Lone Tree wants more transparency from special districts to protect residents from being blindsided by hidden fees and uncontrollable debt caused by “bad actors” in the industry.

An ordinance establishing new procedures, requirements and certain limitations for special districts will be reviewed for a first reading Feb. 18.

The purpose of the ordinance is to create more transparency between governments, city attorney Linda Michow said during a Jan. 21 city council study session.

“The legislative intent is not to fragment and not to proliferate local government, but to be able to consolidate when necessary and available,” Michow said.

A Dec. 5 Denver Post article revealed two major metro districts in Douglas County — Highlands Ranch and the Meadows in Castle Rock — held large sums of debt imposed on homeowners with little sign of climbing out of it anytime soon. Though council and staff noted the Jan. 21 discussion did not relate to the article, Michow said the article did indicate some soft spots in oversight of metro districts.

“There's a fear there's a lack of coordination between the special districts and the approving authority or municipal government in which it operates,” Michow said. “The purpose of this ordinance is to address those.”

Mayor Jackie Millet added there's been “some bad actors in the special district world that have abused these areas.”

The need for the ordinance was not due to any existing issues with Lone Tree's current metro district partners, city staff said.

“Those are partnerships we want to continue to maintain, and they really do allow growth to pay its own way,” City Manager Seth Hoffman said. “We've had really great relationships and really great experience with special districts.”

Much of Lone Tree's infrastructure was either partially or fully funded through metro districts, Hoffman said.

A special district is a quasi-municipal body that provides services not otherwise provided by the presiding governmental jurisdiction. South Metro Fire Rescue, the fire authority for most of the south Denver area, is a special district. So are South Suburban Parks and Recreation and Douglas County Libraries.

A metro district is a type of special district with broad responsibilities, covering anything from mosquito management to facilitating cable television access. They partner with the city through intergovernmental agreements to help fund capital projects and services. Metro districts sell bonds to help finance their projects, which are then paid off through property taxes assessed to homes planned to be built. Hence, “growth paying for growth” — a common phrase to describe the upside to metro districts.

Lone Tree has six main metro districts in its jurisdiction but only has approval authority over the east and west Rampart Range Metro Districts (both created in 2000) and The Yard (2016), which is dormant. Lincoln Station (2002), Heritage Hills (1996), OmniPark (1996) and Park Meadows (1982) metro districts are all within Douglas County's approval authority. The ordinance discussed Jan. 21 would act more as a preliminary measure for when Lone Tree begins to see development grow on the city's east side.

The proposed ordinance creates “transparency for our residents to understand what we are doing in the City of Lone Tree to have growth paying for growth,” Millet said.

Part of the ordinance includes the creation of a model service plan, the main governing document acting as a contract between the approving authority (in this case, Lone Tree) and the special district. That plan was presented before council on first reading Feb. 4.

“That is a really important tool for municipalities to determine how that special district operates within your jurisdictional boundaries,” Michow said.

The proposed ordinance seeks to:

• Formalize the city's expectations for new districts and existing districts

• Require annual reporting of the district's audit and budget to the city (special districts are already required to report this information to the Colorado Department of Local Affairs; however, Michow said, it would be helpful to have that information directly communicated to the city)

• Require notice to the city of privately placed debt

• Require district meetings to be held in city boundaries, once there are residents there

• Require disclosure to homeowners of the existence of metro districts and a mill levy cap

• Establish a limit on certain fees

• Impose a debt ceiling for new districts in the city

• Impose a “linked” maximum interest rate

• Impose developer debt limitations

• Impose a 20-year cap on the timeframe for repayment of developer debt

Millet said there's been discussion at the Metro Mayor's Caucus, a coalition of 40 mayors throughout the Denver metro region, about facilitating transparency between special districts and homeowners regarding the influence of “bad actors” abusing interest rates.

“I'm really proud of the fact we're doing this,” Millet said. “It sets expectations. It's transparency for our residents to understand what we are doing in the City of Lone Tree to have growth paying for growth.”

Councilmember Mike Anderson cautioned staff to avoid limiting necessary expansion for, specifically, South Metro Fire Rescue Authority.

Sharon Van Ramshorst, former Lone Tree mayor pro tem and current president of the Park Meadows Metro District, a metro district partially within Lone Tree's borders and under the county's approval authority, said she was disappointed in the lack of communication to metro districts the Jan. 21 discussion was scheduled.

Millet responded the next step would be for staff to create a model service plan and circulate it to the city's special districts for comment.