Metropolitan District Service Plans: an Overview of Municipal Review

• Publication year: 2004
• Pages: 63
• Citation: Vol. 33 No. 4 Pg. 63

33 Colo.Law. 63 Colorado Lawyer 2004.

2004, April, Pg. 63. Metropolitan District Service Plans: An Overview of Municipal Review

---

63

Vol. 33, No. 4, Pg. 63

The Colorado Lawyer
April 2004
Vol. 33, No. 4 [Page 63]

Specialty Law Columns
Government and Administrative Law News
Metropolitan District Service Plans: An Overview of Municipal Review
by Samuel J. Light

This column provides information to attorneys dealing with various state and federal dministrative agencies, as well as attorneys representing public or private clients in the areas of municipal, county, and school or special district law

Column Editors

Carolynne C. White of the Colorado Municipal League - (303) 831-6411, cwhite@cml.org; Brad Bailey, Assistant City Attorney, City of Littleton - (303) 795-3725 bbailey@littletongov.org; Tiffanie Bleau, Denver, an attorney with Light, Harrington & Dawes, P.C. - (303) 298-1601,
tbleau@lhdlaw.com

About The Author:

This month's article was written by Samuel J. Light, Denver, a partner with Light, Harrington & Dawes, P.C. - (303) 298-1601, slight@lhdlaw.com.
The author thanks attorneys Tami Tanoue and Jane Roberts for their contributions to materials used in the preparation of this article. The author also acknowledges Don Merrion and Lucia Smead, of the Colorado Department of Local Affairs, for their assistance in providing data.

Metropolitan districts often are used to finance development infrastructure in cities and towns. The formation of such a district wholly within an incorporated area requires approval of the municipal governing body. This article provides an overview of the metropolitan district service plan review process and identifies issues related to approval of such a metropolitan district.

There are 2,432 active local governments in Colorado, including 1,126 special districts organized under the Special District Control Act ("Control Act").1 Included among those special districts are 495 metropolitan districts.2 No data are readily available on the number of special districts located wholly within municipalities. Nonetheless, metropolitan districts retain their prominence as entities for the financing of development projects in incorporated areas.3

A development proposal located wholly within a city or town often is accompanied by a proposal to form a metropolitan district to finance the costs of streets, water, sewer, drainage, or other public improvements. A municipality must consent to the formation of a metropolitan district located wholly within its boundaries.4 As such, the municipality essentially has both "veto" power over the formation of the district, and also potential influence over the creation of the district and the content of its "service plan." A service plan is essentially the district's charter governing the facilities, services, and financial arrangements of the district.5 The municipality has certain statutory obligations regarding the review of the special district service plan.

This article is written from the perspective of municipal general counsel for smaller cities and towns. It provides an overview of some of the key issues, procedures, and legal requirements regarding municipal review of metropolitan district service plans. The article focuses on "developer districts" or "financing districts" that are proposed in conjunction with development projects.6 In addition to summarizing issues that may be of particular interest to the municipal governing bodies of such entities, it identifies issues of importance to the municipality in a service plan review.7 In this article, the term "metro district" refers to a development financing metropolitan district proposed to be located wholly within a municipality.

Purposes of Metro
Districts

A metro district is a special purpose local government that provides two or more of the following functions: street improvements, water facilities, sanitation facilities, park and recreation facilities, safety protection, transportation, television relay and transmission, and mosquito control.8 Moreover, a metro district is a discrete governmental entity with a separate, elected governing body and its own taxing, borrowing, and fee collection powers.9

The "typical" metro district proposal in the municipal context proposes that the metro district be formed by developers to finance the significant up-front costs of constructing public improvements required in connection with development. For example, this might include water lines, sewer lines, street improvements, storm drainage, and other improvements. The metro district often will finance and install improvements, then turn the improvements over to the municipality or other service providers.

The metro district also may own and maintain certain improvements - some of which the municipality does not desire to own or operate. These might include a development's entry features, landscape tracts, or amenities intended to serve primarily the development project.

Irrespective of whether the metro district has ongoing obligations to own and maintain improvements, it will remain in existence to levy taxes and pay its debt. The metro district also might impose an operating mill levy and development fees in addition to a debt service mill levy. Subject to the provisions of the TABOR amendment10 and other applicable laws, a metro district can issue tax-exempt municipal bonds and levy property taxes to repay the bonds. This access to the tax-exempt municipal bond financing mechanism is one of the primary financial advantages of formation of a metro district for development infrastructure.11

Issues for Municipal
Governing Body

By statute, the municipal governing body must review and approve the service plan of a metro district proposed to be located within the municipal boundaries. This review includes evaluation of the technical aspects of the proposed service plan. Additionally, the municipal governing body may require assistance from counsel and others in addressing broader legal and policy issues that may be raised as threshold considerations to the proposed formation of a metro district.

A number of these issues, which can become paramount, can be addressed with appropriate provisions in the metro district service plan. However, in this author's experience, both the metro district proponents and municipal staff must be prepared to address such issues early on with the municipal governing body, particularly where there has been little past experience with metro districts.

Potentially Conflicting
Priorities

The governing body may view the municipality as the only "general purpose" local government in the area. As such, it may desire to establish overriding priorities for key issues affecting the citizens. The governing body may view the metro district, which has its own elected officials, as pursuing its own priorities, which could conflict with those of the municipality.

The governing body may view the formation of a metro district as eroding the power of the governing body in the area within the metro district or some larger area. In other words, a measure of the governing body's power is, in essence, transferred to the metro district. There also may be concerns that approval of metro districts will result in: (1) proliferation and fragmentation of local government;12 (2) overlapping of services or "turf battles" over properties to be served; (3) inefficient use of tax resources; (4) duplication in facilities and functions; and (5) citizen confusion regarding provision of services.

Metro District Control

The metro district's voting constituency (as well as its governing body) is made up of taxpaying electors who need not be residents. In the early period after formation, when key financial actions are taken or authorized, the taxpaying electors and governing body members typically are limited to those directly connected with the development.

Over time, as property within the metro district is sold to unrelated persons or entities and the terms of the initial governing body expire, the developer may be expected to lose control of the metro district. However, at the time of metro district formation, there is a concern that the objectives of the district may be frustrated by a change in control Therefore, the control issue requires attention at the time of service plan approval. This issue...