The Loveland City Council passed a resolution at their regularly scheduled council meeting Sept. 4, allowing for the creation of new property taxes to be levied on the future home owners of the proposed â€œLakes at Centerraâ€� development in East Loveland.
Proposed by McWhinney Enterprises, the scheme levies additional property taxes on future residents of the new development in order to pay for building basic infrastructure and other amenities normally provided by the developer. Traditionally, developers pay these costs and recapture their expenses through the higher prices charged for the homes they sell. In this deal, McWhinney Enterprises will be allowed to shift $50,000 per home (for a total of $50,000,000) into pubic debt and take it off the price of the homes. The newly created public debt will be repaid through future taxes levied on the future residents of the community.
Homebuyers in a competitive housing market weigh heavily even slight differences in the prices of the homes they are interested in buying. Seldom, however, will they think to compare the relative property taxes; especially if the two properties are located in the same city. Therefore, hiding the costs of basic infrastructure and private community amenities in public debt through â€œspecial districtsâ€� to be repaid by future property taxes can provide certain developers a significant price advantages over their non-subsidized competitors.
Curiously, the Loveland City Council voted to reject a similar proposal by KB Homes (see LovelandPolitics. com story) in August of last year. Councilors Skowron, Brown, Dozier and Heckel voted against the proposal, in part, because they expressed concern that the twenty year period for repayment for the bonds was too long. This caused the taxing measure requested by KB Homes for their proposed Aspen Knolls development off Taft to fail gaining the necessary approval of the City Council.
Exactly one year and twenty-nine days later, two of the four Councilors who voted against the Aspen Knolls plan voted for the McWhinneyâ€™s Lakes at Centerra special taxing districts. Instead of twenty years of repayment the Lakes at Centerra can incur indebtedness for a period of forty years following the issuance of the bonds. Both Councilors Brown and Heckel supported the McWhinney measure after having voted against the Aspen Knolls proposal last year. Skowron and Dozier were consistent and voted again against created â €œspecial districtsâ€� for a residential development.
The special districts approved by the City Council will allow for 50 mills for debt service and 10 mills for maintainance. One consultant working for the City of Loveland but being paid by McWhinney, stated that he estimated a per household burden of the proposed 60 mills to be approximately $88 per month on average per household in the development. The resolution passed by council allows up to 70 mills of assessment per property. The extra 10 mills is to be available to the bond holders to increase the tax in the event property values fall and the return to the debt needs to be adjusted accordingly to prevent the bond investors from losing any money.
Councilman Glenn Rousey commented, â€œI always enjoy someone telling me itâ€™s a good deal because I can take it off my taxes but it never realy works out that way since I end-up paying more moneyâ€� He voted for the measure.
Rousey also inquired with City Attorney, John Duval, about the need to notify homebuyers before they arrive at the closing table what their tax obligations will be. Duval pointed Rousey to a section in the resolution that states,
â€œrequiring the Owner to provide the mill levy disclosure statement to all prospective purchasers of lots in The Lakes at Centerra Metropolitan Districts Nos. 1, 2, and 3 and the Future Inclusion Area prior to any purchaser entering into the contract to purchase a lot from the owner, or its successors and assigns.â€�
Councilman Skowron voiced concern that the city is giving away its own governmental authority when creating a special taxing district. He also restated concerns regarding such activity that were raised in a regional League of Cities meeting that he had attended.
Loveland City Council Passes Resolution Giving McWhinney More Taxing Districts