Loveland council may let metro district moratorium lapse

Editor’s note: This report was edited to clarify and correct Charles Wolfersberger statement about limiting districts to traditional, fixed debt. BizWest regrets the error.

LOVELAND — Loveland City Council members appear inclined to let the moratorium on metropolitan districts lapse on May 28 but would like to tighten the city’s 17-point criteria for approval of new districts.

In a study session Tuesday night, members of the council reviewed city policies regarding metro districts — the strategy used by developers to tax future residents of districts to pay for installation of infrastructure now. They also heard about potential policy changes, which may be added to or replace city policy in future months.

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Chief Financial Officer Brian Waldes reviewed the city’s 17-point plan, which he said has resulted in fewer metro districts coming before the council for approval and would likely have avoided problems with previous districts had it been in place earlier. The plan was enacted in 2022. Still, he suggested changes, particularly related to additional fees assessed on developers to pay for ongoing monitoring of districts. Other communities charge such fees, he said.

The city has 23 metro districts, he said, the most in the region. Longmont has the fewest, with one. Council members asked Waldes to find out how development is occurring in Longmont without the use of metro districts.

Waldes and two consultants also reviewed how the city could replace metro-district financing with special-district financing or enact a novel hybrid model that would include elements of both metro districts and special districts. 

Metro districts, once approved by city councils, permit developers to set up mini governments that have taxing and bonding authority. Metro districts have flexibility to use bond and tax money for a wide range of infrastructure and amenities. Eventually, the boards that control metro districts are made up of property owners in the district, but initially the developer controls the boards and typically will obligate the district using the bonding authority permitted by law.

Special districts, on the other hand, are enacted by city councils and controlled by city councils. They are limited to assessments on properties in the district for use only on infrastructure. They create an obligation secured by a lien on properties. Property owners can clear the lien by paying it off, or they can transfer the obligation at the time of sale to the next property owner. Selling properties with liens can be more difficult, said Dillon Peters, a consultant from the law firm Butler Snow.

In both cases, future residents of the district pay for improvements to their neighborhoods instead of taxpayers in the city at large.

Metro-district bonds need to be repaid within 30 years. Special-district assessments need to be paid within 20 years, which can mean larger payments over a shorter period if the same amount of money is raised for infrastructure.

A hybrid model that would limit metro district authority to raise revenue might be possible, but it hasn’t been tested in Colorado, Peters said.

Charles Wolfersberger, a certified public accountant who consulted with Waldes on the analysis of metro districts, said the council can use the district service plan to control what metro district boards can do. Cities also can require a five-year financial review, called a quinquennial review, that would evaluate a district’s performance.

Council members, while appreciative of changes to notification requirements that apply to sellers of property in order to let buyers know of their obligations, were concerned that that process is too complicated to give buyers a good picture of future obligations. They asked Waldes to consider policies that level the homeowner expense as much as possible.

Among the requests from council:

• Further disclosures.
• Limitations on debt rates.
• Composition of the boards.
• Mill levy limitations.
• Annual review of metro districts.
• Fees for additional staff time.

“In my mind, we’ll stop growth without metro districts,” said council member Patrick McFall. He was on the council when the 17-point plan was enacted, and he said it solved many issues. He likes districts because it taxes residents of the district, instead of the entire city, for improvements.

Other council members were not as convinced. Council member Erin Black questioned why some communities restrict metro districts to commercial developments instead of both commercial and residential. 

Waldes said he did not know whether elimination of metro districts would cause development to slow. But, “I don’t know how the city would fund the infrastructure at this time without metro districts or special districts.”

Wolfersberger said one “win-win” option would be to prohibit cash-flow bonds and allow districts to only issue traditional debt that is paid similar to a mortgage at a fixed amount over a certain number of years. which require a tax levy over 30 years. “Districts should never debt finance (ongoing) operations; they should always operate with a balanced budget, not push today’s operations onto homeowners down the road,” he said.

Council members Steve Olson and Dana Foley said they want to engage developers in the discussion. Foley also said the council “should push the state” to lengthen the payback period for special-district assessments from 20 to 30 years.