City Council Study Session Agenda and Packet 2020 01 28

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1 /22/2020 Editorial: Rein in the unlimited taxing powers of developers Homeowners in Orchard Farms pay about 90 mills in property taxes for Adams County, Brighton School District No. 27J, a library district, a fire district, and the city of Thornton. But for the Big Dry Creek Metropolitan District (now known as Orchard Farms Metropolitan District) homeowners, as of the 2018 abstract of assessment, pay an additional 73 mills (55 mills for the developer's debt and 18 mills for operations of the metro district). For a home that has an actual value of $500,000, a homeowner would pay about $2,628 for their metro district taxes and $3,240 for their schools, city and county governments, fire and library services. But that $12.9 million is only part of the story. One of the bonds that employees of Lennar, who serve on the metropolitan district board, decided to issue are "cash flow" junior lien bonds, meaning there are no scheduled payments on the principal until 2035. During that time, the smaller $1.9 million bonds will accrue interest at 9%. Lennar employees serving on the board of Big Dry Creek issued these cash flow bonds, and then Lennar purchased the bonds, meaning they will be repaid $19.8 million by 2053 for a $1.9 million initial investment. This self -dealing is unethical and must be stopped. Other debt was packaged more responsibly and sold to outside investors at a reasonable interest rate with payments starting soon after closing. We find it suspicious that this $2 million couldn't be included in the other bonds to save homeowners millions in debt payments. Why look for a better deal when this benefits the bottom line of the developer? It's a clever way for the builder to maximize their own revenue while not "technically" exceeding the statutory limit that metro district property taxes can not exceed 55 mills for debt. Oh, and don't forget that the developer, acting as the metro board, also is imposing an "operations fee" which is a $564 a year fee that is used to pay for operations and maintenance of the district. A separate $500 transfer fee _..................................................................................... is imposed every time a home is sold in the neighborhood (homeowners ................................................................................................................................................................................... likely won't know about this fee until they sell their home and pay closing costs). The bond document for the "cash flow" bonds also disclosed that a "capital fee" could be imposed on the district to repay debt, although no fee is being assessed now. To illustrate the depths of greed we are talking about, it should be noted that Lennar did loan the district $77,702 to get up and running (attorney's fees. etc.). Lennar will be repaid with 5% interest for a total of $110.124 by https://www.denverpost. com/2019/12/11/editorial-metro-districts-developers-taxes-bonds/ 55 3/5