To: Honorable Mayor and Members of Town Council
From: Robert J. Slentz, Town Attorney
Title
Resolution Approving the Hillside at Castle Rock Metropolitan District Service Plan and Master Intergovernmental Agreement
Body
________________________________________________________________________________
Executive Summary
Approval of this Resolution (Attachment A) will enable the organizers of the proposed Hillside at Castle Rock Metropolitan District (the “District”) to seek District Court approval and voter authorization for the formation of the District. The boundary of the District encompass approximately 50 acres. The District proposes to finance infrastructure and improvements for a project of 170 single-family residential units by issuance of 30-year bonds in the approximate amount of $3,665,000.
Standard of Review
The Special District Control Act, Article 1, Title 32, C.R.S., and Chapter 11.02 of the Castle Rock municipal code, the Special District Oversight ordinance (“SDO”) govern the Town Council’s consideration of the request for Service Plan approval.
The Special District Act specifically authorizes the Council to approve the Service Plan as submitted, to disapprove the Service Plan, or to conditionally approve the Service Plan subject to the receipt of additional information or modification.
The Act provides that the Council shall disapprove a service plan unless it finds that:
- there is sufficient projected need for the services the Districts will provided because existing services are inadequate (Necessity);
-
- the Districts are capable of providing sufficient and economical service (Sufficiency); and
-
- District debt can be retired on a reasonable basis (Feasibility).
In addition to the Special District Act, the request must be found to be in compliance with the SDO. The SDO generally provides additional detail and requirements on the submittals otherwise required by the Special District Act, and establishes objective conditions, which trigger the need for service plan amendment under the Special District Act.
The organizers may appeal an adverse decision by the Council to the District Court.
Service Plan
The Service Plan (Attachment B) contains all of the information required by the Special District Act and the SDO. The District is authorized to provide those services for which metropolitan districts are authorized under the Special District Act, subject to the provision that municipal services such as water and wastewater which are provided by the Town.
The Service Plan anticipates that the developer will fully develop the project in phases with private financing, and then recover most, but not all, of the project development costs through issuance of limited tax obligation bonds (‘Bonds”) once the Project is completed. The Capital Plan (Exhibit D) details $5.5 million in project costs, including $1.2 million in a retaining wall and $667,000 in landscaping.
The organizers project that the 170 units will be absorbed in the market over a three-year period commencing in 2017, allowing for issuance of the Bonds in 2019. The principal revenue sources available to retire the Bonds will be a 50 mill property tax, which is the maximum tax levy that may be imposed (subject to “Gallagher” adjustment). This property tax rate is within the range authorized to other metropolitan districts within the Town. The District may also impose a 10 mill operational mill levy resulting in a total capped mill levy of 60 mills, again not atypical of Castle Rock metropolitan districts.
The Financial Plan projects that the Bonds will carry a 5.5% interest rate with a 30-year term. At the request of staff, the Service Plan provides that the Bonds will discharge at the end of the 30-year term, even if at that time there remains outstanding principal or interest.
Master Intergovernmental Agreement
The Master Intergovernmental Agreement (Attachment C) makes the District’s service plan representations and obligations contractual, affording the Town direct legal recourse in the event the District impermissibly deviates from a material provision of the Service Plan.
Staff Recommendation
This proposal is noteworthy for the fact that the underlying development is of such a relatively small scale. Historically, districts have been utilized to finance large scale residential, commercial or mixed use development, requiring large capital investment. We have not previously authorized metropolitan district of this limited service area or scope, which is more of a neighborhood scale.
The organizers assert that the development challenges presented by the physical characteristics of the property justify utilization of public financing. The financial consequence of District formation to the 170 homeowners is that the purchase price of the home may be reduced by the portion of the site development cost that is financed by the District (approximately $21,000 per unit). The homeowner then pays the “saving” in purchase price through District property taxes.
Arguably, the Service Plan makes the case for the feasibility of the financial plan and the ability of the District to provide economical service. Approval or disapproval of the Service Plan then turns on whether Town Council views that the District provides an essential or necessary role in development of the Project.
If the Council finds that the District provides an essential service it should consider adoption of the attached Resolution. If the Council it is disinclined to approve the Service Plan, a motion directing staff to prepare a Resolution of denial is provided below.
Please see the attached information District representatives have presented in support of the formation of the District (Attachment D).
Proposed Alternative Motions
FOR APPROVAL: I move to approve a Resolution approving the Service Plan and Master Intergovernmental Agreement for Hillside at Castle Rock Metropolitan District and Master Intergovernmental Agreement.
FOR DENIAL: I move to disapprove the Service Plan for the proposed Hillside Metropolitan District and direct staff to prepare a Resolution making appropriate findings that the organizers have failed to demonstrate that there is a need for the services proposed to be provided by the District, such Resolution to be presented to Council on May 17, 2016.
Attachments
Attachment A: Resolution
Attachment B: Service Plan
Attachment C: MIGA
Attachment D: Letter from District Counsel