Colorado-Real-Estate-Journal_318734

Page 26 - December 21, 2022-January 3, 2023 www.crej.com Law & Accounting O f the over 4,000 local gov- ernment entities within Colorado, over half are special districts. A specific type of spe- cial district – a metropolitan dis- trict – is a common tool used to finance the construction of public infrastructure necessary for new development and redevelopment projects in Colorado. Because of Colorado’s robust transparency regime, individuals and entities seeking to purchase property can obtain information about poten- tial metropolitan districts from numerous sources. As soon as the purchase and sale contract is executed, a pur- chaser is put on notice about the potential existence of a metro- politan district. The approved Colorado Real Estate Commis- sion real estate purchase contracts for commercial, residential and land transactions contain a para- graph in bold type face alerting purchasers that the property may be within a special taxing district and that such district may issue general obligation debt and sub- ject taxpayers within the district to annual tax levies to repay such debt. Purchasers are encouraged to review the certificate of taxes due for the property and con- tact, among others, the county assessor for additional informa- tion about the potential special taxing district. However, the con- tract need not disclose the name of such metropolitan district. More specif- ic information about a met- ropolitan dis- trict is made available to the purchaser through the title work for the property. If the property is within a metropolitan district, the order and decree evi- dencing the creation of the met- ropolitan district should be listed as an exception in the title com- mitment. The order and decree will set forth the name of the met- ropolitan district, which enables the purchaser to undertake fur- ther due diligence prior to closing on the property. The title work should also list all of the notices that are required to be record- ed on property located within a metropolitan district. Specifi- cally, Colorado law requires that each metropolitan district record a public disclosure document and boundary map that provides the district’s name, the district’s pow- ers, a statement about the district’s service plan and notification that a copy of such document is avail- able from the Division of Local Government (https://dola.colo - rado.gov/lgis/) , and a statement that the metropolitan district is authorized to raise revenues for capital needs and general opera- tions costs, including through the issuance of debt, levying of taxes, and imposition of fees and charg- es, as well as where additional information about the metropoli- tan district can be found. At this stage of the process, a purchaser also may review the certificate of taxes due for the property, which should set forth the name of the metropolitan dis- trict and the mill levy imposed by such district. An important caveat is that the certificate of taxes due for the property may not list the metropolitan district if such district did not levy a mill levy for that particular tax year (for example, if the metropolitan district was just organized). Other means of obtaining infor- mation about metropolitan dis- tricts include the annual trans- parency notice, which contains contact information for the met- ropolitan district and information regarding the metropolitan dis- trict’s governing board, its regu- larly scheduled meetings, the cur- rent mill levy of the metropolitan district, the total ad valorem tax revenue received by the metro- politan district during the prior year, and election information. Such notice may be mailed to each household in the metropoli- tan district or included as part of a newsletter, letter, or notice sent to the eligible electors within a met- ropolitan district, or, potentially more helpful to a purchaser, may be posted on the official website of the metropolitan district or on the Special District Association’s website (https://www.sdaco . org/cora/sda-transparency/ search). Jurisdictions approving metro- politan districts (i.e., the county, city or town approving the met- ropolitan district’s service plan) may require the metropolitan district to prepare and submit an annual report to the jurisdic- tion that may contain, among other things, financial informa- tion about the metropolitan dis- trict (e.g., budgets and audits) as well as development updates and the status of construction of public improvements within the metropolitan district. In addi- tion, a jurisdiction may require the metropolitan district to record additional disclosures in the real property records of the county (which would be listed in the title work) or require the metropolitan district to work with a developer or builder within the metropoli- tan district to provide a notice to potential purchasers of property within the metropolitan district. Specific to newly constructed residences, developers or builders must provide a written disclosure to potential purchasers of prop- erty within metropolitan districts concurrently with or prior to the execution of a contract to sell the property. Such information must include, among other things, a notice to electors and informa- tion regarding the service plan, the mill levies and the maximum debt issuance authorized for the metropolitan district, estimated future property taxes, the residen- tial assessment ratio and formula by which the estimated property taxes can be calculated for the current year, and a statement that the estimates listed in the notice may change and the estimates are not the actual and future prop- erty taxes that may be due. In particular, the statement provides that first-year property taxes may be based on a previous year’s tax classification, which may not include the full value of the prop- erty and, consequently, taxes may be higher in subsequent years. The above-described transpar- ency measures ensure that poten- tial purchasers of property are put on notice early in the purchase process about the existence of a metropolitan district and have the ability to gather additional infor- mation and make an informed purchase decision. s Anne.Bensard@kutakrock.com Knowledge is power: Metropolitan district transparency Anne Bensard Partner, Kutak Rock LLP