Chapter 8 - § 8.2 • COMMON TYPES OF DISTRICTS AND THEIR FEATURES

• Jurisdiction: Colorado

§ 8.2 • COMMON TYPES OF DISTRICTS AND THEIR FEATURES

Of the approximately 75 varieties of districts, six are commonly used for development and redevelopment:

1) County Local Improvement District (LID).¹ An LID may finance, construct, and operate any public improvement that the applicable county is authorized to provide. Money for the payment of bonds and operating costs of an LID comes from special assessments charged to property owners based on the benefit that the improvement provides to their property.
2) (Municipal) Special Improvement District (SID).² An SID is substantially the same as a LID, but is organized by a municipality, a special district, or a business improvement district.
3) County Public Improvement District (PID).³ A PID may finance, construct, and operate any public improvement that the applicable county is authorized to provide. Money for the payment of bonds and operating costs of a PID usually comes from property taxes and, occasionally, from user fees or special assessments.
4) (Municipal) General Improvement District (GID).⁴ A GID is substantially the same as a PID, but is organized by a municipality.
5) Business Improvement District (BID).⁵ A BID, which may be organized only within a municipality, can finance, construct, and operate business-oriented public improvements and services as described in an operating plan that is approved annually by the governing body of the municipality in which the BID is located. BIDs may receive funds through property taxes, special assessments for improvements or services, fees, or any combination of these.
6) Special Districts. Special districts, including metropolitan districts, are sometimes called Title 32 districts because of the location in the Colorado Revised Statutes of the Special District Act, which governs their organization and powers.⁶ A special district may furnish varied improvements and services as described in the district service plan. These may include water, sewer,⁷ streets, drainage, parks and recreation, fire protection, TV relay and translation, mosquito control, traffic safety protection, public transportation, covenant enforcement, security services, and business development services. Health service districts, mental health care service districts, health assurance districts, forest improvement districts, and ambulance districts also operate under the Special District Act and related statutes. Special districts can impose property taxes and collect fees and charges for facilities and services that they furnish.

In addition, other distinct types of entities, such as urban renewal authorities, downtown development authorities, and public mall improvement districts, are used for specific redevelopment purposes. These are discussed in Chapter 9, "Urban Redevelopment and Public Housing." Finally, a number of home rule cities, such as Denver, have charters giving the city powers to authorize the creation of improvement districts within the city that may have the ability to impose special assessments for local improvements or services.⁸

For the most part, improvement districts (types 1 to 4 above) are like administrative areas within the county or municipality in which they exist. The county board or municipal governing body controls the improvement district's activities.⁹ Because the county or municipal staff plays a major role in planning and constructing the district's improvements, coordination problems with the city or county administration should be minimized.¹⁰ These improvement districts may issue bonds to finance improvements. GIDs and PIDs may, but generally do not, provide ongoing operations.

BIDs (type 5 above) may be governed by the municipal governing body, a board appointed by the municipal governing body, or an elected board. Coordination with the municipality is assured by the statutory requirement that the BID's operating plan be approved annually by the municipal governing body.

Semi-autonomous special districts (type 6 above) operate with the same accountability and transparency as a town or a city government, but without the full range of municipal powers. The creation of special districts is subject to the approval and oversight of general purpose governments. Special districts are legally classified as quasi-municipal corporations and political subdivisions of the state.¹¹ This means that they are "almost cities" for purposes of service provision, although they lack nearly all police powers.

Special districts include several entities that have similar characteristics, including:

• Water districts;
• Sanitation districts;
• Water and sanitation districts;
• Fire districts;
• Ambulance districts;
• Park and recreation districts;
• Health services districts;
• Mental health care services districts;¹²
• Health assurance districts;¹³
• Forest improvement districts;¹⁴
• Early childhood development service districts;¹⁵ and
• Metropolitan districts.¹⁶

Special districts have their own enabling statutory authority and are limited by much of the same statutory and case law as other municipal corporations. For example, a water and sanitation district is limited by its service plan in much the same way as a city is limited by its municipal charter. Districts are also limited by the enabling statutes,¹⁷ specialized statutes granting particular powers,¹⁸ and other statutes that apply not only to the water and sanitation districts, but to other local governments, as well. For example, special districts must: (1) comply with the annual local government budget and appropriation requirements,¹⁹ (2) conduct annual audits or qualify for and obtain an exemption from audit, (3) hold certain elections including a biennial regular election for board members, (4) report election results to the Division of Local Government,²⁰ (5) invest their funds only in those instruments allowed to public entities,²¹ (6) hold open meetings, (7) keep open records,²² (8) comply with the Colorado constitutional prohibitions against certain government debt, and (9) comply with Colorado constitutional prohibitions against aid to private corporations.²³ In addition, their directors must disclose potential conflicts of interest.²⁴

Several cases have interpreted special districts' power to enter into contracts relating to their services.²⁵ The courts have liberally construed special districts' powers to enable them to achieve their limited purposes.²⁶ But liberal construction does not allow activities that go beyond the powers in the Special District Act as interpreted by the courts.²⁷ Special districts are required to comply with their service plans or seek county or municipal approval of material modifications to the plan.²⁸ Special districts enjoy the benefits of governmental immunity.²⁹ They have substantial eminent domain powers, even under some circumstances where a private entity, like a developer, stands to benefit from the use of such power.³⁰ Although in one case, the Colorado Supreme Court held that the acquisition of certain permits may be required prior to use of eminent domain powers in some circumstances.³¹

The special district cannot provide a police department or exercise land planning or zoning powers. Under certain conditions, the metropolitan district may provide security services (provided that all local law enforcement authorities with jurisdiction over the area consent), may provide covenant enforcement and design review services, and may provide services in support of business recruitment, management, and development.³² Special districts may create subdistricts to issue bonds and pay for local improvements.³³

A special district may be thought of as an overlay on the existing jurisdictions within its service area. Because no district has a monopoly on service within its area, both the special district and the county or city may provide similar, but not identical, services. A district cannot reasonably withhold its consent to a municipality providing water service within the district's service area if the district is not capable of providing that service and the municipality can.³⁴ Unless restricted by the service plan, special districts may provide most of their services and improvements both inside and outside of the district boundaries. Coordination between governmental entities can be a problem, but the opportunity exists to alleviate fragmentation problems by carefully clarifying these issues in the service plan and by intergovernmental agreement.³⁵

Importantly, neither special districts nor improvement districts can be created without the consent of the town, city, or county in which they are located, and the municipal or county government has powers to monitor the activities, performance, and borrowings of the district over time.³⁶ Both the thoughtful use of districts and the thoughtful control of district activities are important planning tools available to local governments.

§ 8.2.1—Operating Districts and Funding Districts

The world of districts (especially special districts) can be roughly and unofficially divided into two parts: operating districts and funding districts.

Operating special districts tend to be older, established, populated districts that commonly have a high assessed valuation and a built-out infrastructure. These districts are primarily concerned with operating improvements that already exist and making incremental additions to them.

Funding special districts (commonly called "developer financing districts" when they serve a newly developing area), on the other hand, are used primarily to finance new improvements in newly emerging urban areas and, in certain circumstances, to operate and maintain some or all of the new improvements. Often, these funding districts have a low population, a nonexistent or incomplete infrastructure system, and expectations for increases in assessed valuation through new growth. Part of the attraction of the use of special districts to fund improvements is the...