Johnstown conditionally approves Diamond Ridge district plan, cutting debt tax cap to 30 mills

Johnstown Town Council approved a service plan for the Diamond Ridge metropolitan district on Monday on the condition that it be revised to create one district instead of three, with the maximum debt tax rate cut from 40 mills to 30 mills and the maximum time a debt tax may be imposed on a residential property cut from 40 years to 30.

The submitted plan set the maximum debt tax rates for commercial and residential property at 40 mills each. It barred a residential or mixed-use district from levying for debt on any single property developed for residential uses for more than 40 years, with an exception for a refinancing that a board with a majority of end users approves and that produces net present value savings. The council's conditions lower the maximum debt rate to 30 mills, keep the assessment-rate adjustment, and cut the maximum term to 30 years.

The area is anticipated to be residential, with approximately 328 single-family homes and an estimated build-out population of approximately 820 people. The plan sets the maximum operations and maintenance levy at 10 mills, subject to the assessment-rate adjustment and limited to the amount needed for expenses.

The council's conditions also require:

• Streets, water, sewer and storm drainage infrastructure dedicated to the town upon completion and acceptance
• A homeowner-controlled board, with a majority of end users, no later than the earlier of substantial completion or the sale and closing of 50% of the lots
• The petition for organization and the approved service plan filed in Weld County District Court

A metropolitan district may borrow to build a development's roads and pipes and repay the debt from its own residents' property taxes. The plan covers approximately 93 acres south and west of the intersection of Weld County Road 50 and Telep Avenue in Johnstown. The districts may issue no more than $15,000,000 in aggregate debt, and public improvement costs they cannot finance are expected to be funded by the developer.

A presenter said tax-exempt bonds could cost 6% to 8%, compared with 10% to 15% for a construction loan. The lower cost could reduce project capital costs or allow additional amenities or faster infrastructure construction, the presenter said.

Councilmember Dianne Morris said she was uncomfortable approving a district before seeing neighborhood plans, and raised concerns about earlier promises and the treatment of residents in the adjoining neighborhood. "I feel like we're going to give you this and then we may never get anything in return," Morris said.

Approval of the service plan does not approve a specific development area or the number of homes to be built. A presenter said district approval would not approve development plans or construction drawings, and that plans, plats, neighborhood meetings and other town development requirements would still apply.

Morris argued that developers should be able to fund improvements without passing metropolitan-district debt and taxes on to homeowners. Councilmember Nick Bashford said he could not support a vote until the council had proper proof of public notice, and argued that residents should be educated about metropolitan-district taxes. "50 mils is not a small amount," Bashford said.

Special counsel to the town said the town would not be responsible for the district's debt, but that a partly built project could leave the district without the tax base to repay it, a risk that falls on bondholders. The districts are independent local governments, and the town does not guarantee their debt or assume responsibility for their obligations if they default. A presenter said the districts would need to demonstrate financial feasibility and build-out assumptions before issuing debt, and that slower or smaller development would reduce their debt capacity.

Bashford questioned the notice paperwork, saying one certificate named the Greeley Tribune and Larimer County circulation although the district is in Weld County. He also noted that the resolution referred to the Larimer County District Court. Another speaker apologized and said the publication notice reviewed earlier was for a different metropolitan district, and that Diamond Ridge's was published in the Loveland Herald.

Special counsel said a notice only needs to run in a newspaper of general circulation in Johnstown: "it doesn't necessarily have to be the same county." Counsel also said the court-county typo could be corrected to Weld County.

Special counsel said the proponents planned a district formation and TABOR election for the next day, with eligible electors associated with the vacant land voting rather than the townwide electorate. The town's model generally calls for service plans to be submitted by May or June for a November election, counsel said, while this proposal was submitted in September and was on an accelerated schedule.