City Council Study Session Agenda and Packet 2020 01 28

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Kelly PC 999 18th Street, Suite 1450, Denver, CO 80202 Mayor Stolzmann and Councilmembers City of Louisville January 23, 2020 Page 7 duplication in facilities and functions, and citizen confusion and unhappiness. And although, theoretically, districts are not supposed to duplicate services – in fact, that is one of the required findings the local government body makes when approving a service plan – district residents may perceive they are being taxed by both the City and the district for the same services. Some of the issues identified above can be addressed with appropriate provisions in the service plan. For this reason, the service plan is a key document from the City’s standpoint. Financial Issues. The statutes require that the service plan for a proposed district include a financial plan describing all proposed indebtedness. As noted above, the applicable review criteria provide that the governing body shall disapprove a proposed service plan unless the governing body is presented satisfactory evidence that “the area to be included in the proposed special district has, or will have, the financial ability to discharge the proposed indebtedness on a reasonable basis.” The following discusses this statutory finding, as well as investor and tax base issues that may be relevant considerations in reviewing a metro district proposal. A. Required Statutory Finding. It is possible that, if a municipality approves a service plan for a special district that subsequently defaults on its bonds (or otherwise becomes involved in litigation or controversy as to its financial obligations), the municipality might be sued on the theory that it failed to meet a standard of care based on the above-quoted statutory provision. We know of no case where this has actually occurred, and there are very strong counter-arguments and defenses that could be made against such a claim; for example, it could be argued that, if no contrary evidence is presented, the municipality may simply rely on the special district proponents’ statements that the district’s financial plan is sound. But, of course, even a successful legal defense can be expensive. Apart from this risk, a municipality presumably has a general interest in fulfilling its statutory duties in a good-faith, reasonable manner, and there may also be concerns as to possible impacts on the reputation of the municipality or an associated community or area. Therefore, for all these types of reasons, the City may wish to impose standards for proposed service plans aimed at minimizing the risks of special district defaults and financial controversies. Also, conducting a diligent and responsible service plan review may in itself afford considerable protection for the City. If the City determines that its consideration of the financial plan for a proposed special district should be substantive rather than pro forma, the following are some service plan elements that may affect the ability of the City Council to make the required statutory finding: 10