HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 05/13/2008 - USE OF METRO DISTRICTS IN FORT COLLINS DATE: May 13, 2008 WORK SESSION ITEM
STAFF: Mike Freeman FORT COLLINS CITY COUNCIL
Chuck Seest
SUBJECT FOR DISCUSSION
Use of Metro Districts in Fort Collins.
EXECUTIVE SUMMARY
This work session will provide the City Council with an overall understanding of what Metro
Districts are and how they operate. In addition,the second part of the discussion will focus on how
Metro Districts could be used in the City to address infrastructure needs and what the City should
highlight in its policy to achieve the intended results.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
1. Does Council have an understanding of how Metro Districts are used to provide funding for
capital needs?
2. Are Metro Districts an appropriate funding tool for the City of Fort Collins?
3. Has staff highlighted the necessary items to direct the proper usage of Metro Districts within
the City to achieve the intended results?
BACKGROUND
The cost of infrastructure has skyrocketed over the past decade. In response to this,the development
community has turned to the use of Metro Districts to offset a portion of these costs. According to
a recent study released by the State Department of Local Affairs (DOLA), the number of Metro
Districts has grown from just under 300 at the end of 1999 to over 650 by the end of 2004. In five
years, the number has doubled. As a result, nearly all major Front Range communities, with the
exception of the City of Boulder, allow for the use of Metro Districts to fund both services and
capital improvements (i.e., infrastructure).
The development community has pursued this topic with the City of Fort Collins in the past;
however,many ofthose inquiries related to residential construction,which City staff did not and still
does not deem an appropriate use of the Metro District financing tool.
The attached powerpoint presentation provides background on what Metro Districts are,how they
are formed and operate. In summary, Metro Districts are a type of special district created by the
State of Colorado under Title 32,Article 1. If a municipality allows for the use Metro Districts,the
following occurs:
May 13, 2008 Page 2
In summary, Metro Districts are a type of special district created by the State of Colorado under
Title 32, Article 1. If a municipality allows for the use Metro Districts, the following occurs:
1. Property owners of the proposed Metro District submit a Service Plan to the City.
2. The City will review the Service Plan and take one of the following actions:
a. Accept the Service Plan as proposed,
b. Request amendments to the Service Plan, or
C. Deny the Service Plan.
3. If approved, the property owners will schedule an election to form the Metro District.
4. Subsequent to a favorable election and formation of the district, the Metro District will
assess a mill levy that will be collected by the County and remitted to the Metro District to
fund the services and capital improvements outlined in the Service Plan.
5. If the Metro District has been formed solely for financing capital improvements,it will cease
to exist after final pay-off of the debt issued to finance the improvements. Generally,within
35-50 years after the formation of the Metro District.
6. If the Metro District has ongoing operation and maintenance(O&M)responsibilities,it will
have an indefinite lifetime and effectively becomes a perpetual quasi-governmental entity
with equal standing as a health district or other special districts.
The powerpoint presentation also addresses elements of policy that the City could require in order
to match the proper usage of Metro Districts with the shortfalls in funding infrastructure that the
City is now experiencing.
Staff views Metro Districts as a viable funding source to address significant transportation and
utility infrastructure needs of commercial development. In a majority of instances,addressing these
infrastructure improvements will provide benefit to adjacent properties and large areas of the City.
Examples include but are not limited to the following:
• Arterial and collector roadways,
• Storm drainage improvements,
• Extension of utility systems to areas not yet served, and
• Significant improvements deemed necessary by the City.
While staff does not rule out the use of Metro Districts for residential development, staff would
strongly discourage the use of Metro Districts for residential. The primary rationale is that the
proponents of the Metro District will be different parties than future residents who will be saddled
with the responsibility to repay the financing used to fund the improvements. Residential properties
turn over more frequently than commercial. Additionally, there is the impact of the Gallagher
amendment on the original mill levy assessed to finance the Metro District. Over time,as Gallagher
adjusts the non-commercial factor downward, the related mill levy will need to be increased to
maintain the same revenue stream in accordance with the financing. This may prove problematic
for the City as residents seek relief from mill levy burden imposed by a Metro District, whose
formation was approved by the City Council. While the City bears no legal obligation to address
May 13, 2008 Page 3
financially challenged Metro Districts, the City has some history of intervening when other types
of special districts encountered financial difficulty(i.e., SIDs from the 1980s and 1990s).
On the whole,the Metro District tool should be utilized for commercial development and have the
following safeguards included within policy to direct its usage:
1. Focus on significant infrastructure
2. Guide the development to enhance and shape the City
3. Cap the mill levy at 40 mills
4. Limit the lifetime of the Metro District to 40 years.
The attached powerpoint presentation highlights these criteria. Used successfully,the Metro District
financing tool could enhance development within the City and place the burden on parties who
properly understand the risk being assumed and the time limits under which they operate to deliver
the capital improvements.
STAFF RECOMMENDATION
Staff recommends that Council establish a Metro District Policy to direct the usage of Metro
Districts to provide funding for significant capital needs that impose a barrier to development the
City desires to see accomplished. This policy would provide the development community an
understanding of what the City deems as an appropriate usage of Metro Districts. In addition, the
policy would provide the framework addressing usage of financing and an overall"window of time"
in which the Metro District would exist to both construct and pay-off the related infrastructure.
ATTACHMENTS
1. Powerpoint presentation.
2. Comparison between a Special Improvement District, Metro District and a Business
Improvement District.
3. Table of Various Front Range Commercial Metro Districts.
City Council Presentation
Metro District Policy Discussion
May 7 , 2008
Presentation Outline
• Overview of Metro Districts
— What is a Metro District?
— How are they formed ?
— What are they used for?
— Who is impacted ?
• Recommended Fort Collins policy
What is a Metro District?
• A metro district is a type of special district formed
under Title 32 of the Colorado Revised Statutes .
• A special district formed under Title 32 is a quasi -
municipal corporation and a political subdivision of
the State of Colorado .
• A Title 32 special district is able to issue tax-exempt
financing used to finance a portion of the total cost of
public infrastructure and may also own , operate and
maintain public improvements and facilities .
Y
How are Title 32 Districts used ?
• As of April 2008 , the number of Title 32 Districts within the
State of Colorado totaled 1 , 698 ( Dept of Local Affairs ) .
• Within the total there are the following types :
. Metropolitan Districts 17052
. Water or Sanitation Districts or Both 277
. Fire Protection Districts 126
. All Others ( Parks & Rec , Health Svcs , etc . ) 243
• Total of Title 32 Districts in the State 17698
• Metro Districts are the most common type of Title 32
District within the State of Colorado .
How are Metro ( Title 32 ) Districts
Formed ?
• A service plan is submitted to the jurisdiction in which
the property is located . The Service Plan is similar to
a City Charter or State Constitution .
• The jurisdiction ( i . e . . , the City) may impose additional
requirements within the service plan :
— Limit the overall amount of debt that may be
issued
— Limit the mill levy that can be assessed
— Require additional enhancements be provided
Y
What does the Service Plan include ?
• A description of potential capital improvements
and/or possible services to be constructed and/or
funded by the District .
• A map of the District' s boundaries .
• An estimate of population and valuation for
assessment purposes .
• A financial plan showing how improvements and/or
services will be financed . Preliminary schedule
showing when debt will be issued .
Next Steps by District Applicants
• Upon approval of the service plan by resolution of the
City , the City Clerk must notify the State Division of Local
Government of name and type of Title 32 District .
• Upon approval of the service plan , a petition for
organization is filed with the district court .
• Petition must be signed by not less than 30 % of the
taxpaying electors in the proposed district .
• Practical standpoint , electors are effectively the
developer and property owners who support the district .
i
District Court Hearing
• Upon receipt of petition , court sets date of hearing .
• No later than 10 days before court hearing , any
property owner may file a petition to have their
property excluded from the district .
• Pursuant to a court hearing finding the petition
conforms to all legal requirements , the judge shall
order an election on :
• Organization of the proposed district
• Election of the board of directors
• Any financing items
Election Approving District
• Dates : First Tuesday of November or the
First Tuesday in May of even numbered years .
• Generally conducted by mail ballot and only taxpaying
electors may vote .
• Taxpaying electors defined as follows :
Registered to vote in the State of Colorado
. Individual or spouse owns taxable real or personal
property in the proposed district .
Y
Order and Decree
• If a majority of the votes cast are in favor of the
organization of the district , the judge issues an order
and decree organizing the district .
• Organization of the district may not be challenged
unless appeal commenced by the State Attorney
General within 30 days of the order and decree .
• Newly formed district must provide County Assessor
with official notice that a mill levy will be assessed by
July 1 St .
Governing Body of Metro District
• Board of Directors consisting of either 5 or 7 members .
• Directors are elected by a majority vote of eligible electors .
• Eligible elector is any person who is registered to vote in
Colorado and :
— Resides within the metro district ; or
— Owns or is under contract to purchase taxable property
within the metro district .
• Directors must be eligible electors ( likely the developer) .
• Governmental immunity is granted for both district and its
directors acting within the scope of their
Vtr-
Governance Issues
• Metro districts are governments .
• Board of directors meet on a regular basis .
• Will often hire staff (a professional management
company , general counsel and finance personnel ) .
• Board of directors is publicly accountable :
— Must conduct open meetings with proper notice
given to the public .
— Must maintain minutes of all meetings .
Ongoing Requirements of the
Metro District
• Must adopt an annual budget at a public hearing .
• Must complete an annual audit by June 30th .
• May be required to file an annual report to the City
that includes information on the progress of the
district in implementing the service plan .
• In every fifth year after the issuance of voter
approved debt , district may be required by City to file
an application for quinquennial (5-year) finding of
reasonable diligence .
Y i
What Can Metro Districts Build ?
• Street Improvements ( Drainage )
• Transportation Improvements
• Safety Protection Improvements
• Parks and Recreation Improvements
• Water Improvements
• Sanitary Sewer Improvements
• Operations and Maintenance (O & M ) for above items
How are the Improvements Financed ?
• Issuance of tax-exempt bonds , to be repaid by the mill
levy and the full faith and credit of the district .
— Example would be a metro district for a $ 5 million light
industrial park sets a 40 mill levy , issues a 30 year
note to repay $ 1 million of street improvements .
— Another example would be a metro district created on
an 80 , 000 sq . foot office park valued at $ 16 M with
same assumptions to finance $ 3 . 5 million of
interchange and landscape/median improvements .
— City is not legally obligated for the metro district debt .
Y
Recommended Metro District Policies
Staff Recommendations
Key Policy Issues for Discussion
• Economic competitiveness of Fort Collins
• Limit the use of Metro Districts for significant
infrastructure improvements ?
• Allow Metro Districts to fund capital improvements
that are in excess of City requirements?
• Cap the mill levy of the Metro District to protect future
owners/tenants?
• Set an overall time limit on the Metro District?
Y i
YI
Key Policy Issues for Discussion
• Disallow Metro Districts for:
— Residential developments
— Funding ongoing operations and maintenance
except for customary administrative charges
Competitiveness
• The use of Metro Districts has grown statewide from
295 in 1999 to 1052 in 2008 .
• Nearly all Front Range municipalities allow for the
formation of Metro Districts .
• Fort Collins is the only municipality in Northern
Colorado that does not allow Metro Districts .
• Recommendation : allow for limited uses of Metro
Districts .
Y i
Discussion — Competitiveness
• Regional and State-wide developers expect to be
able to use a Metro District where it makes sense for
their project .
• Used in limited ways , they can provide effective
support for desirable projects .
Significant Infrastructure Improvements
• Metro District funds could be used to pay for
significant infrastructure improvements :
— Major arterial , and arterial roadways
— Regional stormwater improvements
— Regional water/wastewater improvements
— Public/private improvements such as open space ,
regional trail connections
• Recommendation : limit the use of Metro District funds
for significant infrastructure .
i
Discussion — Infrastructure Projects
• Harmony Road widening/improvements
• Harmony/ Prospect/Mulberry and 1 -25 interchange
and stormwater improvements
• Arterial roadways in commercial developments
• Linking or connecting regional trails , like Poudre Trail
Enhancements above Requirements
• Metro District funds could be used for paying for
enhancements or improvements ABOVE City
requirements :
— Fagade improvements
— Landscaping
— Other projects that the City may deem to be
important
• Recommendation : allow Metro Districts to provide
funds for enhanced improvements .
Y
Discussion - Enhancements
• The City can work with a developer to not only
finance infrastructure improvements related to their
development but other enhancements that may be
advantageous to the developer or the City .
Cap the Mill Levy
• Many Metro Denver municipalities cap the overall
Metro District mill levy rate at 50 mills as a matter of
policy thereby protecting future owners/investors/
tenants . If the municipality does not cap the mill , the
Metro District may impose a cap .
— City of Loveland does not impose a cap .
— Town of Windsor imposes a 35 mill cap for capital
and a 10 mill cap for operations and maintenance .
• Recommendation : Cap the Mill rate at 40 .
Y
Overall Time Limit
• Municipalities approach the overall time a Metro
District can be in place differently .
— Loveland does not have a limit .
— Windsor has a time limit of 45 years .
• Require the Metro District time limit to start upon the
adoption of the Service Plan .
• Recommendation : Limit the Metro District to 40
years , or sooner if the debt is paid off. Start the time
limit when the Service Plan is adopted .
Discussion - Time Limit
• The recommendation is for the Metro District to exist
for specific purposes then to be terminated .
• Allowing Metro Districts to exist for undetermined
periods of time , or to allow for funding of ongoing
operations and maintenance is not encouraged .
Y
Limit Metro District Uses
• Do not allow Metro Districts for residential
developments , with the exception of Mixed Use
projects
• Do not allow Metro Districts to exist in perpetuity —
don 't allow for ongoing operations and maintenance
to be funded except customary administrative
charges
Summary
• It is the City staff recommendation that the City
Council , should it elect to allow Metro Districts for
commercial and mixed use projects explicitly link
together the concepts :
— Limit the overall debt to be issued
— Limit the mill levy to 40 to protect future owners
and tenants
— Limit the time the District can exist to 40 years or
less
Y
Closing
ATTACHMENT 2
Special Improvement Special or Metropolitan Business Improvement
District District (TITLE 32 ) District
Permitted Improvements : Any improvements that confer Streets , water, sewer , storm Business - oriented improvements
benefit to adjacent properties , draining , parks 8t recreation , 8t services , including streets ,
including streets , street lighting , traffic control , fire , sidewalk, pedestrian malls ,
drainage , sidewalks , facilities for transportation , mosquito control , fountains , paths , decorative
transmitting water or sewage and and TV relay and transmission . structures , planning development
other local improvements . activities , maintenance ,
promotion / marketing , security,
snow removal , and design
assistance .
Powers :
Condemn Property No Yes No
Operate Facilities No Yes Yes
Levy ad valorem taxes No Yes Yes (on commercial property)
Special assessments Yes No Yes
Charge rates , tolls , charges No Yes Yes
Levy sales tax No No No
Issue Bonds :
General Obligation No Yes Yes
Revenue No Yes Yes
Special assessment Yes No No
Formation
Petition Yes Yes Yes
Resolution / ordinance of Yes Yes Yes
governing body
Type of Legal Entity Administrative tool of local Quasi - municipal corporation Quasi - municipal corporation
government
Board may be chosen by variety
Administration Administered through existing Board elected from and by of means including : election by
municipal government agencies property owners in district property owners district,
appointed by City Council , or City
Council acts as board .
Source : Wisor and Crawford " Improvement districts for Colorado counties, cities, and towns " , The Colorado Lawyer (January 2001 )
ATTACHMENT 3
Table of Various Front Range Commercial Metro Districts
Assessed Total Mill Annual
County Name of Metro District Valuation Levy Revenue Notes
Adams Larkridge Metropolitan District No . 1 $7157310 25 , 000 $ 17 , 883 Orchards Mall
Adams Larkridge Metropolitan District No . 2 $87 , 090 25 . 000 $2 , 177
Arapahoe Aurora Centretech Metropolitan District $291220 , 460 40 . 000 $ 1 , 1683818
Arapahoe Centennial 25 Metropolitan District $20 , 7207470 21 , 400 $443 ,418
Arapahoe Centennial Downs Metropolitan District $281216 , 530 33 . 300 $9395610
Arapahoe Dove Valley Metropolitan District $ 1407310 , 820 19 , 984 $27803 , 971 Commercial/ Office Park
Arapahoe Dove Valley Metropolitan District- Bonds Only $798 , 360 13 . 594 $ 105853
Arapahoe Interstate South Metropolitan District $ 1177524 , 390 20 , 000 $27350 ,488
Arapahoe Inverness Metropolitan Improvement District $ 147 , 330 , 920 11 . 820 $ 1 , 7413451
Boulder Superior Metropolitan District No . 2 $81 , 031 , 670 7 . 400 $5993634
Boulder Superior Metropolitan District No . 3 $40 , 3697180 7 , 000 $282 , 584
Boulder Superior/McCaslin Interchange Metro District $21 , 590 , 430 35 . 000 $7553665
Broomfield Interlocken Consol . Metro District $ 1541895 , 727 33 . 500 $5 , 1893007 Flatlrons Retail/ Offices
Broomfield Interlocken Metro District Bonds $ 37126 , 020 33 , 500 $ 104 , 722
Douglas Canterberry Crossing Metro District $24 , 3887780 43 , 000 $ 1 , 048 , 718
Douglas Canterberry Crossing Metro District II $ 10 , 392 , 870 42 . 827 $4455095
Douglas Compark Business Campus Debt Service $ 1 , 1847470 35 , 000 $415456 Business Park
Douglas Compark Business Campus Metro District $ 191808 , 600 42 . 000 $8315961
Douglas E-470 Potomac Metropolitan District $ 5 , 3007750 47 , 309 $2505773
Douglas Franktown Business Area Metro District $ 3 , 598 , 710 25 . 000 $895968
Douglas Park Meadows Metro - Bond $ 32 , 1937500 0 , 000
Douglas Park Meadows Metro $275 , 421 , 990 6387 $ 177595120 Park Meadows Mall
ATTACHMENT 3
Table of Various Front Range Commercial Metro Districts
Assessed Total Mill Annual
County Name of Metro District Valuation Levy Revenue Notes
El Paso Woodmen Hills Metropolitan District $41 , 0657970 0 . 000
El Paso Woodmen Road Metropolitan District $28 , 210, 890 10 . 000 $2823109 Commercial/ Retail
Jefferson Church Ranch Metropolitan District $ 12 , 7161600 25 . 773 $3273745 US 36 Retail/ Hotel
Jefferson Denver West Metro $ 132 , 7407950 35 . 000 $47645 , 933 Colorado Mills
Larimer Centerra Metropolitan District No . 1 $ 150 0 . 000
Larimer Centerra Metropolitan District No . 2 $ 10 , 144, 850 35 . 000 $3555070 Commercial/ Retail
Larimer Centerra Metropolitan District No . 3 $ 14 , 827 0 . 000
Larimer Centerra Metropolitan District No . 4 $ 101144, 850 0 . 000
Larimer Waterfront Metropolitan District $4, 9267480 45 . 979 $2265515
Larimer Windsor Highlands Metro District No . 1 $2 , 4967040 30 . 000 $745881 Residential
Larimer Windsor Highlands Metro District No . 2 $ 1 , 490 , 530 30 . 000 $445716 Residential
Larimer Windsor Highlands Metro District No . 3 $ 1897260 30 . 000 $5 , 678 Residential
Larimer Windsor Highlands Metro District No . 4 $484 , 880 30 . 000 $ 145546 Residential
Larimer Windsor Highlands Metro District No . 5 $ 150 30 . 000 $5 Residential
Weld Water Valley Metro District No . 1 $211459 , 270 20 . 000 $4293185 Residential
Weld Water Valley Metro District No . 2 $ 3 , 193 , 980 20 . 000 $635880 Residential
Weld Windsor Northwest Metro District No . 1 $22271 , 280 30 . 000 $68 , 138 Commercial/ Retail
Weld Windsor Northwest Metro District No . 2 $2 , 430, 510 30 . 000 $725915 Commercial/ Retail
Weld Windsor Northwest Metro District No . 3 $ 38 , 360 30 . 000 $ 1 , 151 Commercial/ Retail
Weld Windsor Northwest Metro District No . 4 $ 1 , 180 30 . 000 $35 Commercial/ Retail