Promoting Good Governance Practices and High Ethical Standards

ALL Wolfersberger, LLC district clients regularly hold public board meetings either within the boundaries of such districts or at nearby public facilities such as libraries, schools, recreation centers and community rooms at fire stations. In fact, all of our district clients hold board meetings less than 2.5 miles from the respective districts' boundaries.

Many accounting, management and legal firms serving metro districts support their district cleints' decisions to hold "public" board meetings in private corporate offices many miles (in some cases over 20 miles) away from the homeowners and taxpayers who live within such districts. In some cases, accounting, management and legal firms will host their clients' district board meetings in the firms' private offices, which are also many miles away from the homeowners in the tax district.

Master/slave metro district structures are created and designed to enable land developer-controlled “master” districts to capture all property tax revenue and government-classified debt proceeds generated by a “slave” metro districts AND (most importantly) prevent the taxpayers’ ability to elect the directors serving on the land developer-controlled “master” metro districts (which controls all of the tax proceeds paid by the taxpayers). Usually, such district structures are found in larger residential developments such a Reunion (Commerce City), Banning Lewis Ranch (Colorado Springs), Southshore (Aurora), Wyndham Hill (Frederick), etc.

Wolfersberger, LLC has never provided accouting or management support to assist in the creation of such district structures. However, Wolfersberger, LLC does provide accounting and advisory services to homeowner-controlled metro districts desiring to deconstruct such structures.  

Our elected representatives in government - whether they serve on a metro district board, city council, county board or state agency - have a legal and ethical responsibility to serve the interests of the people they represent ahead of their own personal interests. For that reason, Wolfersberger, LLC only works with metro districts where the majority (and in most cases, all) of the directors serving on such district boards are independent. Independent directors are much more likely to comply with and honor their fiduciary responsibilities to the current and future taxpayers and property owners of their district.

Many accounting, management and law firms work with and support districts controlled by non-independent directors. Unfortunately, many of these firms incorrectly believe that filing a conflict of interest disclosure form with the Colorado Secretary of State absolves directors from their legal and ethical responsibilities to place the interests of the taxpayers and property owners ahead of their own interests. This is one of the underlying reasons why many metro districts with non-independent boards have a history of (a) issuing high interest-rate debt (some with projected effective interest rates exceeding 40%), (b) entering into blank check funding agreements with companies that employ or are owned by the directors, (c) circumventing the laws requiring the construction of public infrastructure be subject to a public bid process and (d) untimately overleveredging metro districts with debt that requires decades of projected property tax increases to repay such debt.

Facility acquisition agreements (aka blank check fuding agreements or “BCF” Agreement) are unique agreements because they are rarely (if ever) used by any governmental entities other than corporate-controlled metro districts. Generally, through a BCF Agreement, a metro district contingently agrees to fund the corporate land developer that designs and constructs public infrastructure on undeveloped land owned by the land developer within the boundaries of the district. "Public infrastructure" typically includes streets, streetlights, sidewalks, water lines, sewer lines, storm drainage systems, landscaped parks and open spaces, fire hydrants, retaining walls and perimeter fencing.

Interestingly, while many of these corporate land developers and home builders enter into thousands of fixed-price construction contracts with independent home buyers, they claim they are unable to enter into fixed price construction contracts with metro districts (which are funded by the taxpayers but controlled by the land developers) to build streets, streetlights, sidewalks, water lines, sewer lines, storm drainage systems, etc. Because city development codes and city agreements with land developers typically provides detailed dimensions, materials and construction standards for installing public infrastructure, one must wonder why land developers are unwilling to enter into fixed-price construction contracts for building public infrastructure.

Most BCF Agreements contain no provision limiting how much a corporate land developer can claim is owed by a metro district under a BCF Agreements. Many corporate-controlled metro districts operate under the assumption that BCF Agreements allow for the construction of public infrastructure while avoiding the public bid requirements of the State. Colorado law (CRS 32-1-1001(1)(d)) requires metro districts to follow a public bid process for any projects greater than $60,000.

BCF Agreements take advantage of (1) the related party relationships that exist between corporate-controlled directors on a metro district board and the corporate land developer that owns the land to be developed within the metro district and (2) the absence of regulatory oversight and enforcement regarding the conduct of directors serving on metro district boards. [CLICK HERE to learn more about the accouting games and gimmicks used by developer-contolled metro districts.]

Wolfersberger, LLC has never provided accouting or advisory support to any metro districts issuing high interest rate bond debt.

There are over 970 bonds, notes and loans issued and outstanding (comprising over $8.1 billion in debt) across approximately 534 metro districts in Colorado. Since at least 2016, certain accounting firms, management firms, law firms, underwriters and other consultants began assisting developer-controlled metro districts with issuing high-interest rate debt (which will be paid off from property taxes assessed on current and future taxpayers of these metro districts). The net proceeds (after paying the firms' consulting fees) from issuing these debt instruments were paid to companies that either (1) employed the majority of the directors on these metro district boards or (2) were owned by the majority of directors that served on these metro district boards.

	Metro District (Location)	Bond Issue Date	Bond Issue Description	Original Face Value	Total Projected Repayment	Repayment Factor	Net Effective Interest Rate	Bond Offering Doc Excerpt [NOTE A]	Board controlled by	Underwriter	Accountant	General Counsel	Bond Counsel
1.	Cundall Farms Metro District (Thornton)	12/14/17	Series 2017C Limited Tax Junior Lien Subordinate General Obligation Bonds	$ 792,000	$12,558,351	15.9	46.2%		Land developer	DA Davidson & Co	CliftonLarsonAllen, LLP	White Bear Ankele Tanaka & Waldron, PC	Kutak Rock, LLP
2.	Amber Creek Metro District (Thornton)	10/31/17	Series 2017C Junior Lien Limited Tax G.O. Bonds	$1,752,000	$25,778,853	14.7	39.4%		Lennar	DA Davidson & Co	CliftonLarsonAllen, LLP	Seter Vander & Wall, PC	Kutak Rock, LLP
3.	Leyden Ranch Metro District (Arvada)	05/25/17	Junior Subordinate General Obligation Limited Tax Bonds, Series 2017C	$600,000	$8,552,304	14.3	39.0%		Land developer	DA Davidson & Co	Simmons & Wheeler, PC	White Bear Ankele Tanaka & Waldron, PC	Butler Snow, LLP
4.	Lewis Pointe Metro District (Thornton)	03/23/17	Junior Lien Limited Tax General Obligation Bonds, Series 2017C	$536,000	$3,375,076	10.2	38.8%		Lennar	DA Davidson & Co	CliftonLarsonAllen, LLP	Miller & Associates	Kutak Rock, LLP
5.	Leyden Rock Metro District No 10 (Arvada)	12/14/17	Series 2017C Bonds	$4,101,000	$52,208,867	12.7	36.3%		Land developer	DA Davidson & Co	CliftonLarsonAllen, LLP	White Bear Ankele Tanaka & Waldron, PC	Kutak Rock, LLP
6.	Colorado International Center Metro District No 3 (Aurora)	04/25/18	2018C Junior Lien Limited Tax General Obligation Bonds 2018C Bonds	$750,000	$5,830,131	7.8	33.8%		Land developer	DA Davidson & Co	CliftonLarsonAllen, LLP & SDMS, Inc	McGeady Becher, PC	Ballard Spahr, LLP
7.	Hawthorn Metro District No 2 (Arvada)	12/14/17	Series 2017C Limited Tax Junior Lien Subordinate General Obligation Bonds	$928,000	$10,811,575	11.7	30.8%		Land developer	DA Davidson & Co	CliftonLarsonAllen, LLP	White Bear Ankele Tanaka & Waldron, PC	Kutak Rock, LLP
8.	Orchard Farms Metro District (aka Big Dry Creek Metro District) (Thornton)	08/02/17	General Obligation Bonds Series 2017C	$1,865,000	$21,716,768	11.6	29.5%		Lennar	DA Davidson & Co	CliftonLarsonAllen, LLP	White Bear Ankele Tanaka & Waldron, PC	Kutak Rock, LLP
9.	Lanterns Metro District No 1 (Castle Rock)	07/31/19	Junior Lien Limited Tax General Obligation Bonds, Series 2019C	$1,329,000	$12,677,930	9.5	29.4%		Toll Brothers	DA Davidson & Co	CliftonLarsonAllen, LLP	White Bear Ankele Tanaka & Waldron, PC	Ballard Spahr, LLP
10.	Ward TOD Metro District No 1 (Arvada)	12/10/19	Limited Tax General Obligation Bonds Junior Lien - Series 2019C	$708,000	$7,498,897	10.6	28.2%		Toll Brothers	DA Davidson & Co	CliftonLarsonAllen, LLP	White Bear Ankele Tanaka & Waldron, PC	Ballard Spahr, LLP
11.	Tallman Gulch Metro District (Parker)	01/12/18	Junior Lien Limited Tax General Obligation Bonds Series 2018C	$830,000	$6,894,238	8.3	24.4%		Land developer	George K Baum & Co	CRS of Colorado	Miller & Associates	Kutak Rock, LLP
12.	Mayfield Metro District (Thornton)	05/04/20	Subordinate General Obligation Limited Tax Bonds, Series 2020B	$1,244,000	$4,642,046	3.7	23.1%		Century Communities	DA Davidson & Co	CliftonLarsonAllen, LLP	Collins, Cockrel & Cole, PC	Sherman & Howard, LLC
13.	North Holly Metro District (Thornton)	07/19/18	Junior General Obligation Bonds Series 2018C	$1,654,000	$12,469,343	7.5	20.9%		Toll Brothers	DA Davidson & Co	CliftonLarsonAllen, LLP	Miller & Associates	Ballard Spahr, LLP
14.	Mountain Shadows Metro District (Arvada)	03/29/18	General Obligation Bonds Series 2018C	$1,994,000	$10,735,367	5.4	19.5%		Land developer	DA Davidson & Co	CliftonLarsonAllen, LLP	White Bear Ankele Tanaka & Waldron, PC	Kutak Rock, LLP
15.	Colorado International Center Metro District No 4 (Denver)	04/18/19	2019B-2 Subordinate Bonds	$3,993,000	$18,353,350	4.6	14.9%		Land developer	DA Davidson & Co	CliftonLarsonAllen, LLP & SDMS, Inc	McGeady Becher, PC	Kutak Rock, LLP

NOTE A - The attached forecast/projection of debt service payments related to each bond is an excerpt of the bond offering document filed on EMMA. The financial information in these schedules should be read only in connection with the accompanying Summary of Significant Assumptions and Accounting Policies and the Accountant's related report - all included in the bond offering document filed on EMMA. A link to the EMMA website is provided on the homepage of our website.

Recognizing liabilities that are not really liabilities.

Recognizing assets that are not really assets.

Disclosing stated interest rates on debt but not disclosing the projected effective ("true cost") interest rates on such debt.

Underreporting collection costs for the purpose of increasing the amount of debt a district attempts to borrow.

[CLICK HERE to learn more about the accouting games and gimmicks used by developer-contolled metro districts.]

Unfortunately, these accouting games are common across many Colorado metro districts. Wolfersberger, LLC has assisted many districts with correcting, restating and improving the financial transparency of their financial statements.

Wolfersberger, LLC invests significant time educating and supporting directors and homeowners with improving their skills reading and understanding the financal statements of their metro districts.