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Kelly PC <br />999 18th Street, Suite 1450, Denver, CO 80202 <br />Mayor Stolzmann and Councilmembers <br />City of Louisville <br />January 23, 2020 <br />Page 9 <br /> <br /> <br />district bonds will be marketed only to investors having financial sophistication and resources <br />appropriate for the risk level of the bonds (even though such assurances do not really provide <br />support for the required statutory finding). Investor suitability requirements typically combine <br />minimum bond denomination requirements with provisions limiting sales to institutional or <br />accredited investors, with investment grade ratings and/or credit enhancement as an alternative. <br />Concerns as to the marketing of the district’s bonds may also be addressed by requiring a City <br />disclaimer in all offering materials. Early issues of bonds by metro districts are not typically <br />sold to the general public. These bonds are considered “riskier” bonds as the development has <br />typically not yet occurred and is not guaranteed. The bonds are sold at higher interest rates and <br />to “accredited investors” who are individuals or organizations that are sophisticated investors and <br />thus able to bear the risk of loss of their investment. Additionally, these bonds are typically sold <br />in denominations of $500,000, so the purchasers of these bonds are financially able to purchase <br />bonds in large denominations. <br /> <br />In some instances, a district may want to issue bonds for the commencement of public <br />infrastructure before they are able to be sold to investors, even accredited investors. In that case, <br />a district may issue a bond to a developer, which would allow the district to start these <br />improvements, and then the district would “refund” this obligation when the district has some <br />assessed value and issues bonds. These obligations sometimes take the form of “cash flow <br />bonds,” and are not repaid until the proposed district issues bonds to the public. Sometimes <br />these bonds are structured in such a way that any unpaid amounts, principal and interest, <br />continue to accrue interest on the interest, or “compound” interest. The City Council should <br />consider whether it wants to prohibit or at least regulate the possible issuance of this type of <br />financing in the service plan. <br /> <br />Frequently districts enter into agreements pursuant to which a district agrees to reimburse a <br />developer for up front costs of public infrastructure. This agreement may or may not take the <br />form of an actual bond, and may or may not accrue interest. The City could restrict the <br />repayment of developer “debt” by limiting the interest rate payable on developer debt or bonds, <br />or putting similar restrictions on this issuance. <br /> <br />C. Protection of taxpayers and tax base. Finally, service plans may be required to <br />state a maximum mill levy in order to protect future owners of property within the special district <br />from excessive property taxes (if the special district issues property-tax based debt and then does <br />not develop as planned). Mill levy limits are typically subject to a “Gallagher adjustment” to <br />compensate for changes in the legally prescribed ratio of assessed value to market value, <br />providing that such adjustment does not, to the extent possible, enhance or diminish actual tax <br />revenues. <br /> <br /> <br />12