First, you were acting as both the developer and the government – self serving conflict of interest. Second, what you did was not in the public interest:
“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. At oral argument, counsel for the District conceded that the District’s directors, all employees of the Developer, operated under a conflict of interest in pursuing condemnation of Parcel C.”
The fact that the Developer threatened to condemn Parcel suggests a kind of alter ego relationship between the District and the Developer, as does the fact that the Developer signed the amendments to the Agreement, but the District did not. In other words, the Developer spoke for the District and the District acted for the Developer.” (Court of Appeals decision is linked below)
The developer appealed to the Colorado Supreme Court. The Colorado Supreme Court did not dispute that there was a self serving conflict of interest but disagreed with the conclusion stating that it was actually ok for the developer/special district to take the private property because it was for a “public purpose”:
“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, neither of these two facts sufficiently demonstrates the District’s bad faith.”
“9 The process of developer-initiated special district formation is by no means peculiar to the District here or Colorado as a state. The Colorado Department of Local Affairs informs as follows: “Metropolitan districts, since they can offer multiple services, are often established by developers to finance, through the issuance of municipal bonds, the infrastructure necessary to support a new subdivision.” Special District Assistance, Special Districts: A Brief Review for Prospective Homeowners 3 (Colo. Dep’t Loc.Aff.),https://drive.google.com/file/d/0B0m67XbcqVYRbVJYVGFmLURqeU0/view [https://perma.cc/VGT3-N6DW]. And across the United States, special districts spend nearly $175 billion and have almost $300 billion in debt. Nadav Shoked, Quasi-Cities, 93 B.U. L. Rev. 1971, 1977 (2013). Nationally, there are almost as many special districts as there are counties, cities, and towns combined. Id.” (Supreme Court Decision is linked below)
So, in essence, the Colorado Court of Appeals noted the undisputed fact that the developer acting as developer and special district board of directors – developer and government at the same time – is a self serving conflict of interest. And, “when serving in their capacities as board members, may not take actions based on their own self-interests as the developer.” Court of Appeals
The Supreme Court did not disagree but concluded that in this case, what the developer was doing was “in the public interest”. And, with respect to the self serving conflict of interest, we’ll look the other way because, in so many words, (my words) “since thats the way they have always done it and because a lot of other people do it in other states, that makes it ok”.
Kinda like saying even though a lot of people commit crimes and have been doing it a long time – its ok. Not the kind of legal reasoning that inspires confidence.
So, the case has now been filed with the United States Supreme Court. The U.S. Supreme Court doesn’t have to take the case and make a decision. The first step is to persuade the U. S. Supreme Court to take the case.
Here is an excerpt from the Brief arguing that the United States Supreme Court needs to decide this case:
That leaves it for now in the hands of the United States Supreme Court on the eminent domain issue.
And invites further reform by the cities, counties and state legislatures on the eminent domain issue.
But the conflict of interest issue is even stronger as to other issues than it was before. The future residents were not an issue in the eminent domain case.
This eminent domain case did not involve the developer speaking for, representing and incurring debt for residents who didn’t even exist yet
Both the Colorado Court of Appeals and the Colorado Supreme Court recognize that developer as developer and government at the same time is a self – serving conflict of interest. That is and always should have been obvious to everyone.
So, whether or not it is bad faith to take private property under eminent domain has no impact on whether or not it is bad faith to represent the resident and the developer at the same time – without permission from the resident.
Those special district agreements signed by the same person for both the residents and the developer at the same time promising that the residents will pay all the developer’s “debts” (read “unaccounted for developer profits”) – aren’t worth the paper they are printed on.
Single party contracts where the single party has a conflict of interest with the non-represented party.
Single party contracts deliberately signed even before there is any reason to enter into the contracts – because the residents and their money won’t arrive for at least another couple years.
That is a conflict. That is bad faith. And they know it.
And the fact that they have gotten away with it for all these years doesn’t make it right. And certainly doesn’t make it legal.
Here is the Colorado Court of Appeals decision, the Colorado Supreme Court decision and the Petition to the United States Supreme Court:
So, we have the visions of the past.
And we have the clear vision of the present provided by the Denver Post. Providing even more clarity, fresh air and sunshine to see what is really going on.
And, we have visions of the future. Opportunities to make this place even better and more prosperous for the little ones we will chase around the house Christmas morning.
We never stop learning. And we never stop making a difference. One way or the other.
John Henderson
Here is an Opinion from the Editorial Staff of the Post appearing in today’s paper. It will be bookended by articles in the post about this “legal thievery” with prior and subsequent stories in the Post.
https://www.denverpost.com/2019/12/11/editorial-metro-districts-developers-taxes-bonds/
Editorial: Rein in the unlimited taxing powers of developers
Denver Post investigation shows metro districts, developers create billions in debt, leaving homeowners with soaring tax bills
As it turns out, giving developers taxing and bonding authority was a bad idea.
METRO DISTRICTS:
DEBT & DEMOCRACY
A Denver Post investigation has found Colorado’s metro districts create billions in debt, leaving homeowners with soaring tax bills.
Read more from week one of the investigation here.
Have a question about this series? Submit it here and reporter David Migoya could answer it in a future story.
Just because we’re $17 billion into this failed experiment of trusting for-profit companies with taxpayer dollars doesn’t mean it’s too late to stop. In fact, a new metropolitan district is likely being considered by a city council or county commission near you this month. These city and county officials should stop approving the formation of new districts immediately until local officials and state lawmakers are able to gain control of the situation.
The situation, to briefly recap the first part of The Denver Post’s investigation “Metro Districts: Debt and Democracy,” is dire. Post reporter David Migoya uncovered multiple ways developers in Colorado are abusing the almost unlimited power granted to them through these metropolitan districts.
Almost no new development is occurring in Colorado that isn’t funded, at least in part, with taxpayer money. But it isn’t local elected officials spending that money and guarding against fraud and abuse. The developers themselves have complete control, sometimes for decades.
Migoya’s reporting included disturbing examples of developers violating public trust.
RELATED: Read more from the Denver Post investigation “Metro Districts: Debt & Democracy” here.
We’ll highlight one bad deal from among hundreds:
Lennar Corporation — one of the nation’s largest homebuilders — is running a metropolitan district that will help pay for the development of a subdivision called Orchard Farms in Thornton. Homeowners in this relatively small community of about 450 homes on 154 acres are being fleeced by compounding interest, bad debt and transfer fees.
According to a bond document obtained by Migoya as part of his investigation, homeowners in this neighborhood will be paying off the developer’s debt until 2053. As of 2018, $12.9 million in debt had been issued by Lennar’s representatives on the metro district board, and it will be paid for through property taxes at rates that rival the city, county and school taxes combined.
Homeowners in Orchard Farms pay about 90 mills in property taxes for Adams County, Brighton School District No. 27J, a library district, a fire district, and the city of Thornton. But for the Big Dry Creek Metropolitan District (now known as Orchard Farms Metropolitan District) homeowners, as of the 2018 abstract of assessment, pay an additional 73 mills (55 mills for the developer’s debt and 18 mills for operations of the metro district). For a home that has an actual value of $500,000, a homeowner would pay about $2,628 for their metro district taxes and $3,240 for their schools, city and county governments, fire and library services.
But that $12.9 million is only part of the story.
ASK A QUESTION
Have a question about our Debt & Democracy investigation? Submit it here and reporter David Migoya could answer it in a coming story.
One of the bonds that employees of Lennar, who serve on the metropolitan district board, decided to issue are “cash flow” junior lien bonds, meaning there are no scheduled payments on the principal until 2035. During that time, the smaller $1.9 million bonds will accrue interest at 9%. Lennar employees serving on the board of Big Dry Creek issued these cash flow bonds, and then Lennar purchased the bonds, meaning they will be repaid $19.8 million by 2053 for a $1.9 million initial investment. This self-dealing is unethical and must be stopped.
Other debt was packaged more responsibly and sold to outside investors at a reasonable interest rate with payments starting soon after closing. We find it suspicious that this $2 million couldn’t be included in the other bonds to save homeowners millions in debt payments. Why look for a better deal when this benefits the bottom line of the developer? It’s a clever way for the builder to maximize their own revenue while not “technically” exceeding the statutory limit that metro district property taxes can not exceed 55 mills for debt.
Oh, and don’t forget that the developer, acting as the metro board, also is imposing an “operations fee” which is a $564 a year fee that is used to pay for operations and maintenance of the district. A separate $500 transfer fee is imposed every time a home is sold in the neighborhood (homeowners likely won’t know about this fee until they sell their home and pay closing costs). The bond document for the “cash flow” bonds also disclosed that a “capital fee” could be imposed on the district to repay debt, although no fee is being assessed now.
RELATED ARTICLES
• Schrader: Colorado’s penchant for allowing developers to tax homeowners for infrastructure is out of control
• Carroll: In the Wild West of Colorado’s metropolitan districts, developers can take land by force
• Guest Commentary: Metropolitan districts and how my community — Solterra — landed in a mountain of debt
• Guest Commentary: City officials must heed the red flags flying over Colorado’s special districts
To illustrate the depths of greed we are talking about, it should be noted that Lennar did loan the district $77,702 to get up and running (attorney’s fees, etc.). Lennar will be repaid with 5% interest for a total of $110,124 by 2022.
Basically every new subdivision on the Front Range, including urban infill projects in Denver, has a similar scheme of debt, taxes and fees in place likely with no oversight from anyone, except maybe your local newspaper reporter.
City and county officials have lost control of billions of taxpayer dollars. Before any more of these projects are approved significant guardrails and controls need to be put in place.
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