The Denver Post ran several more stories last week on the topic of metro districts being used to build the infrastructure for nearly every new home community in metro Denver.


"When a metro district is created, the only voters are the developers, their spouses, and a few business associates." The Denver Post found that there instances in which only 2 people served on the initial board and made all the decisions. Further the Denver Post discovered that these developer-controlled metro districts have authorized approximately $1.5 TRILLION in debt!


These districts are not in this much debt...yet; but could be without asking the homeowners for a tax increase which is against Tabor. Basically the developers and their close friends have created the world's largest Heloc with a credit limit that may be 3-10 times than they need upfront. And then if more money is needed the developers access their Heloc without voter approval. Then, a year later homeowners' property taxes increase.


The metro district issues both senior bonds and junior bonds. But, the senior bonds can only be owned by banks or institutions such as pension funds and I assume insurance companies. And this debt has interest rates that "are far higher than today's 30 year mortgage rates" the Denver Post found and the interest earned is tax free as they are considered a municipal bond with great tax advantages. WOW! That would be an amazing investment! I want access to this investment.


The metro district may also issue junior bonds that typically the developers hold for themselves. And these bonds carry a much higher interest rate of say 9% with NO monthly or annual payments due to the bond holders. Instead this debt explodes in value. For example, at 9% this debt would double every 8 years. So, in 32 years $10 million of initial debt would be $160 million!!!


And the junior bond holders have very little risk. Why? The Denver Post found "in nearly every case a one-sentence clause buried deep within hundreds of pages of bond paperwork requires a metro district to refinance the debt before the debt can be forgiven."


So, let's say the debt issued by these bonds will be forgiven in 30 years, but in year 29 the junior bond holders demand that their debt be refinanced and they are made whole by the district's homeowners. In my example above, they may receive $140 or $150 million. And I am thinking this money would come to them tax free! And the homeowners property tax bills would increase dramatically to pay this debt.


I would be very cautious about buying a property in a metro district that has Junior Debt!


So, I asked David Migoya who wrote this story for the Denver Post-

Where can I or my clients find out if a certain metro district allows for junior bond holders?


Migoya: Tricky answer. All metro districts, by their taxing and bonding authority, allow for junior bonds. Whether your district is one of them can be determined in a number of ways. You can check a district's financial filings with the Colorado Department of Local Affairs, where they are required to file notice of general obligation debt. That notice will reflect if junior bonds have been sold (sometimes called subordinate debt). To determine if a developer is the holder of the bonds you'll have to request a copy of the bond agreement and the indenture of trust agreement from the district. Both are public records.


The Denver Post highlighted in their editorial on the 11th a subdivision named Orchard Farms in Thornton that is being built by Lennar. This neighborhood of 450 homes "will be paying off the developer's debt until 2053." A homeowner who owns a $500k home in this neighborhood pays property taxes of $3240 for their city and count and an additional $2628 for their metro district for a total tax bill of nearly $5900.


In a story from December 12th I learned that metro districts have "Master" districts and "servant" districts. The "Master" district or "Management" district is controlled by the original Board of Directors who formed the metro district. These insiders from the developer can never be unseated by a resident in the subdivision. Whereas, the "Servant" district is run by the homeowners. But, in most cases the homeowners have NO power or authority.


Here is a list of metro districts in Arapahoe County in which metro district bond debt is higher than the assessed value of their homes as of this year-

  • Copperleaf #3
  • Whispering Pines #1
  • Southshore #2
  • Adonea #2
  • Sorrel Ranch
  • Murphy Creek #3 

You can search each metro district by clicking the link below and scrolling to the bottom and looking under "Search Colorado Metro Districts". This will tell you and your clients what the Tax Mill Levy Rate is in each metro district and lower mill levies mean lower property taxes. I encourage you to save this link and use it often.


At this link David Migoya answers readers' questions


Here is the link for the Colorado Department of Local Affairs where you can do more searching about each metro district-