Jacki Marsh - Mayor of Loveland, acknowledged how "unAmerican" the situation is in Colorado with new homeowners trapped in ever rising debt spirals spawned by unscrupulous developers.
"My taxes are some of the highest in Denver. They are eating away at my savings, and I am fearful of being able to sell my home, especially in a market downturn. Who will buy after potential buyers read this reporting. How suspect will they be when they realize how our city and state governments have let loose the dogs of greed upon Colorado homebuyers?" - Letter writer, D. Post, responding to the 'Debt & Democracy' report.
The grim Sunday Denver Post expose (December 8, p. 1A) of how developers are cleaning out the bank accounts of new home owners, can serve as a primo cautionary memo for anyone thinking of moving to this state. In other words, if you do, you better be damned careful where you decide to buy a home. Is a new fracking well soon to be set up nearby, with chemical pollutants spewing out to deliver skin sores and asthma to your kids?
Or...is the new home in a district that allows developers to approve tens of millions in public financing bonds for their businesses - and pay for it by leveraging property taxes on homes that haven't even been built yet?
The latter is the trap in which (according to the report) Tiene and Tyler Sterkel find themselves after closing on their new, $312,000 home in 2014. That 2-story, 5-bedroom place just east of Loveland was as sweet and delightful as the couple dreamed it would be - from the custom finishes to the granite countertops and the suite-scale master bedroom. They were also overjoyed to see that when their first property tax bill arrived it was only $818.60 .
However, that didn't last long. A year later - and already on a tight budget- they found the tax had climbed to $3,500. By 2018 it had climbed ever more in line with the home's assessed value, reaching $5,106. 91 by 2018. According to Tiene Sterkel quoted in the front page Post piece:
"We were suddenly buried in property taxes we couldn't afford. The mortgage on the house we could afford just fine. But the taxes murdered us, we never saw it coming."
As the Post piece notes, the Sterkels admitted "We could have been better consumers and checked out the property tax details of their community before purchasing."
But the piece adds:
"But with no tax history in a new development it's unclear how much they could have learned about the tax obligations they would eventually face or the tax promises the metro district had made long before their home was ever built."
Indeed, the last is the real bugbear because Colorado law doesn't require the developers to make readily available (or easily found) the specific types of disclosures that could have helped them. As the Post notes:
"Information about future property taxes is often not provided to buyers in new developments. Minimal warnings about the general risks of a special taxing district are buried deep in stacks of mortgage paperwork. Also, complex tax advisories and transparency notices are filed with relatively unknown government offices rather than given to the homeowners they're intended to inform."
Go figure. How did this home property tax morass come about anyway? Basically, it originated because lax Colorado laws literally grant property developers the power of having and controlling small fiefdoms. Developers create a plan for what's to be built and (roughly) how it will happen- oh, and the total cost. This plan also outlines how high the property taxes can go to repay that cost.
Once approved by the relevant sponsoring authority, e.g. city or county gov't, the proposers must petition the nearest state district court to be formed and legally recognized. This is usually a pro forma 'rubber stamp' operation now. (Of the more than 3,000 "special" districts today, there were fewer than 1,300 a decade ago)
A vote of the "property owners" then follows. According to the Post:(p. 15 A):
"These are generally the developers, their spouses and a select handful of business associates."
Then noting that a review by the Post "found one example where 12 people voted and another where the electorate was two people. The average is about six voters."
Furthermore, the power of these voters is awesome. They get to decide who will serve on the district's board of directors (nearly always each other), how much debt the district can incur and the homeowner burden (generally all the debt not based on a concrete formula will be paid off by the homeowners)
Most egregious? No regulations, nada, stop these developer -controlled boards from approving arrangements that are financially advantageous to their business, allowing them to finance overly ambitious plans without fear of liability.
According to the Post's investigation: "nearly half of the Sterkel's tax bill - and the reason it shot up so quickly - went to Thompson Crossing Metropolitan District No. 4, a quasi-government metro district that controls the area where they purchased."
This is an area featuring 1,900 homes planned for a community known as Thompson River Ranch. About 650 of those homes are finished today, but because of the sketchy setup, the Sterkels are paying taxes on the bonds to finance all the future projects. Hence the need for nearly half their tax bill to go to the quasi-government outfit run by the developers. (And when voting comes up, say on approval of new bonds, only the developers' spouses and families can cast votes.) Thus,these districts are really taxing authorities created by the subdivision developers themselves- with the blessings of local governments - for the sole purpose of selling government like bonds to finance their projects.
It's a cozy, tailor-made setup for developer predators, since they can vote on the size of the bonds, the applicable interest rates, and repayment schedules. (Repayment of the bonds is tied to future property taxes assessed to the homes that will eventually be built.)
The whole process is essentially undemocratic given property tax owners must vote on any new tax - and metro districts are no different- Except when a district is created the only voters are the developers, their spouses and business associates.
Basically then, to put things into perspective, the state has allowed developers to rise to the station of feudal lords and their districts are fiefdoms - with the new homeowners (like the Sterkels) now indentured servants (or more accurately, serfs) who will have to likely labor the rest of their days - and 7 days a week - to keep up with the property taxes. Also, with no chance at all of reselling - not after people read this Denver Post piece.
Those contemplating a move to Colorado, beware!
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