Face the State

Face The State Staff Report

Over the past decade, Colorado has seen its number of governmental entities grow by 50 percent, due almost entirely to the creation of special districts across the state. In response to growing concerns by property owners, state Sen. Morgan Carroll, an Aurora Democrat, has sponsored legislation to increase special district transparency.

These special districts are local governments that provide services such as fire protection, sanitation, road repairs and water services. As with other local governments, special districts have the authority to issue debt and to levy and collect property taxes. Residents are often left in the dark about the special districts they live in, and many do not even realize there are boards that govern these special districts.

Carroll's bill seeks to increase transparency in special districts by giving property owners in those districts access to more information about what their property taxes are financing. "The problem is, we’ve got less than 3 percent voter turnout, elections are held off cycle, off location and with no actual notice given to electors," Carroll said.

Under the legislation, taxpayers in those districts would also be given more opportunities to cast informed votes regarding special districts through mail-in ballots preceded by increased notification before the election.

Local activist Justin Longo began looking into the formation of special districts last year and wrote an issue paper about it for the Independence Institute, a free-market think tank. “A 50 percent growth rate of special districts in 10 years is not normal,” he said, adding that there are about 250 new special districts formed every year.

According to Longo, the districts are normally formed with future development of an area in mind. “But what if development doesn’t pan out?” he asks. In the late 1980s and early 1990s the savings and loan crisis thrust the country into a recession, causing massive amounts of debt to fall on people in underdeveloped communities.

One such casualty was Chuck Broerman, a property owner in Colorado Springs who moved from Ohio 21 years ago with his wife. They bought a home near Powers Boulevard when it was still a dirt road and considered a newer area in town. The developers of Broerman’s neighborhood used a special taxing district to issue bonds that would fund infrastructure, but when the savings and loan crisis hit, the developers didn’t have the money to pay back the bonds.

There were 220 homeowners in the district at the time and growth was stagnant. The homeowners were at risk of becoming responsible for funding the continued development of Powers Boulevard. The project was slated to cost $13 million, which meant that each homeowner in the district would have been on the hook for nearly $60,000. “It nearly caused people in my area to go bankrupt, and I know several people who actually just walked away from their homes because of the uncertainty the special taxing district put people in,” Broerman said.

According to Broerman, it was very difficult to find any information on the special district. After lots of persistence, however, he was finally able to get a seat on his district's governing board, which ultimately got a loan from the city and was able to restructure its debt. The loan from the city allowed the special district to extend the bond for Powers Boulevard another 20 years. Once the recession ended and the area began to grow again, the bond was ultimately paid off within six years.

Longo says it would be difficult to alter the way special districts are formed, but Carroll’s bill will help property owners in special districts better understand the taxes they are paying. He maintains that boards should be communicating election information and meeting information regularly to residents. “Developers are very good at keeping these elections clandestine,” he said. “They follow the letter of the law, but they don’t follow the intent of the law. They do their best to keep people from knowing the board elections are occurring.”