Residents of future Colorado Springs neighborhoods are likely to pay higher property taxes to cover the price of future roads, sidewalks and parks as inflation forces development costs higher.
The Colorado Springs City Council voted 7 to 2 Tuesday to make numerous changes to the rules that govern metro districts, including increasing the total cap on property taxes the districts can charge.
Metro districts are the main tool for building new roads, sidewalks and other infrastructure needed for new neighborhoods and collectively have issued $660 million in debt across town, said Carl Schueler, comprehensive planning manager previously. The community could reach $1 billion in outstanding debt issued by business improvement districts and metro districts if all the pending and approved bonds close, he said.
As part of the changes, metro districts will no longer have to come before council for separate approval when they issue their debt, as they have in the past. Instead, developers will have the option to make their case for infrastructure needs, property taxes and financing at the same time.
Metro district financing can be controversial if the developers purchase their own debt. To help address this issue, City Council capped the interest rates that bonds purchased by developers can earn at no more than 4% higher than the indexed rate for highly rated bonds. The state legislature considered prohibiting developers from purchasing their own debt earlier this year but backed away from the measure.
Councilmembers Bill Murray and Yolanda Avila voted against the policy changes. Murray raised concern that the changes to the metro district policy were largely shaped by the development community. Representatives from Oakwood Homes, Norwood Development Group and Classic Homes all participated on the working group that shaped the policy, along with council members and others.
"This whole thing is for and by developers," Murray said.
Metro districts need the flexibility to ask the City Council for additional revenue through property taxes because infrastructure costs have risen 30% recently, Classic Homes CEO Doug Stimple said previously. The cap on property taxes metro districts can charge will now be capped at 50 mills to pay off debt and 20 mills to cover maintenance and operations, up from 30 mills to pay off debt and 10 mills to cover maintenance and operations, such as running small parks. The higher cap on tax levels falls in line with state limits.
When subdivisions are envisioned, the developers serve on the boards of metro districts and make decisions about financing. Once subdivisions are complete, residents are meant to take seats on the district boards and make decisions about refinancing debt that can bring down taxes for residents.
But transitioning to resident-led boards can be tough. A city auditor's report in September showed fewer than 10 metro districts in town had transitioned. The city has about 60 metro districts, although not all of them have residents yet, Schueler said, previously.
Councilwoman Nancy Henjum noted that without metro districts, the city wouldn't be growing, but citizens need to better understand districts and get involved.
"Without citizens getting on these boards, it's really taxation without representation," she said.
Dave Talbot, a resident of Tuscan Foothills Village, outlined some of the problems that can arise within metro districts when they are not well managed. He did not receive documentation that he had moved into a metro district that receives 39% of the property taxes he pays and he couldn't factor that cost into his decision to buy the house.
The district also hasn't fulfilled its landscaping responsibilities, leaving trees to die for lack of water and failing to plant native grass as promised, he said.
"Please, make sure there is strong enough language in there that deals with these issues," he said.
Metro districts should be improving their communication with residents under recent changes to state law that requires most districts to maintain websites with contact information for board members and financial statements. Residents also must receive information about how to run in district elections as part of a recent change.