FAQ: What Is a Metropolitan District?

By
Real Estate Broker/Owner with New Paradigm Partners LLC EB #1326335

In Colorado, metropolitan districts are special tax districts, a form of local government, created to provide municipal services in areas where these do not exist. These services most typically include water, sanitary sewer, transportation improvements, and parks and recreation, but there are several other municipal services that may be covered as well.

 

Metropolitan districts have become common in Colorado in recent decades as urban growth moved outside of areas that could be easily served by existing local governments. There are now about 1,850 of these special districts operating in the state. A very common type, and one that will be familiar to many home owners in northern Colorado, happens when a developer builds beyond the bounds of existing infrastructure and the nearby municipality has no existing budget or authority to extend services.

 

Road ConstructionIn those cases, a metropolitan district may be formed to finance, develop and manage those services. The district imposes a special tax on new development in the affected area, and issues municipal bonds backed by the anticipated future revenues from that tax.

 

So that new subdivision just outside of town, with new streets, sewer and water lines, a swimming pool and park owes its existence to the metropolitan district that funded its infrastructure. And because the developer didn't have to pay those costs - they're being passed on to the homeowner as a part of his property tax - the homes can be priced to compete with other similar homes that already have access to municipal infrastructure - although their property taxes will be higher than homes not in a metropolitan district.

 

There are some potential problems with this arrangement. In the event that the development is not sufficiently successful to generate the tax revenue necessary to repay the bonds, existing property owners who fall under the district will likely bear the entire burden of repayment. Metropolitan district bonds are general obligation bonds, and in the event of a default, the bondholders have the right to place a tax levy to satisfy the obligation. That is exactly what happened a decade or so ago with some very large municpal districts in our state. The outcome was financially very damaging to the existing property owners and as a consequence, the state made legislative changes to improve the financial basis of future districts.

 

As part of those changes, our real estate purchase contracts contain special disclosure language making buyers aware of the potential existence of such districts. We always run a check for our buyers on any contemplated purchase. And as a matter of due diligence, when a purchase involves such a district, we always recommend that our clients take the time to review the district's finances and records.

 

If you'd like more information, a good place to start is Special Districts: A Brief Review for Prospective Homeowners published by the Colorado Department of Local Affairs.

Posted by
Mary & Dick

Mary & Dick Greenberg
New Paradigm Partners LLC
2601 S. Lemay Ave. #41
Fort Collins, CO 80525
970-689-4663
www.maryanddick.com

 

Data Source: IRES MLS

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Rainmaker
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Steffy Hristova
HomeSmart Elite Group Tempe AZ Tel: 480-966-9353 - Tempe, AZ
Tempe AZ Realtor - Your Home Close to Your Work!

Dick, this is important information for buyers who are looking to purchase their home in Northern CO, and your explanation is easy to read and understand. In AZ, we have Community Facilities Districs, similar concept.

Jun 16, 2017 09:42 AM #11
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Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

You underscore the importance of working with someone who knows all the local financial ramifications of purchasing in a particular area of Northern Colorado. I can't imagine choosing to work with anyone else for real estate needs. You and Mary are the the only smart choice. 

Jun 16, 2017 10:02 AM #12
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Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

We don't have these in Oklahoma like in Colorado but we do have what we call fire distrcits that can impose an added tax to homeowners to fiance a fire department. This happens when it is outside the usual tax base.

Jun 16, 2017 10:37 AM #13
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Belinda Spillman
Aspen Lane Real Estate Colorful Colorado - Aurora, CO
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This is a great description of Metro Districts.  It is all so confusing for home owners.  Nice feature.

Jun 16, 2017 12:43 PM #14
Rainmaker
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Ronald Gombach
The Gombach Group - Morrisville, PA

Dick Greenberg — is Metro District an attribute/field in your MLS?  If so, Searchable?

Jun 16, 2017 01:34 PM #15
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Dick WOW 1850 metropolitan district.  Here in CT I only know of one and that is in Hartford.

Jun 16, 2017 02:24 PM #16
Rainmaker
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Sheri Sperry - MCNE®
Coldwell Banker Residential Brokerage - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi Dick, 

Great explanation of this. As soon as I started reading, it reminded me of a "Mello-Roos" tax in California. Generally newer areas needed to finance building schools and services.  Many buyers wanted to stay away from these areas because of the special levy but these areas also grew faster and appreciated faster as well!

Jun 16, 2017 03:42 PM #17
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Jeff Dowler
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude - Carlsbad

Hi Dick

Great explanation of something that is likely confusing to many, or something they do not even know about. They remind me a little of our CFDs (Community Facilities Districts), usually associated with newer housing communities and a special property tax known as Mello Roos .

Have a great weekend!

Jeff

Jun 16, 2017 04:38 PM #18
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Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

Great information Dick Greenberg  and you explain it so well . Congrats at your well deserved Star

Jun 16, 2017 05:13 PM #19
Rainer
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Shahar Hillel
Augusta Financial Inc. - Stevenson Ranch, CA
Mortgage Consultant, Loan Officer.

Dick hello.

Some very good information here.

Thank you for the post.

Jun 16, 2017 05:23 PM #20
Rainmaker
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Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale - Probate Broker

Dick, I am with Jeff Dowler on this. Reading this sounds similar to our Mello-Roos taxes. Interesting read and certainly something I am willing to bet all real estate agents don't know about or discuss with their clients.  

Jun 16, 2017 06:54 PM #21
Rainer
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Dörte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear Dick,

In our area, builders finance the same thing with a special tax, called a front foot fee. Just like Mello-Roos in California, they are special for various amounts of time, from around 20-40 years, depending on the builder, time the home was built & area. Once they start running out, the neighborhood become real popular again, because people love it, when their taxes go down (in this case because the front foot fee has been satisfied).

Jun 16, 2017 07:38 PM #22
Rainmaker
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Myrl Jeffcoat
GreatWest Realty - Sacramento, CA
Greater Sacramento Real Estate Agent

In California, we have Mello-Roos In areas where homes are newer.  For folks in older neighborhoods, Sacramento County takes care of the ser system.  There are several different water districts however.  We are fortunate to have SMUD, which is a rate payer owned utility for electricity.

Jun 17, 2017 02:07 AM #23
Rainmaker
264,387
John Wiley
Jones & Co. Realty - Cape Coral, FL
Lee County, FL Real Estate GRI, SRES,GREEN,PSA

What a great explanation of a Metropolitan District. It is so important for the Consumer to work with a Professional and knowledgeable Real Estate Agent.

Dick Greenberg is that agent to go to for your real estate needs in Colorado.

Jun 17, 2017 04:40 AM #24
Rainmaker
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Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Another good reason to involve agents in Real Estate transacting

Jun 17, 2017 05:50 AM #25
Rainmaker
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Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good Morning Dick - the buyer really need to do the research before assuming the risk.  Thanks for laying it out.

Jun 17, 2017 08:22 AM #26
Rainmaker
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Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Once again,  you prove why it's so important to work with a local agent, Dick Greenberg ... one familiar and experienced at transacting properties in the area in which the Buyer hopes to purchase their home.  Local knowledge regarding this issue and potential cost could save big money ... and monetary stresses down the road. 

Gene

Jun 18, 2017 04:47 PM #27
Rainmaker
1,340,234
Lise Howe
Long and Foster - Washington, DC
Assoc. Broker and Attorney Licensed in DC, MD, VA,

Thanks for providing this excellenr description of metropolitan districts. As noted by other commenters we have a variation of this in the metropolitan D.C. Area where new construction has exceeded the municipal or county capacity to provide service

Jun 19, 2017 03:34 AM #28
Rainmaker
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Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

Wow - a buyer could get in real financial trouble without the aid of an agent who not only knows about these districts - but warns them.

Jun 20, 2017 09:36 AM #29
Rainmaker
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Jan Green
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

Interesting coincidence Dick. We have Community Facility Districts (CFD's) set up the same way.  For instance, Buckeye and Goodyear, Arizona have CFD's.  I doubt we have 1800 of these, but it's good to understand them.  About 3 years ago I served on our Disclosure committee and these were finally included, like yours.  I wonder who started this idea first?  

Jun 20, 2017 08:05 PM #30
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