Rooney Valley News

City Council and Staff:

 

I offer the following in response to the hearing March 15, 2021 and in anticipation of the Council’s further consideration of this important issue.

 

Also attached is a handbook for residents and local government and exhibits.  Page 11 of the handbook specifically outlines proposed reform at the city level.

 

1.  One concern expressed by staff are the staff resources it will take to provide responsible oversight.  There was also a concern about potential liability to the city.

 

Longmont similarly addressed the resource issue and decided to prohibit metro districts for residential development.  They have had no problem finding quality developers building homes at the same competitive prices without metro districts.

 

Liability is another reason not to allow metro districts unless the city can stop the abuses.  Approving them with knowledge of the abuses only invites liability.

 

2.  “But for”.  This is a beginning point.  It was expressed during the work sessions but did not come up on March 15.  The developer has an affirmative obligation to provide, with verifiable data, that they cannot build the development the traditional way – by including the cost of infrastructure in the cost of the developed lot.

 

Keep in mind, with metro districts, they get paid back through the bonds.  They already have the money.  Similarly, including the cost in the price of the developed lot pays it back.  But without the two loans, two separate layers of profit and two separate layers of interest.

 

3.  Disclosure to prospective homebuyers.  Let the marketplace work.  Real estate agents call me frequently to obtain evaluations for a particular district.  Lonnie Glessner is a loan officer who regularly puts on a zoom class for agents entitled “How to Protect your Clients from Metro Districts”.  He has up to 100 participants at each class.

 

If you publish a disclosure report for all the metro districts in Lakewood, the agents will gratefully share that with their clients.   In half a page or less it can state:

 

the district mill rate,

the mill rate for all other taxes,

the total authorized finance debt in the ballot issue ($4.9 billion for Solterra),

the total authorized debt in the Service Plan ($91 million for Solterra)
the statement from the audit that the developer board has a conflict of interest with the residents (or not if it is all resident),

the total amount of bond debt issued,

the total amount of annual payments for current bond debt in the next 5 years, and

the remaining amount of bond debt to be issued.

 

All this information is in the published documents.  Residents should not have to hire an attorney and accountant to paw through all these materials and pull it out.

 

4.  The Service Plan is the charter for this new government you are creating.  It can be as restrictive as you want it to be.  There is no right to a metro district.  They do it on your terms or they don’t do it.

 

I will be working on a model service plan.  Page 11 of my handbook (below) provides examples of what it can contain.

 

5.   Get residents on the board as soon as possible.  This is a critical problem.  I am constantly finding districts where the developers are stating a resident cannot serve until the community is built out (as in Solterra) or districts where the developer is creating multi layers of governance to ensure residents never sit on the board making the actual taxing and spending decisions.

 

Require in the Service Plan and by ordinance that every meeting notice include

 

– a statement (also contained in each audit) that the board members have a conflict of interest with the residents.

– a self nomination form

– that as soon as a resident files a self nomination form, the current board member sitting in that position who is serving “because no one else wanted to serve” is immediately disqualified (because now someone is officially stating they are willing to serve), that disqualification creates an immediate vacancy and that resident must be appointed before the next meeting or a special election held if more than one resident files a nomination form.

 

There has been discussion about requiring boards be resident within a certain period of time.  That is a license to cheat.  The developers will then say they have a right to control the boards until that deadline.  When in fact, as soon as a resident buys a house, they have a right to serve.

 

6.  Financial Limits.   This begins with requiring that the developer provide, for review and approval by the city, the proposed ballot issues setting the debt and debt finance authorizations ($4.9 billion for Solterra) and the ballot issue that eliminates the right of the residents to vote on issuing bond debt.

 

The first provision should be limited to 50% of the actual verifiable cost of the infrastructure.

 

This second provision, eliminating the right of the residents to vote on issuing bond debt for up to 20 years must be prohibited.

 

The next opportunity to control the debt limits is in the Service Plan.  The debt limit approved by the city should not exceed 50% of the total amount of verifiable cost to build the infrastructure.  if they need more, they can apply for more authority.

 

The Service Plan application must also contain the “but for” analysis.  They must show with verifiable data that the developer is not double charging the residents for infrastructure – once in the price of the developed lot and a second time in the metro district financing.  This occurred in Solterra.

 

Councilperson Gutwein asked how often the developer comes back to request more debt.  The answer is, currently, never.   They write themselves a blank check in the beginning which the city never sees.  In the ballot issue for Solterra they authorized themselves permission to issue up to $4.9 billion in debt.   Essentially a blank check.

 

7.   Oversight challenges.  This is an issue.  To do it right, it requires a commitment of staff and financial resources.  Again, let the marketplace help.  If the developer is required to disclose verifiable data accessible to the residents, it will be easier to provide that check an balance on how much the infrastructure actually cost, what the money spent on the developed lot paid for and what the proposed bond debt pays for (including the cost of additional profit and interest for the developer and the bond investors.

 

8.  Multi districts.  This is how the developer suppresses the residents’  right to govern themselves.   There is no provision in Title 32 for this multi district structure.  The developers, enabled by their counsel, just do it and as long as no one objects, they get away with it.

 

9.  Affordability.    There is simply no way that adding two layers of profit and two layers of interest to the cost of pipe in the ground makes paying for that pipe in the ground more affordable.

 

Think about it.  The cost of homes in metro districts is the same as the cost of the homes outside of metro districts.  The price is determined by the marketplace.

 

The cost of the home outside the metro district included the cost of the infrastructure in the cost of the developed lot – the way it has been done forever, before metro districts and the way its done in most of the rest of the country.

 

The taxes in metro districts that add on the loan and bond debt with two profit centers plus two layers of interest increase the cost of homeownership significantly.

 

The house in the metro district may cost the same as the house outside the metro district but the cost of the taxes to supposedly  “repay developer debt” makes owning that house unaffordable.

 

Think about it again.  Under the developer’s theory, the cost of buying a house in a metro district would be LESS than the cost of a house outside the district because the cost of the infrastructure would not be included in the price of the developed lot.

 

I guarantee you that the cost of the developed lot is the same whether its in a metro district or not and the cost of the home is never less in a metro district than it is outside a metro district.

 

Why can I make that guarantee – its the marketplace.  The developer and the builder are going to charge as much as they can get.  They are not discounting the cost of the developed lot or the home in anticipation of the big payout with the bonds later on.

 

No, the future bond debt is simply a “bonus” guaranteed by a statutory process that meant well but was twisted into an abusive scheme to provide another profit center for developers.

 

Thank you all again very much for taking the time to address this important issue.  I am available at any time to answer questions or work with staff in helping with the details.

 

Here is the handbook and exhibits:

 

John Henderson

Sent from my iPad