City Council Study Session Agenda and Packet 2020 01 28

Home Browse Search

Kelly PC 999 18th Street, Suite 1450, Denver, CO 80202 Mayor Stolzmann and Councilmembers City of Louisville January 23, 2020 Page 6 address these issues by capping the mill levies a district may impose, irrespective of whether such a cap is otherwise required by the statute. State law authorizes a district to issue general obligation bonds if it meets the statutory debt limit (which is that the total general obligation debt of the district is either less than $2 million dollars or does not exceed 50% of the valuation for assessment of the taxable property located within the district). Notwithstanding the debt limit mentioned above, bonds can be issued if the debt fits in to one of the exceptions to the debt limit restriction, such as the bonds being rated in one of the four highest rating categories by a rating agency, or is issued to financial institutions or institutional investors. Additionally, bonds may be issued outside of the debt limit if the mill levy on the bonds does not exceed 50 mills. So most “new” metro districts issue bonds that are limited to repayment by whatever revenue 50 mills generates, but some districts have higher mill levies, and some have lower, so mill levies between districts, even districts in the same or similar locations, may fluctuate. • Similarly, when a district provides services in only a portion of the City, a resident may receive different types and levels of services from neighboring development, depending on where they live, and dissatisfaction may result. Conversely, a district may provide amenities or savings in housing costs, by allocating the initial improvements over time, that are not realized in non-district developments. Further, a district may provide funds for additional projects beyond those required by the City’s land development standards. • In a “worst-case scenario,” a district may default on its bonds, causing potential problems for the residents, bondholders and City. As you may know, well-publicized problems arose with metro districts in the 1980s, when bonds were issued, infrastructure was built, and the developer became financially insolvent before full build-out; this left a small number of homeowners saddled with massive property tax levies to repay the bonds. In response to these problems, the statutes were substantially amended to impose greater debt and mill levy limitations, and to impose certain requirements on how district financing is issued and sold. These provisions create incentives to protect homeowners through mill levy limits and were intended to reduce the risk of unlimited mill levies in limited tax districts. The limited tax nature of bonds authorized under most service plans are intended to mitigate this risk, but it is still important that the service plan include limitations and provisions to ensure the financial viability of the district and reduce the risks associated with bond default. • Unless controlled properly, districts can lead to proliferation and fragmentation of local government, “turf battles” over properties to be served, inefficient use of tax resources, 9