A Bill to End Junior Debt in Metro Districts

House Bill 22-1363 will be heard on the 26th in its first House committee. My biggest concern for the last 2 years is the junior debt being issued and held by the developers or people close them. This bill would provide some much needed Metro District reforms such as—
· Would give local governments more authority and say in reviewing Metro Districts’ Service Plans.
· Set restrictions on where board meetings are held. For many years they have been held 20-30 miles away from the homeowners in said district as the boards don’t want homeowners at their meetings.
· Would end the issuance of junior bonds being held by the developer or builder or people close to them.

In The Denver Post last week they asked Kristi Pollard, Executive Director of the Metro District Education Coalition (the developer’s group), about this bill and she said “capping debt could lead to residents paying more money because the proposed law would shift risk to investors.” The last time I checked capping debt levels lowers the cost for homeowners. Am I missing something?

In response that this bill would keep developers from buying their own bonds Pollard said this could further contribute to higher costs for residents. I am sorry, but the junior debt that is held by the developers increases the costs for homeowners as their tax bills will remain stubbornly high for 50-60 years.

Later, Ms. Pollard said, “Developers have to front money early on in a project in order to keep those costs as low as possible, and this would prohibit that from happening.” Yes, developers front money early on, but senior debt is used first to repay the developers. Then, junior debt is issued, but I can’t think of a good reason why junior debt is needed. I worry this debt is being issued to enrich the developer, their company, and possibly their family in 20-40 years. Or this debt is needed because the developer went over budget in their infrastructure costs and big corporate investors didn’t want to buy all the debt because of this.