In Colorado, metropolitan districts go hand-in-hand with new home construction. If your home is less than 20 years old, chances are you live in a metro district.
Colorado metro districts at a glance:
- There are 2,337 metro districts statewide as of November 2023 per the Colorado Department of Local Affairs (DOLA)
- 87 percent of all new homes sold in the Colorado front range in 2023 were located within a metro district, according to Zonda
- 90 percent of Colorado master-planned communities (MPCs) are within a metro district, per Zonda
Given these numbers, it’s essential to understand the role of metro districts, and how they serve and benefit Colorado homeowners and homebuyers. Metro districts have received some bad press in the past few years, so it’s also important to address negative perceptions surrounding them, including how misunderstandings and misconceptions cause homeowner confusion and frustration.
To that end, we reached out to our friends at Piper Sandler to help us address some of the most frequently asked questions about metro districts — their purpose and function, how they’re funded, and how residents can get involved in making important decisions about their communities. The team at Piper Sandler has been a market leader of metro bond issuances in Colorado for more than 20 years. “Metro districts are a vital financing tool to help support the rapid growth that’s occurred in Colorado. Metro districts ensure that growth pays its own way because metro district property taxes that are paid by the residents of a new community are used to support the financing of the public improvements for that specific community,” said Shelby Noble, a Managing Director in the Special District Group at Piper Sandler. Shelby added, “Metro districts localize the cost of the public improvements to fund new development rather than spreading those costs throughout the entire city, town, or county.”
Table of Contents
- What Is a Metro District?
- How Is a Metro District Formed?
- What Are the Benefits of Metro Districts?
- How Is a Metro District Funded?
- How Can I Find Out if My Home Is in a Metro District?
- Who Makes Metro District Decisions?
- How Can I Serve on My Metro District’s Board?
- Get Involved
What Is a Metro District?
A metro district is a type of local government formed under Title 32 of the Colorado state statute. Their ultimate purpose is to fund, oversee, and sometimes operate critical public infrastructure necessary for new residential and commercial developments. Metro districts gained wider appeal statewide after the passage of the Taxpayer’s Bill of Rights amendment in 1992 (TABOR), which meant that municipalities were less likely to be able to raise taxes to pay for public infrastructure.
A metro district will provide needed services that often fill unmet needs in a particular city, town, or rural area. Some infrastructure examples that commonly fall under a metro district’s purview include the construction of sewer, water, fire services, and street infrastructure as well as recreational amenities (parks, pools, trails and event spaces, for example). A metro district has the authority to finance, design, develop, and maintain these various features, structures, and services.
How Is a Metro District Formed?
A metro district is often formed at the earliest stages of development. A detailed metro district service plan is submitted to a jurisdiction’s city council or county commission office for approval. The service plan is the metro district’s governing document and is similar to a town charter or constitution. The service plan contains limitations on the amount of debt that can be issued, the maximum level of taxation, and the maximum time period over which the tax can be imposed, among other things.
After the service plan is approved, the property owners within the proposed metro district file a petition for organization with the district court. If the petition meets the statutory requirements, the court will hold a public hearing and order an election on behalf of the proposed metro district. If the majority of the votes cast are in favor of the organization of the metro district, the court issues an order and decree organizing the metro district (recorded against the real property within the metro district).
What Are the Benefits of Metro Districts?
Metro districts were created to finance infrastructure that helps to address Colorado’s housing shortage and rising costs by creating an efficient way to finance the public improvements required for new development.
1. Address Affordability
According to the Colorado Association of Home Builders, public infrastructure typically adds $30,000 to $40,000 to the price of a new home. Forcing homebuyers to absorb these significant costs upfront would create a larger affordability crisis in the state. Every $1,000 increase in the price of a new home prices out more than 127,000 households nationwide. Metro districts shift this cost burden by financing infrastructure projects through bond proceeds that are repaid by residents in the form of property taxes spread out over a designated period of time.
2. Lower Short & Long-Term Costs
Metro district bonds replace the highest marginal cost of capital for land developers and homebuilders. These cost savings pay for additional amenities within a community or help lower the cost of home lots.
The cost to borrow through a metro district is often significantly lower than other available sources of capital for development. This is partly because interest on the debt is exempt from federal and state income tax. This form of capital also comes at a critical time in the development cycle when alternatives are expensive. Metro district funding lowers total development costs and creates opportunities to utilize smart growth principles to foster more livable, sustainable, and economically resilient communities.
3. Accelerate Home Construction
Without metro districts, a city, town, or rural area and its residents are on the hook for all of the upfront development costs for essential infrastructure. The state’s mill levy limitations reduce a jurisdiction’s revenue and its ability to shoulder these costs, which would cause yearslong delays in new home construction.
Metro districts allow essential infrastructure development sooner so that more homes can be built quickly. What’s more, community amenities like parks, trails, and pools can also be built earlier compared to the traditional pay-as-you-go model.
How Is a Metro District Funded?
A metro district pays for its construction projects by issuing bonds, a common form of financing for governmental entities. Bond investors shoulder the upfront infrastructure costs so that a community can better accommodate the new homes in the community. Homeowners repay these costs primarily in the form of ad valorem property taxes on their homes.
Local authorities approve metro district taxation in its service plan, limit mill levies, and provide financial oversight. Bond repayment terms and maturity maximums are set by the municipality to spread out and minimize the financial burden among homeowners and protect residents from high rates of taxation. Metro districts often refinance their debt to reduce taxpayer burden over time, resulting in lower taxes for residents as the credit quality of a project improves.
How Can I Find Out if My Home Is in a Metro District?
If you’re a homeowner, finding out if you live in a metro district is as easy as looking at your annual property tax bill which is available from the county treasurer. Your metro district taxes appear as a line item on the bill along with the total amount.
By law, homebuyers must receive metro district tax information as part of their disclosures when they go under contract to buy a new home. That notice outlines the amount of property taxes that will be owed annually given the contracted price of the home and the level of taxation. For existing homes, there are multiple disclosures that are mandated by law before a home sale closes. In a new residential development, some metro districts will even provide a good faith estimate of future taxes prior to or at the point of sale.
For reference and for metro district boundary information, DOLA provides metro district maps to the public.
Who Makes Metro District Decisions?
A city or county’s local authorities review and approve a metro district’s service plan, which clearly outlines and provides oversight of taxation, debt limits, term limits, services, and amenities.
Similar to a Colorado homeowner’s association, a metro district board is made up of elected members. The landowner initially makes up the board at the earliest stages of construction as there are no other property owners to participate. Homeowners can generally run for a board seat once they own property in a metro district. Everyone that is eligible is encouraged to run for the board seats and actively participate in metro district governance.
Metro districts must operate from and within their service plans that were approved at the time of formation. Their operations are publicly accountable to the residents they serve. To allow for full financial and operational transparency, beginning in 2024, each metro district is required by law to perform the following:
- Hold regular meetings open to residents and the public
- Adopt and publish an annual report
- Operate its own public website
How Can I Serve on My Metro District’s Board?
Some of the best ideas come from the people living in the community, and participation in metro district leadership is one of the best ways to have a voice in your community. Residents can be elected to a metro district board as early as six months after the first home is built within its boundaries. Four-year service terms are staggered with elections taking place every two years. Residents can learn of upcoming board elections by mail, email, or the respective metro district’s website.
Get Involved
There’s no time like the present to participate in your local metro district and help make important decisions about your local community. Visit your metro district website for more information, including upcoming meetings, elections and meeting minutes. To learn more about all Colorado metro districts, visit the Metro District Education Coalition, a nonprofit and nonpartisan group created as a resource for Colorado homebuyers and homeowners.
A special thank you to Shelby Noble and John Kolstoe at Piper Sandler for their time and insights during the research for this blog.
