To: Honorable Mayor and Members of Town Council
From: Dave Corliss, Town Manager
Bob Slentz, Town Attorney
Trish Muller, CPA, Finance Director
Title
Discussion/Direction of the Metropolitan District Summary for the year ending December 31, 2017
Body
________________________________________________________________________________
Executive Summary
What is a Metropolitan District?
In order to fund the infrastructure needed in a development, developers can form a metropolitan district (metro district) that has the authority to issue bonds. A metro district is a taxing entity, separate from the Town of Castle Rock, that exists primarily to finance public improvements that benefit property owners in the district. The proceeds from the bond issuance are then used to fund infrastructure construction. The metro district assesses a mill on properties within the district and uses property tax revenue generated from that mill to fund the debt service payments. Metro districts are also allowed to levy a general operating mill, as approved in their service plan, to cover administration and operation expenses.
Summary of the 2017 Review
The Town has received the required information from each of the 36 active Districts, as required by the Town code.
Our purpose in reviewing the Annual Metro District submission is to 1) identify Metro District compliance with the filing requirement (completeness and timeliness); 2) note any unusual items or items of note in the District submission including the Audited Financial Statements and Budget document; and 3) identify any significant circumstances that could potentially impact future repayment of long-term debt.
Town staff has reviewed each of the submissions for the year ended December 31, 2017, and is highlighting certain considerations for four of the Metro District areas (Castle Oaks, Crystal Valley, Founders and Meadows) in this report. These considerations include the size of the outstanding debt, ability to timely service debt and other considerations. We will continue to monitor the considerations as noted and will also expand our reporting to comment on all Districts in subsequent years. Staff plans to present the 2018 Metro District Summary to Town Council in December.
Conclusions
Do all residential or commercial areas in Castle Rock have Metro District debt?
Many households in Castle Rock have Metro District debt. However, there are certain residential areas that were either developed without the use of a metro district (such as Metzler, Craig & Gould, Red Hawk, Timber Canyon and Diamond Ridge, for example) or the Developer used the Metro District to issue debt and has successfully paid it off. This was the case for the Plum Creek Metropolitan District, which paid its District debt in full in 2015 and no longer assesses a metro district mill levy on its residents.
Analysis of the Metro Districts
In total, the Metro Districts within the Town’s limits have approximately $733M in debt outstanding. See Attachment E for an analysis of Metro District Debt Maturity Dates. This information is taken from the amortization schedules for each external issuance; developer advances are not given a term certain, as they are subordinate to the external debt and are payable from available revenues after meeting current obligations. No amortization schedule or maturity date exist for the developer advances.
Based on the procedures performed on the annual reports submitted by each Metro District for the year ended December 31, 2017, it is evident that each Metro District has its own story. Districts have varying levels of debt and maturity dates, various stages of development, and revenue sources limited to their mill levy as stated in the service agreement. Although the intent of a metro district is to issue debt to fund the infrastructure and start-up costs of a development, the success of a given metro district is contingent upon the debt amount and terms, the stage of development, and current and future market conditions.
Although metro district debt may be an important tool for the development community, it can become burdensome on current and future residents and businesses. The amount of debt issued and the term of the repayment should not out-last the life of the asset it funded. In certain cases, metro district debt exists long after the life of the asset; infrastructure may be replaced one to two times before the debt is retired. Metro districts tax future residents and businesses rather than rolling the infrastructure costs into the up-front price of the home.
Staff will continue to monitor Metro District submissions and plan to inform Council of any potential concerning situations.
NOTE: The information presented in this report was generated from a review of the Metro District Annual Reports. Our review is based on the information presented in these documents, statements submitted by management, and a conservative projection of future market and revenue trends. We have not performed a full audit of the information. Accordingly, the statements and conclusions in this report represent the Town’s analysis of the information provided and do not predict future performance of the Metro Districts.
Staff Report Attachments
Attachment A: Castle Oaks Metro District Summary
Attachment B: Crystal Valley Metro District Summary
Attachment C: Villages at Castle Rock (Founders) Metro District Summary
Attachment D: Meadows Metro District Summary
Attachment E: Summary of Metro District Debt
Attachment F: Town-wide Metro District Summary
Attachment G: Metro District Map
Attachment H: Property Taxes by Metro District