HomeMy WebLinkAbout20090406.tiffBOARD OF COUNTY COMMISSIONERS OF
WELD COUNTY, COLORADO
JEFF HARE, MIKE WELCH, ROD GANTENBEIN AND ANGIE POWELL,
APPELLANTS
v.
BEEBE DRAW FARMS METROPOLITAN DISTRICT NO.1, APPELLEE
BRIEF FROM REI LIMITED LIABILITY COMPANY, PETITIONERS FOR
EXCLUSION OF PROPERTY FROM BEEBE DRAW FARMS METROPOLITAN
DISTRICT NO.1
MaryAnn McGeady
McGeady Sisneros, P.C.
450 E. 17th Avenue, Suite 400
Denver, Colorado 80203
303-592-4380
Counsel for REI Limited Liability Company
January 23, 2009
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2009-0406
TABLE OF CONTENTS
I. ISSUES PRESENTED 1
II. TABLE OF AUTHORITIES 2
III. OPINIONS BELOW 3
IV. STATUTES INVOLVED 3
V. STATEMENT OF FACTS 3
VI. SUMMARY OF ARGUMENT 6
VII. ARGUMENT 7
A. THE BOCC MUST ORDER THE EXCLUSION OF THE REI PROPERTY
BECAUSE IT SATISFIES THE REQUIREMENTS UNDER SECTION 32-1-
501, C.R.S 7
1. The exclusion of the REI Property is in the best interests of District No. 1.
7
2. Exclusion of the property is in the best interests of the REI Property being
excluded 8
3. Exclusion of the REI Property is in the best interests of Weld County 9
4. It is more costly for the REI Property to remain in District No. 1. 10
5. District No. 1 will be able to provide services in a more economical and
sufficient manner if the REI Property is excluded. 10
6. District No. 2 will be able to provide the services at a more reasonable
cost than if the REI Property remained in District No. 1. 10
7. Denying the Petition would have a negative impact on employment and
other economic conditions in District No. 1 and surrounding areas. 10
8. Denying the Petition would have a negative impact on the region, special
district and surrounding areas 1 I
9. An economically feasible alternative is available. 11
10. No additional costs will be levied on the property remaining in District
No. 1. 11
B. THE BOCC SHOULD UPHOLD THE DECISION OF DISTRICT NO. I TO
EXCLUDE THE REI PROPERTY BECAUSE THE DECISION IS
SUPPORTED BY THE EVIDENCE IN THE RECORD AND DISTRICT NO. I
DID NOT ACT ARBITRARILY, CAPRICIOUSLY, OR UNREASONABLY IN
EXCLUDING THE REI PROPERTY. 12
1. The BOCC should review District No. l's decision under an arbitrary and
capricious standard. 12
2. The BOCC should apply the same standard of review that is applied by
courts in actions brought under Rule 106(a)(4) of the Colorado Rules of
Civil Procedure. 14
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3. District No. I's decision to exclude the property is reasonable and
supported by the evidence 15
C. THE PETITION WAS NOT LEGALLY DEFECTIVE AND SHOULD NOT BE
THROWN OUT 15
1. District No. 1 properly excepted from the exclusion 39 acres of property
owned by individuals 16
(a) District No. 1 is authorized under the statute to approve a Petition
for Exclusion in whole or in part. 16
(b) The removal of the 39 acres of property is immaterial to the
exclusion of the remaining property16
(c) The owners of the 39 acres have subsequently petitioned for and
consented to the exclusion 17
2. District No. 1 acted properly and within its authority in allowing REI to
finance the exclusion proceedings on an on -going basis 18
D. THE EXCLUSION OF THE PROPERTY DOES NOT CONSTITUTE A
MATERIAL MODIFICATION OF THE SERVICE PLAN UNDER SECTION
32-1-207(2), C.R.S. OR UNDER THE TERMS OF THE SERVICE PLAN ..... 18
1. The exclusion of the REI Property does not constitute a material
modification of the Service Plan under Section 32-1-207(2), C.R.S. 18
2. The exclusion of the REI Property does not constitute a material
modification of the Service Plan under the terms of the Service Plan. 19
E. THE AMENDED IGA IS NOT AN ILLEGAL INTRUSION UPON THE
EXERCISE OF DISCRETION 26
VIII. CONCLUSION 27
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I. ISSUES PRESENTED
1. Whether, upon applying a heightened "de novo" standard of review, the BOCC should order
the exclusion of the REI Property because the exclusion satisfies all conditions of Section 32-
1-501(3), C.R.S. and better implements the intent of the Service Plan.
2. Whether, upon applying the more appropriate "arbitrary and capricious" standard of review,
the BOCC should uphold District's No. 1's decision to exclude the REI Property because the
Board of Directors did not act arbitrarily, capriciously or unreasonably in ordering the REI
Property to be excluded.
3. Whether the Board of Directors properly removed 39 acres of property from the exclusion
and properly assured that REI would finance the costs of the exclusion proceedings.
4. Whether the exclusion of the Property and the Amended IGA constitute a material
modification of the Service Plan.
5. Whether the Amended IGA is an improper intrusion upon the Districts'- exercise of
discretion.
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II. TABLE OF AUTHORITIES
Paee No.
STATE CASES:
Adams v. City of Colorado Springs,
496 P.2d 1005 (Cob. 1972) 11
City and County of Denver v. Board of Adjustment for the City and Counts, of Denver,
55 P.3d 252 (Cob. Appl. 2002) 8
City of Denver v. Hubbard,
68 P.17 Cob. App. 346 (Cob. Appl.) 19
Greenwood Village v. South Suburban Metropolitan Recreation and Park District,
509 P.2d 317 (Cob. 1973) 9
In re the Organization of the Northern Chafee County Fire Protection District.
Chafee County, Town of Buena Vista v. Northern Chafee County Fire Protection District,
544 P.2d 637 (Cob. 1975) 8
Krupp v. Breckenridge Sanitation District,
1 P.3d 178 (Cob. Appl. 1999) 9
Millis v. Board of County Commissioners of Lorimer County,
626 P.2d 642 (Cob. 1981) 8
State ex. Rel. Senff v. City of Columbia,
343 S.W.2d 888 (Tenn. 1961) 11
Whelden v. Board of County Commissioners of the County of Adams,
782 P.2d 853 (Cob. Appl. 1989) 9
Wolf Creek Ski Corporation v. Board of County Commissioners of Mineral County
170 P.3d 821, 825-826 (Colo. Appl. 2007) 7
STATUTES:
Colorado Revised Statutes, Section 32-1-501, et seq.
Colorado Revised Statutes, Section 32-1-207, et seq.
Colorado Revised Statutes, Section 32-1-401, et seq.
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III. OPINIONS BELOW
This is an appeal of Beebe Draw Farms Metropolitan District No. l's, a quasi -municipal
corporation and political subdivision of the State of Colorado ("District No. 1"), resolution of the
Board of Directors approving the exclusion from its boundaries of certain property owned by
REI Limited Liability Company ("REI").
On October 7, 2008, REI petitioned District No. 1 for the exclusion of approximately
2,226 acres of property from the boundaries of District No. 1. On October 20, 2008, District No.
1 held a public hearing on the exclusion, pursuant to statute, at which time certain residents
within District No. 1 requested the District to table its decision until such time as the impacts of
the exclusion could be fully evaluated.
District No. 1 continued the meeting of the Board of Directors until November 3, 2008.
Upon request of REI, District No. 1 removed from the Petition approximately 39 acres of
property, leaving 2,187 acres of property subject to the exclusion. At the public meeting on
November 3, 2008, District No. 1 considered the factors set forth in Section 32-1-501(2) and
ordered the property to be excluded from the boundaries of the District. Appellants appeal the
decision of District No. 1.
IV. STATUTES INVOLVED
The following statutes are relevant to the determination of the present case: 32-1-207, et.
seq., C.R.S., 32-1-401, et seq., C.R.S, and 32-1-501, et seq., C.R.S.
V. STATEMENT OF FACTS
Beebe Draw Farms Metropolitan District was originally organized in 1986 upon approval
of a Service Plan ("Original Service Plan") by the Weld County Board of County Commissioners
("BOCC") in order to provide for the financing of certain public improvements and services.
The Original Service Plan anticipated a short development period and anticipated construction of
all public improvements immediately. Development within the District was stalled due to
adverse market conditions and financial difficulties of the original developer. In order to meet
new market conditions and to implement the plans of the new ownership interests, a
Consolidated Service Plan ("Service Plan") was approved by the BOCC in May 1999 which re-
organized the original district into District No. 1 and created a new Beebe Draw Farms
Metropolitan District No. 2 ("District No. 2") (together, District No. 1 and District No. 2 are
referred to herein as the "Districts"). The new district structure was created in order to ensure
uniform property tax levies within the Districts and to ensure the imposition of a reasonable tax
burden on property as development commences.
The purpose of the Service Plan was to create a dual district structure in order to provide
a more efficient administration of services and facilities necessary to serve the Beebe Draw
Farms and Equestrian Center ("Development"). The Service Plan specifically provides that
District No. 1 is to function as the taxing district primarily responsible for levying taxes and
raising revenue to pay the operating, capital, and debt service of the Districts in order to fund the
capital improvements. District No. 2 is responsible for administering and operating both
Districts, furnishing all District services, and acquiring and installing all public facilities and
{00140985.DOC v:3) 3
improvements needed to serve the Development. District No. 2 was "organized to assure the
public facilities and improvements necessary to serve subsequent phases of the Development will
be financed in a timely, efficient, and economical manner as development occurs." (Service
Plan, page 16).
The purpose of the Service Plan is to establish guiding principles under which the
Districts must operate. However, the Service Plan also recognized that the exact relationship
between the Districts would be set forth in more detail in one or more intergovernmental
agreements between the Districts. The Service Plan requires the Districts to enter into an
intergovernmental agreement(s) "clarifying the respective responsibilities and the specific
functions and services to be provided by each District." (Service Plan, page 6). The Service Plan
specifically states that the "intergovernmental agreements will be designed to assure the orderly
provision of public services and facilities and the economic administration of the Districts' fiscal
affairs, resulting in a planned residential community which will be an asset to the County."
(Service Plan, page 6). Furthermore, the Service Plan recognizes that the "[i]ntergovemmental
agreements between the Districts will assure that property tax levies remain reasonable and
uniform throughout the Development." (Service Plan, page 9). The Service Plan also provides
that financing of the public improvements may be provided by a tax pledge from District No. l
to District No. 2 pursuant to the intergovernmental agreement(s) between the Districts. (Service
Plan, page 13). Amendments to the intergovernmental agreement(s) shall not constitute a
material modification of the Service Plan and are binding and enforceable agreements between
the Districts regarding implementation of the authorities set forth in the Service Plan. (Service
Plan, page 17).
The Service Plan generally describes the Districts as they existed on the date of approval
of the Service Plan, i.e., "District No. 1 contains approximately 4,120 acres....District No. 2 will
contain approximately 3,408 acres of platted and unplatted property owned by RBI and located
completely within the boundaries of District No. 1." (Service Plan, pages 9-10). The Service
Plan also recognizes that once property has been platted, property within each new phase of the
Development will be excluded from District No. 2 so that the developed property is only
contained within District No. 1.
However, the BOCC recognized the need for flexibility in the boundaries of the Districts
and specifically provided that "[t]he Board of Directors of the Districts will have complete
discretion to approve inclusions or exclusions without processing an amendment of this Service
Plan." (Service Plan, page 11). The BOCC also recognized the need for alternative financing
structures than that originally set forth in the Service Plan and provided that "[u]se of an
alternative financing plan will not require an amendment of the Service Plan" (Service Plan,
page 13). Section I.D of Service Plan provides:
"This Service Plan has been drafted with sufficient flexibility to enable the
Districts to provide the public services and facilities currently anticipated for the
Development under evolving circumstances without the need for numerous
amendments in the future." (Service Plan, page 16).
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On August 8, 2001, the Districts entered into an Intergovernmental Agreement ("Original
IGA") whereby District No. 1 agreed to impose a mill levy, which is determined and set by
District No. 2, in an amount sufficient to raise revenues necessary to finance the construction of
the improvements to serve the Development, but not to exceed forty (40) mills for operating
purposes ("Required Mill Levy"). District No. 1 further agreed to remit the revenues received
from the Required Mill Levy, after payment on the 1998 existing bonds, to District No. 2 in
order for District No. 2 to provide the public improvements.
The Service Plan sets forth the financing plan at the time of approval of the Service Plan
whereby District No. 2 is anticipated to issue revenue bonds or notes secured primarily by
revenues generated from property taxes collected by District No. 1 and that District No. 1 will
issue notes or pledge to District No. 2 property taxes to fund the public improvements. (Service
Plan, page 34). Even though District No. 2 was not initially anticipated to have a separate mill
levy, the Service Plan specifically provides that District No. 2 has the power to impose property
taxes within its boundaries (Service Plan, page 10). "No provision of this Service Plan shall be
construed to restrict the issuance by either District of limited tax obligation bonds....." (Service
Plan, page 34). "Other financing plans may be implemented, if subsequently determined by the
Board of Directors of the Districts to be in the best interests of the Districts." (Service Plan, page
35).
In August 2008, Appellants initiated a recall of three of the directors on the District No. 1
Board — Christine Hethcock, Dan Sheldon and Tom Burke, all individuals having current or prior
affiliations with REI. The grounds for recall stated by Appellants was simply that the directors
did not represent the interests of the homeowners and residents within District No. 1. No other
grounds were stated or have subsequently been articulated by Appellants. In order to avoid the
wasting of taxpayer dollars on a recall election, the three directors resigned their positions and
homeowner residents were appointed to the District No. I board.
In addition to the recall election, certain of the Appellants, as members of the
Development's owners association, have recently made unsubstantiated claims and threats of
litigation against REI with respect to the operation and management of the owners association.
These claims and threats are not directly related to the operation of the Districts but are
illustrative of the general hostility Appellants have toward REI. Appellants appear to be
pursuing whatever avenues possible in attempt to harass and intimidate REI, including this
appeal.
Given the Appellants' hostile course of conduct toward REI and REI's concerns that the
newly appointed resident board members on District No. 1 may elect to violate the terms of the
Service Plan and Original IGA, and pursuant to Section 32-1-501, et sea., C.R.S., on or about
October 7, 2008, REI submitted a petition ("Petition") to exclude approximately 2,226 acres of
its undeveloped property ("Original Exclusion Property") from the boundaries of District No. 1
("Exclusion"). REI's Petition was a direct effort to avoid continued hostilities and costs of
potential litigation to enforce the terms of the Service Plan and the Original IGA.
On October 14, 2008, District No. 1 published notice of a hearing on the Petition in the
Greeley Tribune, which notice required all interested persons to appear at the hearing to show
cause in writing why such Petition should not be granted. The Petition was heard at a public
{00140985.DOC v:3) 5
hearing held on October 20, 2008 ("Public Hearing"). At the Public Hearing, REI presented
evidence that the Exclusion of the Original Exclusion Property was in the best interests of the
Original Exclusion Property, District No. 1 and the surrounding development as a whole and that
the exclusion of the Original Exclusion Property and proposed amendments to the Original IGA
more effectively and efficiently implement the requirements and obligations set forth in the
Service Plan. Also at the Public Hearing Appellants submitted a "Letter from Concerned
Residents" to "express concern about this transaction and ask the Metro District boards to table
the decision until the economic impact...can be evaluated thoroughly and properly by all
parties." (Record of Proceedings, "Letter from Concerned Residents"). At no time during the
Public Hearing did any of the Appellants fully and completely "object" to the Exclusion of the
Original Exclusion Property. Rather, they simply requested the Districts to fully consider the
impacts of such Exclusion.
Upon conclusion of the Public Hearing, District No. I did not approve the Exclusion but
rather requested additional information in order to fully consider the impacts of the Exclusion,
economic and otherwise. District No. 1 also requested that certain amendments be made to the
Original IGA in order to fully implement the new financing plan between the two Districts.
District No. I then scheduled a special meeting for November 3, 2008, at which it planned to
consider the approval or disapproval of the Petition.
At the public meeting on November 3, 2008, REI requested that approximately 39 acres
of property from the Original Exclusion Property be removed from consideration by the Board.
The Board granted REI's request (the Original Exclusion Property minus the 39 acres is referred
to herein as the "REI Property"). After considering the impacts of the Exclusion and the
requirements under Section 32-1-501(3), C.R.S., District No. 1 approved the Exclusion at the
November 3, 2008 public meeting and approved the Amended and Restated Intergovernmental
Agreement between District No. 1 and District No. 2 ("Amended IGA"). District No. 1 filed its
Petition for Exclusion of Property with the Weld County District Court pursuant to statute and
the District Court approved the Order of Exclusion on December 2, 2008.
On November 20, 2008, Rod Gantenbein, Angie Powell, Jeff Hare and Mike Welch,
residents within District No. 1, submitted to the BOCC a letter of appeal of District No. l's
decision to exclude the REI Property. On January 15, 2009, Appellants supplemented their letter
of appeal with Appellants' Brief.
VI. SUMMARY OF ARGUMENT
First, even under an independent "de novo" standard of review, the BOCC should order
the exclusion of the REI Property because its meets the statutory requirements set forth in
Section 32-1-501(3), C.R.S.
Second, under an arbitrary and capricious standard of review, which is the appropriate
standard for a BOCC review, the BOCC should uphold the decision of District No. 1 to exclude
the REI Property because the decision is supported by the evidence in the record and District No.
I did not act arbitrarily, capriciously, or unreasonably in excluding the REI Property.
(00140985.DOC v:3) 6
Third, the BOCC should not require the Petition to be thrown out because District No. 1
properly removed 39 acres of property from the exclusion Petition and properly assured that REI
would finance the costs of the exclusion proceedings.
Fourth, the exclusion of the REI Property and the approval of the related Amended IGA
do not constitute material modifications of the Service Plan under Section 32-1-207(2), C.R.S.,
or under the terms of the Service Plan itself.
Finally, execution of the Amended IGA is within the Districts' authority and is not an
intrusion upon the Districts' exercise of discretion.
VII. ARGUMENT
A. THE BOCC MUST ORDER THE EXCLUSION OF THE REI PROPERTY
BECAUSE IT SATISFIES THE REQUIREMENTS UNDER SECTION 32-1-501, C.R.S.
The first of many red herrings in Appellants' brief is whether District No. l's decision
should be reviewed by the BOCC wider the typical "arbitrary and capricious" standard of review
or a heightened "de novo" standard of review. As discussed in Section VII.B. below,
Appellant's attempt to apply a "de novo" review and get a second "bite at the apple" is contrary
to Colorado law and common sense. More importantly, the distinction is meaningless because
the result is the same regardless of which standard of review is applied.
Section 32-1-501(3) sets forth particular factors for a district to consider when deciding
whether to grant or deny a petition for exclusion. The Board of Directors of District No. I made
a determination with respect to each factor in granting the Petition for Exclusion. Even assuming
for the sake of argument that the BOCC should make its own independent review of the evidence
before the District No. 1 Board, in reviewing the record and the factors in Section 32-1-501,
C.R.S., it is clear that the BOCC must make the same decision as District No. 1 and order the
exclusion of the REI Property.
1. The exclusion of the REI Property is in the best interests of District No. 1.
The Exclusion of the REI Property is in the best interest of District No. 1 because it
ensures the implementation of the capital improvement program set forth in the Service Plan and
ensures that all capital improvements will be provided more efficiently.
The Development is currently planned for approximately 800 single family homes with
approximately 50 homes being built to date. In addition to the reservoir, open space, riding
trails, swimming pool, and playground already constructed, the capital improvement program
approved in the Service Plan also anticipates a major equestrian center, tennis court, basketball
court, multi -purpose court, putting green, cross -county trails, and water, street and drainage
improvements and facilities. The majority of improvements necessary to serve the residents
within District No. 1 and the Development as a whole have yet to be constructed.
It is in District No. l's best interests to ensure that the property within the Development
is fully developed and that it be provided with all facilities and improvements set forth in the
Service Plan. Although a handful of residents may disagree with the provision of the facilities
{00140985.DOC v:3) 7
and improvements set forth in the Service Plan and the long term development plan, it is
ultimately in the best interests of District No. 1 to ensure the full build -out of the Development.
The provision of the public improvements assures the full build -out of the Development and
complies with the "Company's long term development plan" set forth in the Service Plan.
(Service Plan, pages 7-8). Unfortunately, given the animosity of a minority of homeowners
(including the Appellants) towards REI, the original structure and Original IGA creates an
inherent risk that District No. 1's newly appointed board may fail to certify the Required Mill
Levy and/or fail to remit revenues to District No. 2. Although the Service Plan clearly states that
District No. 1's failure to impose the Required Mill Levy and/or remit the revenues to District
No. 2 constitutes a material modification to the Service Plan, District No. 2 would be forced to
protect its right and enforce the terms of the Service Plan and Amended IGA through expensive
litigation. And although District No. 2 will ultimately prevail in its claims against District No. 1,
development would be stalled, land use approvals would be frustrated, and precious taxpayer
dollars would be wasted in the process. It was not the intention of the BOCC in approving the
Service Plan to potentially allow a few residents within District No. 1 to frustrate the funding of
the capital improvements necessary for the entire Development, but rather to see the
Development through full build -out. Allowing District No. 2 to impose its own mill levy for the
financing of the capital improvements mitigates the impact of potential litigation by avoiding the
risk that District No. 1 would refuse to remit revenues to District No. 2 for the financing of the
capital improvements. The new financing structure implemented in the exclusion of the RE
Property and the Amended IGA and authorized by the Service Plan ensures that District No. 2
will continue to receive the revenues necessary for financing of the public improvements and
ensures the continued success of the Development.
Appellants claim that exclusion of the REI Property is not in the best interests of District
No. 1 because it would result in improvements being constructed outside the boundaries of
District No. I without assurance that the REI Property would ever be re -petitioned for inclusion
into District No. 1 and therefore a Service Plan amendment is required. However, the location of
the improvements is immaterial, as the Service Plan sets forth a dual district structure for the
benefit of all property owners within the Development, including property owners within District
No. 1 and District No. 2. Even if the REI Property is not re -included into District No. I in the
future, residents within District No. 1 will continue to have full access to all improvements and
facilities.
Appellants also claim that exclusion is not in the best interests of District No. 1 because it
will require an election in District No. 2, will require District No. 1 to impose a mill levy and
remit the revenues to District No. 2, is an intrusion on the discretion of future boards, that the
Amended IGA constitutes a multiple fiscal year obligation of District No. 1, and that the new
structure does not impose an obligation on REI to petition for re -inclusion into District No. 1.
All of Appellants' claims are discussed in Sections D and E below.
2. Exclusion of the property is in the best interests of the REI Property being
excluded.
It is in the best interests of the property being excluded that the capital improvements
continue to be provided and that the financing be provided in the most efficient manner as
possible. Allowing District No. 2 to impose its own mill levy for the financing of the capital
(00140985.DOC v:3) 8
improvements ensures that District No. 2 will continue to receive the revenues necessary for
such financing and will avoid unreasonable and unnecessary delays in development caused by
groundless litigation. The exclusion of the REI Property will also ensure that taxpayer dollars
are spent on financing the capital improvements rather than on attorney fees and court costs
associated with unnecessary litigation. The provision of the capital improvements for the
excluded REI Property is necessary in order for the REI Property to be developed and to be
marketable.
Appellants contend that exclusion of the REI Property is not in the best interests of the
REI Property because it violates to the terms of the Service Plan and does not ensure the future
development of the REI Property. For the reasons set forth above and in Section E below, we
disagree. Exclusion of the REI Property is specifically authorized by the Service Plan and better
assures the development of the REI Property by guaranteeing that taxpayer dollars flow directly
to District No. 2 for construction costs rather than risking delay and unnecessary litigation.
3. Exclusion of the REI Property is in the best interests of Weld County,
In the Service Plan, the BOCC recognized the benefit incurred upon the County by the
organization of the Districts and the provision of facilities and services to be provided by the
Districts. In particular, the Service Plan provides that the organization of District No. 2 as the
service district and the re -structuring of District No. 1 as the financing district:
"will create several benefits for the Development and the County.
In general these are: (i) coordinated administration of construction
and operation of public improvements and delivery of facilities and
services needed for the Development in a timely manner; (ii)
maintenance of uniform property tax levies and reasonable tax
burdens on all property within the Development through proper
management of the financing and operation of public
improvements; and (iii) assurance that all public improvements are
constructed and paid for in a timely and cost effective manner."
(Emphasis Added) (Service Plan, pages 6-7).
The exclusion of the REI Property from District No. I and the ability of District No. 2 to
impose a mill levy on such property fully implements the factors set forth above and ultimately
benefits the County by ensuring the REI Property is efficiently developed in accordance with
Service Plan approved by the County and thereby creating jobs during construction and
expanding the County's tax base.
Appellants claim that exclusion is not in the best interests of the County because
exclusion is made contrary to the Service Plan and does not give the County any record or
knowledge of such change and therefore does not allow the County to monitor development.
Appellants' arguments are without merit. For the reasons set forth in Section E below, the
exclusion of the REI Property does not constitute a material modification of the Service Plan and
the BOCC specifically granted the Districts complete discretion in approving inclusions and
{00140985DOC v:3} 9
exclusion. Exclusion of the REI Property assures that the REI Property will continue to be
developed and financed as approved by the BOCC through the development approval process.
4. It is more costly for the REI Property to remain in District No. 1.
Should the Petition for exclusion be denied and the REI Property forced to remain in
District No. 1, there is no assurance that the Board of Directors of District No. 1, which is now
100% controlled by resident homeowners, will impose the mill levy on the REI Property and
transmit the revenues to District No. 2 without being required to do so through costly litigation.
Such result would be disastrous to both the REI Property and the residents within District No. I.
Although the Service Plan and Amended IGA require District No. 1 to continue to impose the
Required Mill Levy and remit the revenues to District No. 2, District No. 2 may be required to
enforce this obligation through litigation resulting in a waste of taxpayer dollars. Excluding the
REI Property allows District No. 2 to impose and collect its own mill levy without risk of
interference and ensures the continued success of the Development through the implementation
of an efficient and economic financing plan.
5. District No. 1 will be able to provide services in a more economical and
sufficient manner if the REI Property is excluded.
Exclusion of the REI Property will result in less administrative and operational costs of
District No. 2 and will avoid costs associated with litigation matters between the Districts, which
costs are financed in part by the property owners within District No. 1. Ensuring an efficient and
economical financial plan will ultimately result in overall less costs and a lower mill levy for
residents within District No. 1.
6. District No. 2 will be able to provide the services at a more reasonable
cost than if the REI Property remained in District No. 1.
Excluding the property allows District No. 2 to impose and collect its own mill levy
without risk of interference and will ultimately result in overall less costs and a lower mill levy
for all residents within the Development.
7. Denying the Petition would have a negative impact on employment and
other economic conditions in District No. 1 and surrounding areas.
Appellants claim that denying the Petition will not have any adverse economic impacts
on District No. 1 or surrounding areas. However, should the Petition be denied and the REI
Property forced to remain in District No. 1, there is no assurance that the Board of Directors of
District No. 1, which is now 100% controlled by resident homeowners, will continue to impose
the mill levy on the REI Property necessary to finance and construct the remaining capital
improvements. Such result would be disastrous to the REI Property, the residents within District
No. 1, District No. 2 and the County because no development would occur and no tax base
generated. In addition, taxpayer dollars would be spent on litigation costs rather than the public
improvements.
{00140985.DOC v:3)
10
8. Denying the Petition would have a negative impact on the region, special
district and surrounding areas.
Should the Petition for exclusion be denied and the REI Property forced to remain in
District No. 1, there is no assurance that the Board of Directors of District No. 1, which is now
100% controlled by resident homeowners, will continue to impose the mill levy on the REI
Property which is necessary to finance and construct the remaining capital improvements. Such
result would be disastrous to the REI Property, the residents within District No. 1, District No. 2
and the County because no development would occur and no tax base generated. In addition,
taxpayer dollars would be spent on litigation costs rather than the public improvements.
9. An economically feasible alternative is available.
District No. 2 will be able to provide the services and facilities necessary for the REI
Property in a more economical manner than if the REI Property remained in District No. 1 by
eliminating the potential of taxpayer dollars being spent on frivolous litigation and eliminating
the administrative costs associated in the ongoing accounting and transfer of dollars between the
Districts.
Appellants argue that an economically feasible alternative is not available because
District No. 2 is required to hold an election in November 2009. As described in Section E
below, the BOCC anticipated the need for future elections by either District and specifically
authorized District No. 2 to impose its own mill levy.
10. No additional costs will be levied on the property remaining in District
No. 1.
It will not be necessary for District No. 1 to levy additional costs on other property within
the District if the Petition for exclusion is granted. Appellants claim that District No. I will incur
additional costs because the improvements and facilities may potentially be located outside of
the boundaries of District No. 1. Appellants' argument is simply wrong. The location of the
improvements is immaterial and does not effect the mill levy to be imposed by District No. 1 —
following the exclusion and the approval of the Amended IGA, the mill levy imposed by District
No. I on the property within its boundaries will not change, therefore no additional costs are
levied by District No. 1.
In considering the factors set forth in Section 32-1-501(3) and the record before the
Board of Directors of District No. 1, the BOCC must order the exclusion of the RE1 Property
because it is in the best interests of District No. 1, of the REI Property itself, and of the County to
exclude the REI Property, it is more costly for the REI Property to remain in District No. 1,
District No. 1 will be able to provide services in a more economical manner if the REI Property
is excluded, District No. 2 will be able to provide services to the REI Property, denying the
petition may have a negative impact on employment and economic conditions in District No. I
and the surrounding areas, and no additional costs will be levied on the property remaining in
District No. 1 if the exclusion is granted.
Since the record supports the granting of the exclusion of the REI Property and
Appellants are the challenging party, Appellants have the burden of proof in establishing that the
{00140985.DOC v:3)
11
exclusion of the REI Property does not meet the statutory requirements set forth in Section 32-1-
501(3). Appellants' arguments against the exclusion are either immaterial, exaggerations,
conclusory and unsupported by factual evidence, or are erroneous because they are specifically
authorized by the Service Plan. Appellants have not and cannot meet their burden. As such, the
decision of the District No. 1 Board should be affirmed.
B. THE BOCC SHOULD UPHOLD THE DECISION OF DISTRICT NO.1 TO
EXCLUDE THE REI PROPERTY BECAUSE THE DECISION IS SUPPORTED BY
THE EVIDENCE IN THE RECORD AND DISTRICT NO. 1 DID NOT ACT
ARBITRARILY, CAPRICIOUSLY, OR UNREASONABLY IN EXCLUDING THE REI
PROPERTY.
1. The BOCC should review District No. l's decision under an arbitrary and
capricious standard.
Appellants have requested the BOCC make an independent review of the record and the
factors set forth in Section 32-1-501(3). As stated above, even if the BOCC conducts an
independent review, the BOCC must order the exclusion of the REI Property because it satisfies
the requirements set forth in Section 32-1-501(3). As noted above, whether the BOCC makes a
review under a de novo standard of review or an arbitrary and capricious standard, the result is
the same: the REI Property is excluded from District No. 1. However, for the reasons stated
below, Appellees maintain that the appropriate standard of review by the BOCC is an arbitrary
and capricious standard.
Appellants argue that since Section 32-1-501, C.R.S., does not specifically contain the
words "arbitrary and capricious," then the BOCC must review District No. l's determination
de novo. Appellants argument is illogical and misleading.
It is a long held maxim that statutes should be interpreted to "effect the General
Assembly's intent, giving the words in the statute their plain and ordinary meaning... courts will
not interpret a statute in a manner that leads to an absurd or unreasonable result." Wolf Creek
Ski Corporation v. Board of County Commissioners of Mineral County, 170 P.3d 821, 825-826
(Colo. Appl. 2007). The language in the applicable exclusion statute is clear and self-evident.
Section 32-1-501(5)(b)(I) provides "any petition that is denied or resolution that is finally
adopted may be appealed to the board of county commissioners of the county in which the
special district's petition for organization was filed for review of the board's decision."
(Emphasis Added). The language is unambiguous and clearly sets forth the legislature's intent
that the BOCC make a review of District No. 1's decision. A de novo hearing in front of the
BOCC would not involve a "review" of District No. 1's decision, but rather would require a
completely new hearing upon which the BOCC would make its own independent determination.
If the legislature intended for the BOCC to make an independent determination, it would not
have provided for a review of the board's decision but rather would have provided for a new
hearing with the BOCC.
Furthermore, a de novo standard of review leads to an "absurd or unreasonable result"
because it does not give any deference to the decision of the government which was created by
the BOCC for the very purpose of making such decisions. If the BOCC were authorized to
(00I40985.DOC v:3}
12
conduct a new hearing and make an independent determination, the legislature would have
provided for the entire exclusion process to occur at the BOCC level from the outset. Failing to
give deference to the decision -making body makes the entire exclusion process in front of
District No. 1 a mere formality and completely meaningless. An independent determination by
the BOCC results in a duplication of efforts and the squandering of taxpayer dollars.
The language in the exclusion statute sets forth the same standard of review by the BOCC
as a reviewing court may make of the BOCC's decision. Section 32-1-501(5)(b)(II) provides:
"Upon appeal, the board shall consider the factors set forth in subsection (3) of this section and
shall make a determination whether to exclude the properties mentioned in the petition or
resolution based on the record developed at the hearing before the special district board."
Section 32-1-501(5)(c) further provides:
"Any decision of the board of county commissioners may be
appealed for review to the district court....On appeal, the court
shall review the record developed at the hearing before the special
district board, and, after considering all of the factors set forth in
subsection (3) of this section, shall make a determination whether
to exclude the properties mentioned in the petition or resolution."
Because the language of review by the BOCC and the district court is the same,
Appellants argument for a de novo standard would result in the district court making its own
independent determination on the exclusion of the property, essentially resulting in three separate
and distinct hearings. Such a result would be absurd and unreasonable.
Appellants argue that a de novo standard of review applies because Section 32-1-401,
C.R.S., which addresses inclusions into districts, contains the words "arbitrary, capricious and
unreasonable." Appellants comparison to the inclusion statute is misleading. The language cited
by Appellants is specific to challenges made by counties and municipalities who are potential
alternative service providers to the property proposed to be included into a special district.
Section 32-1-401(2)(d) provides that a "municipality or county which has filed an objection to
the inclusion and which can provide adequate service to the real property described in the
petition within a reasonable time and on a comparable basis may bring an action in the court...to
determine whether the action of the board granting the inclusion was arbitrary, capricious, or
unreasonable." This language is specific to an appeal made directly to a reviewing court and
acknowledges the court must review the decision under an arbitrary and capricious standard.
Furthermore, Section 32-1401, C.R.S., does not, on its face, provide a right to appeal by
individual property owners, but rather only sets forth a right to appeal by counties and
municipalities. This does not mean, however, that property owners are left without remedy but
rather a property owner's appeal of an inclusion decision must be brought under Rule I06(a)(4)
of the Colorado Rules of Civil Procedure.
{ 00140985.DOC v:3)
13
2. The BOCC should apply the same standard of review that is applied by
courts in actions brought under Rule 106(a)(4) of the Colorado Rules of Civil Procedure.
Given the fact that property owners must appeal decisions of special districts to include
property under Rule 106(a)(4) of the Colorado Rules of Civil Procedure and that no case law
exists on the specific issue of the review of a special district's exclusion process, it is appropriate
to look at the standard of review applied in Rule 106(a)(4) actions. Rule I06(a)(4) provides for
judicial review of an agency action and the standard of review has long been established as
whether the agency acted arbitrarily, capriciously, or unreasonably. Here, the BOCC is
essentially acting as an appellate court in reviewing the decision of District No. 1. In Millis v.
Board of County Commissioners, 626 P.2 652 (Colo. 1981) in a suit brought under Rule
106(a)(4) against the board of directors of a water district, the Colorado Supreme Court held that
"the district court may not substitute its judgment for that of the Board, nor may we. Our
function is to determine whether there is any competent evidence to support the Board's
decision." Id. at 660.
In City and County of Denver v. Board of Adjustments for the City and County of
Denver, 55 P.3d 252 (Colo. Appl. 2002), the Board of Adjustments revoked a decision of the
zoning administrator approving a zoning permit for construction. The City and County of
Denver appealed the Board of Adjustments revocation under Rule 106(a)(4). The Colorado
Court of Appeals upheld the decision of the Board of Adjustments and found that the "board's
decision must be affirmed unless there is no competent evidence in the record before the board to
support its conclusion." Id. at 256 (Emphasis Added).
In re the Organization of the Northern Chafee County Fire Protection District, Chafee
County. Town of Buena Vista v. Northern Chafee County Fire Protection District, 544 P.2d 637
(Colo. 1975), the Town of Buena Vista petitioned for the exclusion of its property from the
newly formed Northern Chafee County Fire Protection District ("Fire District"). The Fire
District filed a motion to dismiss the exclusion petition and the district court granted the motion
to dismiss. The Town of Buena Vista appealed and the appeal was transferred from the Court of
Appeals to the Supreme Court. The Supreme Court reversed the decision and held that the "duty
of the trial court is to [r]ender judgments which flow naturally from a determination of the facts
and the applicable law. The purpose of an appellate court is to Irleview judgments, not to make
them for the trial court." Id. at 638 (Emphasis Added). The Supreme Court reversed the
dismissal and ordered that the petition for exclusion be granted. Id.
In Krupp v. Breckenridge Sanitation District, I P.3d 178 (Colo. Appl. 1999), property
owners within the sanitation district appealed the district's setting of fees for services. The
district court upheld the sanitation district's decision and the Colorado Court of Appeals
affirmed. The Court held that "[s]ince the board was in a better position to determine the weight
and credibility of the evidence presented, we decline to substitute our judgment for that of the
board." Id. at 182.
In Greenwood Village v. South Suburban Metropolitan Recreation and Park District, 509
P.2d 317 (Colo. 1973), Greenwood Village petitioned the district court for exclusion from the
South Suburban Metropolitan District. The statute in question provided for a hearing on the
determination of the exclusion of property at the district court level upon the satisfaction of
{00140985.DOC v:3}
14
certain conditions. The district court ordered the property to be excluded and the Colorado
Supreme Court upheld the exclusion under an arbitrary and capricious standard of review. The
Court held that the "statute involved provides a specific statutory procedure for the exclusion of
territory from a special service district. It sets forth conditions which the petitioning
municipality must meet and which the trial court must find have been complied with in order to
obtain exclusion from a district." Id. at 337.
Here, the BOCC is acting as the reviewing court and should therefore review the decision
of District No. 1 under an arbitrary and capricious standard and it should not simply substitute its
own judgment.
3. District No. l's decision to exclude the property is reasonable and
supported by the evidence
The issue then for the BOCC is whether the decision of District No. 1 is supported by the
record and whether District No. I acted arbitrarily, capriciously, or unreasonably in rendering its
decision. In Whelden v. Board of County Commissioners of the County of Adams, 782 P.2d 853
(Colo. Appl. 1989), landowners sought review of a decision by the board of county
commissioners in granting a certificate of designation. The board of county commissioners
made findings on the record of the existence of the factors required pursuant to statute. The
Court of Appeals held that "[a]lthough the evidence presented at the public hearing on these
issues was conflicting, our review persuades us that there is substantial evidence in the records
which, if believed by the Board, supports its findings." Id. at 856.
Here, the Board of Directors of District No. 1 held a public hearing on the Exclusion and
continued the meeting to a later date so that it may fully consider the impacts of the Exclusion.
The Board of Directors of District No. 1 properly considered all the factors set forth in Section
32-1-501, C.R.S,. in determining to exclude the REI Property. There is evidence in the record
from REI that Exclusion of the REI Property is in the best interests of District No. 1, of the
property itself, and of the County and of the surrounding area as a whole by ensuring that the
capital improvements are being provided to the Development in an economic and efficient
manner. In addition, there is evidence in the record that the Exclusion of the REI Property
complies with the terms of the Service Plan approved by the BOCC.
A decision is not rendered unreasonable simply because certain property owners disagree
with the decision. The Board of Directors of District No. 1 made a determination of each of the
statutory requirements and its decision is adequately supported by the record.
Because District No. 1 did not act arbitrarily, capriciously, or unreasonably, the BOCC
must affirm the decision of District No. Ito exclude the REI Property.
C. THE PETITION WAS NOT LEGALLY DEFECTIVE AND SHOULD NOT
BE THROWN OUT
The fact that Appellants have no substantive basis to object to the District No. 1 Board's
decision to exclude the property at issue is evidenced by Appellants' inexplicable reliance on
irrelevant and immaterial procedural issues as the crux of their argument. Appellants attempt to
cloud the issues before the BOCC by making moot arguments regarding the removal of 39 acres
(00140985.DOC v:31
15
from the original Petition. Appellants also complain that the petitioner failed to post a deposit
sufficient to cover the costs of the hearing. Essentially, Appellants would have the BOCC
require the Petition be resubmitted, a new hearing be held, and the Service Plan amended, all to
simply reach the same result at a significantly greater cost to the Districts and the taxpayers.
Simply put, Appellants' contention that the petition should be "thrown out" because of these
claimed "procedural" flaws is misguided and should be summarily rejected.
1. District No. 1 properly excepted from the exclusion 39 acres of property
owned by individuals.
The Petition filed on October 7, 2008 requested the exclusion of approximately 2,226
acres of property from the District and was signed only by REI. However, it was later
discovered that 39 acres of the property included in the 2,226 was actually owed collectively by
REI, Dan Sheldon, Christine Hethcock, Tom Burk, Steve Steele, Kim Delancey and James Fell,
a prior director on the Board of Directors of District No. 1, who is deceased. At the meeting on
November 3, 2008, REI requested the District except from the exclusion these 39 acres since the
Petition was not signed by the individuals with interest in the property and in order to allow REI
time to sort out the respective ownership interests and to determine and locate the beneficiary of
James Fell's estate.
(a) District No. 1 is authorized under the statute to approve a Petition
for Exclusion in whole or in part.
Section 32-1-501(4)(a)(I) provides, in part, "if the board....detetmines that the property
described in the petition or resolution or some portion thereof should be excluded from the
special district, it shall order that the petition be granted or that the resolution be finally adopted,
in whole or inpart" (Emphasis Added). Appellants improperly allege that "this phrase of the
statute presupposes that the Petition was legally sufficient and signed by 100% of the fee owners
of the properties described in the Petition." Appellants are assuming language in the statute that
is not written. On the contrary, Section 31-1-501(1) provides that "the boundaries of a special
district...may be altered by the exclusion of real property by the fee owners or owners of 100%
of any real property situate in the special district filing with the board a petition requesting that
such real property of the fee owner or owners be excluded and taken from the special district."
This section requires that in order for an exclusion to be granted, 100% of the owners of property
must file a petition and consent to the exclusion. Here, although not all property owners
executed the original petition, the property that was ultimately excluded was consented to by
100% of the property owners. The statute clearly gives the Board authority to approve portions
of property contained within a petition and simply requires that, prior to exclusion, 100% of
property owners consent. Here, 100% of the property owners of the 2,187 acres approved in the
Board's order did execute the Petition and consent to the Exclusion.
(b) The removal of the 39 acres of property is immaterial to the
exclusion of the remaining property.
In Adams v. City of Colorado Springs, 496 P.2d 1005 (Colo. 1972), Adams appealed the
annexation of certain property into the City of Colorado Springs because the property finally
annexed by the City differed from the initial description of the property. The Colorado Supreme
{00140985.DOC v:3)
16
Court held that even though the property that was finally annexed differed from the initial
description, "all of the area annexed by the ordinance was described in the published notice. All
of the persons affected were on notice and were represented at the hearing...An immaterial
variation...is not fatal and does not render void an ordinance of annexation." Id. at 1007. In
reaching its decision the Court also cited a Tennessee case in which the court held that a variance
in the descriptions deleting some territory was immaterial as to the area remaining and the statute
was complied with. See State ex. Rel. Senffv. City of Columbia, 343 S.W.2d 888 (Tenn. 1961).
Here, the removal of 39 acres from the original Petition is immaterial to the remaining
2,187 acres. The owners of the 2,187 acres executed the Petition and were represented at the
Public Hearing and at the meeting on November 3, 2008. Furthermore, the public was put on
notice of the Exclusion of the 2,187 acres and no harm was incurred by anyone.
(c) The owners of the 39 acres have subsequently petitioned for and
consented to the exclusion.
Even if the original Petition as filed on October 7, 2008 was "legally defective" because
it did not contain the signatures of the individuals with an interest in the 39 acres, Appellants'
contention is now moot. Since the November 3, 2008 meeting, REI was able to locate the heir of
James Fell, who conveyed her interest in the 39 acres to REI. On or about December 23, 2008,
REI, Dan Sheldon, Christine Hethcock, Tom Burk, Steve Steele and Kim Delancey filed with the
Board of Directors of District No. 1 a petition to exclude the 39 acres that was originally
included in the October 7, 2008 petition and subsequently removed by District No. 1. Clearly
the property owners intended to have the 39 acres excluded and have ultimately consented to
such exclusion. Furthermore, Appellants fail to inform the BOCC of the relationship between
each of the individual property owners to the Development as a whole. Each individual property
owner is currently or has in the past been affiliated with either the Developer or the
Development. It cannot be disputed that it is and was the intention of the individual property
owners to exclude the 39 acres from District No. 1. The removal of the 39 acres was simply to
correct issues in title, and in particular with regard to a deceased individual. The individual
owners were all present either at the Public Hearing or the November 3, 2008 hearing and did not
object to the exclusion of the property. Appellants lack standing to bring a claim on the property
owners behalf when the property owners themselves have not chosen to bring a claim but rather
have proceeded to petition for exclusion of the property.
{00140985.DOC v:3)
17
2. District No. I acted properly and within its authority in allowing REI to
finance the exclusion proceedings on an on -going basis.
Appellants contend that since the Petition was not accompanied by a deposit of funds by
REI, the Petition was legally defective and therefore should have been rejected. Appellants
claim is far-reaching, unsupported by the statute, and impracticable. Although the statute states
that the petition shall be accompanied by a deposit of money sufficient to pay all costs of the
exclusion hearing, the statute does not provide that a petition should be rejected or thrown out
due to a lack of such deposit. Rather, the purpose of this statutory requirement is to ensure that
all costs are paid by the owner petitioning for exclusion and that the remaining taxpayers within
the district are not unreasonably burdened by petitioner's request.
The Petition contained a covenant to pay the costs of the exclusion proceedings, which
the Board determined to be a reasonable assurance that REI would finance such costs. District
No. l's decision to not require a deposit is reasonable considering the fact that the Petition
contained a covenant to pay costs and given the historical relationship between REI and the
Districts. Specifically, REI has financed millions of dollars in construction costs for public
improvements necessary to serve the Development and continues to fund shortfalls in the
Districts' operating revenues despite the fact that the REI is under no legal obligation to do so
and has no agreement with the Districts to be reimbursed for such funding. Furthermore, REI
has in fact requested invoices from the Districts for the exclusion proceedings and has
acknowledged on record, including at the Public Hearing, that it is obligated to pay such costs.
Appellants argument to reject the Petition on the basis that REI did not deposit funds with the
District is an attempt to ignore the underlying issues and only results in requiring the Districts to
respond to unreasonable claims. Requiring the Petition to be resubmitted even though all
property owners of the property have consented to the exclusion and all costs being paid will
result in more taxpayer dollars being spent; dollars better spent on the construction of public
improvements.
D. THE EXCLUSION OF THE PROPERTY DOES NOT CONSTITUTE A
MATERIAL MODIFICATION OF THE SERVICE PLAN UNDER SECTION 32-1-
207(2), C.R.S. OR UNDER THE TERMS OF THE SERVICE PLAN
1. The exclusion of the REI Property does not constitute a material
modification of the Service Plan under Section 32-1-207(2). C.R.S.
Exclusion of the REI Property does not constitute a material modification of the Service
Plan under Section 32-1-207 and no Service Plan amendment is required. Section 32-1-207(2),
C.R.S., requires that material modifications of service plans be made by petition to the board of
county commissioners. Section 32-1-207(2), C.R.S., provides:
(00140985.DOC v:3)
18
"Such approval of modifications shall be required only with regard to changes of
a basic or essential nature, including but not limited to the following: Any
addition to the types of services provided by the special district; a decrease in the
level of services; a decrease in the financial ability of the district to discharge the
existing or proposed indebtedness; or a decrease in the existing or projected need
for organized service in the area. Approval for modification shall not be required
for changes necessary only for the execution of the original service plan or for
changes in the boundary of the special district...."
(Emphasis Added)
Appellants argue that the exclusion of the REI Property is a material modification to the
Service Plan because it materially changes the boundaries of District No. 1. The statute does not
establish any thresholds for exclusion based on acreage of land being excluded, but rather clearly
states that service plan modifications are not required for changes in the boundary of a district. If
the legislature wanted to require service plan modifications for large exclusions, it would have
stated so.
2. The exclusion of the REI Property does not constitute a material
modification of the Service Plan under the terms of the Service Plan.
Appellants argue that because the Service Plan originally contemplated all property lying
within the boundaries of both Districts and platted property being excluded from District No. 2
as property develops, the exclusion of all undeveloped property from District No. 1 and the
future re -inclusion into District No. 1 fundamentally changes the structure of the Districts. We
disagree.
Although the Service Plan originally contemplates all properties lying within the
boundaries of both Districts and that the platted property would be excluded from District No. 2
as property develops leaving all developed property in District No. 1, Appellants fail to
acknowledge the intent of the Service Plan and the structure and guiding principles established
by the BOCC within the Service Plan. The BOCC organized the Districts to ensure the
development of the property as ultimately approved by the BOCC through the development
approval process. The Districts were created to provide a financing mechanism necessary to
implement the development plans approved by the BOCC. The BOCC recognized and
established the need for flexibility in the relationship between the Districts for the financing of
the public improvements. In approving the exclusion and Amended IGA, the Districts complied
with the procedures and guiding principles established by the BOCC and Appellant's attempt to
throw out the Districts' decision is a futile attempt to challenge the underlying process and
structure established by the BOCC.
As mentioned in subsection (1) above, Section 32-1-207(3) specifically provides that
exclusion of property does not constitute a material modification of the Service Plan. If the
BOCC wanted exclusions to constitute a material modification necessitating an amendment to
the Service Plan, it was in its authority to provide such in the Service Plan. For example, the
Service Plan specifically sets forth certain circumstances constituting a material modification:
"The failure by either District to perform its responsibilities hereunder shall constitute a material
100140985. DOC e3)
19
modification pursuant to Section 32-1-207, C.R.S., for which the prior approval of the County
shall be required." (Service Plan, page 5). However, the BOCC did not include language in the
Service Plan that exclusions constitute material modifications of the Service Plan, but rather
specifically provided that the Districts have complete discretion to any exclusions.
Appellants contend that without the property being re -included into District No. 1, the
"existing property in District No. 1 will bear the full brunt of the costs of operations of the
facilities built, administered and operated by District No. 2." Appellants statement is conclusory
and unsupported. The property owners within District No. 2 will be subject to the District No. 2
mill levy and the property owners within District No. I will be subject to the same mill levy as it
was previously subject to — the Required Mill Levy is neither increasing nor decreasing.
Furthermore, the services being provided by District No. 2 will directly benefit the residents
within District No. 1.
Appellants next argue that because REI is not a party to the Amended IGA and there is
no recorded covenant against the property, there is no legal requirement that it re -include the
property into District No. 1 and, therefore, a Service Plan amendment is required. Appellants
argument, then, would suggest that the Service Plan and Original IGA are also invalid.
Appellants fail to acknowledge that REI is not a party to the Original IGA and is not a party to
the Service Plan. As such, a requirement for re -inclusion in a modified Service Plan would no
more bind REI than the Amended IGA. If the Amended IGA is not valid because REI is not a
party, then the Service Plan and Original IGA are also invalid, a result the BOCC clearly did not
intend.
Appellants argue that because District No. 2 must hold an election to authorize the
imposition of an operations and maintenance mill levy, such requirement should be embodied in
an amendment to the Service Plan rather than the Amended IGA. Appellants fail to recognize
that the existing Service Plan already anticipates the need for future elections. At the time of
approval of the Service Plan, the BOCC recognized that alternative financing structures may be
implemented and that future elections will be needed in order to implement such alternative
financing structures. The Service Plan grants both Districts the authority to issue general or
limited tax obligation indebtedness, revenue debt or other obligations to finance and construct
the public facilities and improvements and recognizes that the Districts will hold elections to
seek debt authorization from their electorates to provide for such financing:
"Final determination of the amount of debt for which approval will be sought
from the Districts' electorates will be made, from time to time, by the Board of
Directors of each District based on the then current estimates of construction
costs, issuance costs, and contingencies. Authorization to issue bonds and enter
into the various agreements described herein will be sought from each District's
electorate pursuant to the terms of the intergovernmental agreements between the
Districts."
(Emphasis Added). (Service Plan, page 36).
{00140985.DOC v:3}
20
Section I.D. of the Service Plan recognizes the need for flexibility to enable the Districts
to provide the public services and facilities under evolving circumstances without the need for
numerous amendments in the future.
The exclusion of the REI Property does not alter the general provisions of the Service
Plan or the provision of services throughout the Development. In particular, Appellants cite
language that District No. 2 will contain approximately 3,408 acres of platted and unplatted
property, that property within each new phase of the Development will be excluded from District
No. 2 when such property has been platted and lot sales have been commenced by REI or other
developers, and that as development occurs within District No. 2, improved property will be
excluded from the District, and the total assessed valuation of property within the District will
decrease. The exclusion of the REI Property and the Amended IGA will not modify these
provisions of the Service Plan: District No. 2 will continue to contain approximately 3,408 acres
and platted property will be excluded from District No. 2 and included into District No. 1 as
development occurs.
Appellants specifically object to the Amended IGA because it requires District No. 1 to
impose a mill levy and remit certain revenues therefrom to District No. 2. The Service Plan and
Original IGA obligate District No. 1 to impose the "Required Mill Levy," which is defined in the
Original IGA as the mill levy required to be imposed by. District No. 1 at the rate to be
determined annually by District No. 2, and to remit the revenues from the Required Mill Levy to
District No. 2. The Amended IGA does not modify this District No. 1 obligation. Appellants
claim that the requirement for District No. 1 to impose a mill levy and remit revenues to District
No. 2 constitutes a material modification to the Service Plan. However, this is already
specifically set forth in the Service Plan. Revisions to the Amended IGA are within the powers
of both Districts and the Service Plan specifically acknowledges that amendments to the Original
IGA will not constitute a material modification of the Service Plan.
The following provisions of the Service Plan support the exclusion of the REI Property and the
approval of the alternative financing structure implemented in the Amended IGA:
a. Page 4
• "...the existing District [District No. 1] will function as the taxing
district primarily responsible for raising revenue to pay operating,
capital and debt service expenses of the Districts..."
b. Page 4-5
• "District No. 2 will be responsible for administering and operating
both Districts, furnishing all District services, acquiring and
installing all public facilities and improvements needed to serve
the Development, and providing intermediate financing for future
District projects, as necessary."
{ 00140985.DOC v:3)
21
c. Page 5
• "This Service Plan defines the respective responsibilities and
authorities of, as well as the limitations and restrictions on, the
Districts."
• "The failure by either District to perform its responsibilities
hereunder shall constitute a material modification pursuant to
Section 32-1-207, C.R.S., for which the prior approval of the
County shall be required."
d. Page 6
• "District No. 1 will be responsible for levying property taxes and
raising other revenue needed to pay operation and debt service
expenses, to fund capital improvements, and generally to support
the Financing Plan."
• "District No. 2 will be responsible for administering and operating
the Districts, furnishing all services, acquiring or installing the
public facilities and improvements needed to serve the
Development, and providing intermediate financing for future
District projects, if necessary."
• "Because of the interrelationship between the Districts,
intergovernmental agreements will be executed by the Districts
clarifying the respective responsibilities and the specific functions
and services to be provided by each District."
• "The intergovernmental agreements will be designed to assure the
orderly provision of public services and facilities and the economic
administration of the Districts' fiscal affairs..."
e. Page 6-7
• "The organization of District No. 2 as the service district...and the
re -structuring of District No. 1 as the taxing district to raise
property taxes and other revenue required to pay the costs of
operations and debt service will create several benefits for the
Development and for the County. In general, these benefits are:
(i) coordinated administration of construction and operation of
public improvements and delivery of facilities and services needed
for the Development in a timely manner; (ii) maintenance of
uniform property tax levies and reasonable tax burdens on all
property within the Development through proper management of
the financing and operation of public improvements; and (iii)
(00140985.DOC v:3)
22
assurance that all public improvements are constructed and paid
for in a timely and cost effective manner."
f. Page 7-8
• "The dual district structure will assure that the construction and
operation of each phase of public facilities will be completed in a
manner consistent with the Company's long-term development
plan."
g. Page 8
• "The use of District No. 2 for financing and constructing each new
phase of public improvements needed within the Development and
for managing the public improvements and operations...will
facilitate the implementation of the Financing Plan, even if
timelines change, and will assist in assuring the coordinated
provision of services throughout the Development."
h. Page 9
• "Intergovernmental agreements between the Districts will assure
the property tax levies remain reasonable and uniform throughout
the Development."
Page 10
• "District No. 2 will have the power to impose property taxes only
within its legal boundaries but will be authorized to provide public
services and facilities throughout the Districts..."
Page 11
• "The Board of Directors of the Districts will have complete
discretion to approve inclusion or exclusions without processing an
amendment of this Service Plan."
k. Page 12
• "In order to minimize the proliferation of governmental activities,
District No. 2 will operate and maintain the public facilities and
improvements within the Development in accordance with
intergovernmental agreements with District No. 1."
1. Page 13
• "The Districts may obtain financing for the public improvements,
if necessary, through the issuance of general or limited tax
(00140985.DOC v:3)
23
obligation bonds or other debt instruments of District No. 1,
including the issuance of notes or tax pledges to District No. 2
pursuant to the intergovernmental agreements between the
Districts..."
• "Use of an alternative financing plan will not require an
amendment of the Service Plan..."
m. Page 16
• "District No. 2 will be organized to assure that public facilities and
improvements needed to serve subsequent phases of the
Development will be financed and installed in a timely, efficient,
and economical manner as development occurs."
n. Page 17
• "For purposes of the District Act, the making or amendment of the
intergovernmental agreements shall not constitute a material
modification of this Service Plan. They will, however, be binding
and enforceable agreements between the Districts regarding the
implementation of the authorities set forth in this Service Plan."
o. Page 27
• "As noted in this Service Plan, the relationship between District
No. 1 and District No. 2, including the terms for financing,
constructing, and operating the public services and improvements
needed to serve the Development, will be established in one or
more intergovernmental agreements."
P.
{00140985.DOC v:3)
Page 27-28
• "The intergovernmental agreements will provide comprehensive
procedures and requirements for the payment of: (i) the capital
costs of the public improvements, including the payments to the
Water District and other governmental agencies; (ii)
administrative, operational and maintenance expenses of the
Districts; (iii) costs of issuance of District bonds, debt service, and
related financing expenses of the Districts; and (iv) for the
construction, acquisition, operation and maintenance of all
facilities and services needed for the Development and the
administration of District affairs by District No. 2."
q. Page 28
• "District No. 2 will be responsible under the intergovernmental
agreements for contracting for and supervising the acquisition and
24
construction of all public facilities and improvements needed for
all subsequent phases of the Development..."
• "In addition to payments for financing a portion of the public
improvements within the Development, District No. 1 shall pay
District No. 2 for operating and maintaining the improvements and
administering the affairs of the Districts and any major repair or
replacements of the improvements ("service costs"). District No. 1
shall pay the service costs in accordance with the terms of the
intergovernmental agreements."
r. Page 33
• "The intergovernmental agreements between the Districts will
provide that the obligation of District No. 1 to pay District No. 2
for the costs of financing the public improvements needed for the
Development and for operating expenses incurred for the provision
of services within the Development will constitute voter -approved
financial obligations of District No.1 "
• "District No. 2 may issue revenue or bond anticipation notes to
fund the costs of the public improvements until such times as it is
able to collect revenues from District No. I ..."
s. Page 34
• "District No. 2 may issue revenue anticipation notes or bonds
secured primarily by the revenues generated under the Developer
Fee Agreement and property tax revenues collected by District No.
1. District No. I may issue notes or pledges to District No. 2
secured by property tax levies to fund the acquisition and
installation of other major facilities needed to serve the
Development."
While the Service Plan did initially contemplate the original structure whereby all
property within the Development is contained with District No. I and District No. 1 imposes a
mill levy and remits the revenues from such mill levy to District No. 2, the Service Plan also
contemplates and recognizes that alternate financing structures may be implemented through
intergovernmental agreements without constituting an amendment to the Service Plan and that
the specific terms of the financing and construction of the improvements are to be set forth in
such intergovernmental agreements. Also, the Service Plan specifically authorizes District No. 2
to impose a mill levy within its boundaries. The alternative financing structure being
implemented through the exclusion of the REI Property and the Amended IGA is well within the
authority and obligations set forth in the Service Plan. Finally, the proposed alternative
financing structure better implements the provisions of the Service Plan by assuring that public
facilities and improvements needed to serve the Development will be financed and installed in a
timely, efficient, and economical manner.
(00140985.DOC v:3)
25
E. THE AMENDED IGA IS NOT AN ILLEGAL INTRUSION UPON THE
EXERCISE OF DISCRETION
Appellants argue that the requirements in the Amended IGA which bind District No. 1 to
impose the Required Mill Levy and require District No. 1 to vote in favor of the future inclusion
of the platted property is an illegal intrusion upon the exercise of future boards' discretion in the
exercise of their legislative powers and in the exercise of their quasi-judicial capacity. However,
a municipality, in contracting for services which the municipality has the authority to provide,
does not improperly delegate authority by binding the municipality to pay for these services for a
period of years. In City of Denver v. Hubbard, 68 P.17 Colo. App. 346 (Colo. Appl.), the City of
Denver entered into a contract for a term of ten (10) years for the provision of water and lighting.
The Colorado Court of Appeals held that the provision of essential services are absolute
necessities for municipalities and that a municipality must be able to contract for the construction
and operation of such services. Id. at 997. The Court further held that a multiple year contract is
a "mode of providing for the necessary current expenses of the municipal government" and that
"any other conclusion would be disastrous to the carrying on of the multifarious business affairs
of the city" (Id. at 996, 999). The Court of Appeals also held that because Colorado law does not
expressly limit the power of a city as to the length of a contract, it would not interfere with the
judgment of the city council in fixing the term of the contract.
Here, District No. 1, a quasi -municipal corporation, is granted authority under the statute
and in its Service Plan to provide certain public improvements and services and is obligated
under the Service Plan to impose and remit to District No. 2 such mill levy necessary to finance
the operation, maintenance, and capital costs for such improvements. In approving the Service
Plan, the BOCC recognized that it would be more efficient and cost productive for District No. 2
to provide these services to District No. 1. Like the City of Denver, District No. 1 must have the
authority to enter into a contract with District No. 2 to provide these services to its constituents.
Appellants argument that the Amended IGA cannot require District No. 1 to impose the
Required Mill Levy or approve future inclusions would also suggest that the Service Plan, as
approved by the BOCC, is also an illegal intrusion upon the exercise of future boards. The
Service Plan requires District No. 1 to impose the Required Mill Levy, as determined by District
No. 2. The Service Plan also contemplated platted property to be excluded from District No. 2 as
it developed, essentially requiring District No. 2 to approve such future exclusions. The
Amended IGA does not bind future boards any more than the Service Plan already requires, but
rather further implements an efficient relationship between the Districts. Under Appellant's
argument, if the Amended IGA improperly intrudes on the Districts' exercise of their discretion,
then the Service Plan and Original IGA must also be invalid; a result the BOCC clearly did not
intend.
00140985.DOC v:3)
26
VIII. CONCLUSION
For the foregoing reasons, whether applying a de novo standard of review or an arbitrary and
capricious standard, the BOCC should uphold District No. l's decision and order the exclusion
of the REI Property.
Respectfully Submitted,
MCGEADY SISNEROS, P.C.
MaryAnn MeGeady
450 E. 17th Avenue, Suite 400
Denver, CO 80203
303-592-4380
Attorneys for REI Limited Liability Company
{00140985.DOC v:3}
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