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Carol Harding ^r"
From: Myrna Folsom [myrna_f_2000@yahoo.com] ', ? ; :I ]:
Sent: Monday, March 21, 2005 6:13 AM
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To: Carol Harding r t�
Subject: metropolitan districts
To: The Weld Board of County Commissioners
Dear Commissioners:
It would seem that the Weld Board of County Commissioners is about to join the recent mania
for permitting the use of metropolitan districts as a device for financing land use projects. This method
for financing residential and other developments permits developers to procure funding [perhaps
unobtainable from other sources], minimize their financing costs and limit their responsibilities in going
forward with their developments. There are inherent dangers to the public in the use of this type of
financing. Specifically, there is a danger to property owners, who purchase property in these
developments, for a possible intolerable future escalation in their property tax responsibilities and/or
liability for repayment of outstanding district general obligation bonds, if the legal entity of the
developer declares bankruptcy. There is the danger to the bondholders of losing their investment if the
district declares bankruptcy.
After failures of some districts in the early 90s, which resulted in immense tax liabilities falling
on the shoulders of some homeowners and the loss of investment to some district bondholders, the state
legislature was said to have passed legislation protecting these individuals. As far as I can determine,
this protection consists of a new district applicant being required to provide to the Commissioner of
Securities evidence of financial capability to meet principle and interest payments on bonds in a timely
manner. The Commissioner of Securities, an appointee, is responsible for providing the requirements
format for this evidence, evaluates it and, hopefully monitors any changes in it. Apparently, the property
owner is still liable for the general obligation bond payments, the legislature having only given him the
"protection" of the developer/landowner having met the requirements of the Commissioner of Securities
by providing evidence of having the financial wherewithal to repay the bonds.
Metropolitan districts are easily formed, since the developer/owner has control of the votes
needed to create it, determines its rules and votes for funding [thereby "complying" with TABOR], all
with the acquiescence of local government in which the district is located.
In expansive times of the development and construction industries, metropolitan districts may
function adequately. However, in the down cycling of a construction boom, the developer may have
structured his corporate and individual responsibilities so as to escape with little or no financial injury or
civil responsibility, leaving the investor and/or the property owner financially hanging and twisting in
the wind. Government officials will have gone on to other interests and the developer to other
promotions. Judging from the inherent dangers in assuring the solvency of metropolitan districts, to the
property owners and bond investors who become involved in these districts, the best advise remains
caveat emptor.
John Folsom
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3/21/2005 2005-1031
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