By Danaly Howe, Centennial Consulting Group
If you are searching for new home in Colorado, chances are that you will come across a subdivision governed by a Metropolitan district. Metro districts, for short, are being popularized over the traditional homeowners association (HOA) structure, and for good reason. Prior to the 1980’s, most cities and municipalities paid for the cost of new roads, utilities, and other infrastructure. Since then, developers have been expected to pave the way for their developing communities. Metro Districts have been around since the 1980’s and provide an alternative, and increasingly common, method for paying infrastructure costs. At first glance, metro districts can seem complicated and intimidating, but a few key ideas can help any new home buyer become comfortable with their structure.
Metropolitan districts are governmental entities that operate much like a town council: board members are elected through an election process alike to your county elections, meetings are open to the public, and there are regular statutory filings which provide transparency. Although metro districts are not required to provide HOA-type functions such as covenant enforcement, they are being utilized more frequently in this capacity. Most notably, metro districts (and other types of districts such as fire districts, school districts and library districts) collect property taxes from their population to pay for expenses.
In new communities without a metro district, the developer will recoup the cost of infrastructure when they sell the lots or finished homes. This reimbursement through property sales means that home prices in these communities are typically higher than in a metro district subdivision; the first homeowner shoulders the burden of these costs in their purchase price. In a metro district neighborhood, these infrastructure costs are paid for like a home mortgage. Development costs are consolidated into long term debt (usually 30 years) and paid off over time through payments coming from the property tax mill levy. Homeowners in metro district areas contribute to the debt in proportion to how long they own their property. Metro districts must have their development costs certified by a 3rd party engineer for fair bidding, costs, and verification of installation. Only those costs which have been verified can be reimbursed.
Metropolitan districts can be in addition to, or in place of, a homeowners association. Instead of HOA dues, operations costs are usually funded through property taxes (in addition to the taxes for debt). These include such expenses as landscaping maintenance, snow removal, management, accounting, legal, and utilities. Both types of entities have a board of directors who make decisions concerning the budget, contractors and rules and regulations. Because taxes are used to fund district property, these areas are considered public and accessible to anyone. For this reason, developers may create an HOA in addition to a metro district to allow for amenities (such as a pool facility) to be kept private to its owners. Other reasons for a dual district and HOA structure include separating out the debt and covenant / community responsibilities, and for cases such as condominiums where metro districts cannot use taxes on private property.
If you are interested in learning more about metro districts and how they compare to HOAs, you are invited to attend the CAI Spring Showcase on March 31, 2020, which includes a class entitled “Metro Districts vs. HOAs – What are They?” taught by Danaly Howe. This class will take a more in-depth look at how various aspects of districts function, including legal requirements, meetings, records requests, elections, and budgeting. We will also dive into some of the pros and cons of metro districts and expand on information surrounding how property taxes on new homes work and misconceptions surrounding tax collections.
To find out whether a property is part of a metro district, a search of the property tax record on the County Assessor site will show a list of taxing entities that are currently in effect. Additionally, the Special District Association collaborates with all types of districts to provide information and resources with can be accessed by going to www.sdaco.org.
Currently working toward her PCAM, Danaly has been a District Manager and AMS with Centennial Consulting Group in Northern Colorado for over 7 years. She can be reached at danaly@ccgcolorado.com, or by calling 970-484-0101 ext. 1. The Centennial Consulting Group’s website is located at www.ccgcolorado.com.
