In the weeks before residents of the Colorado International Center Metro District #3 were to take control of their governing board in 2018, the developers who still ran it squeezed in just one more bit of business.
Through a flurry of meetings, several of them held in corporate offices 18 miles from the district located southwest of the Gaylord Rockies Resort, the men behind CIC#3 approved the sale of more than $3.2 million in bonds. Property owners will pay for those bonds over the next two decades.
The developers say the money was to reimburse themselves for costs of the district’s infrastructure – the sidewalks, sewers, and water lines – and they weren’t sure they could trust the incoming resident-controlled board to get it done.
The move was just one of at least a half dozen The Denver Post has found where metro district developers, faced with losing their board seats – and ultimately control of the metro districts they helped build – to residents upset over high property taxes and other issues, have approved millions of dollars in additional financing measures.
In one case, the developers used their authority as board members to simply take away the land they still owned. In another, they approved the bond sales and kept them for themselves, a long-term investment to ensure they would be reimbursed for work they’d done and paid for any additional work to come, according to meeting minutes reviewed by The Post and interviews with participants.
Property owners did not get to vote on the bond measures because the developers who formed the districts had already established their debt limits years earlier – some into the billions of dollars — The Post has reported previously.
“Builders and land developers have devised ways to control and manipulate districts to conduct hundreds of millions of dollars of transactions with themselves, relying on taxpayer dollars to pay themselves back,” said Charles Wolfersberger, an accountant whose eponymous firm manages several metro districts. “And they’re doing it whenever they want, even in the face of losing control to the very people who have to pay the bonds they’re issuing. It’s a slap in the homeowner’s face, really.”
State law permits metro district developers to both front cash to get the district going, and then serve on the district’s board of directors and approve the public financing that will pay them back.
Among the other examples The Post found:
— On Dec. 18, 2019, the developer-controlled board of Erie Commons Metropolitan District #2, just south of downtown Erie, approved the sale of more than $32.6 million in bonds largely to repay their companies for infrastructure work. The next day, residents filed petitions with the Weld County District Court to recall the board members. Residents have since decided to run for the board themselves and unseat the developers in the upcoming May elections.
— With builders reticent to purchase property while a resident-initiated recall effort was gathering signatures, the developer-controlled board at Buffalo Highlands Metropolitan District in July 2019 voted to exclude about 75% of the land they owned from the district. That essentially means new bonds or refinancing old ones would be too expensive because there are fewer properties to tax. The developers can also continue their work without resident interference. The board members promptly resigned soon after, forcing the city council of Commerce City to name immediate replacements.
— In April 2018, the developer-controlled board at Amber Creek Metropolitan District in Thornton voted to pay $10.9 million to developer/builder Lennar Homes for infrastructure costs. Two weeks later, homeowners within the district were elected to take control of the board.
— In May 2018, the five members of the Carriage Hills Metropolitan District in Frederick – all part of the same developer family – approved more than $7 million in bonds, $2.6 million of it in a private sale, to repay their company for previous infrastructure expenses just five days before three residents would be elected to the body. In a subsequent lawsuit still pending, another developer accused the former board of purposely first repaying itself with bond proceeds while ignoring the more than $400,000 he said he is still owed.
Special district board members are the only elected positions in Colorado that do not have to abide by the state’s strict rules governing conflicts of interest, an exemption that legislators put into law decades ago, just as metro district developments were gaining in popularity.
“It might make sense for metro districts to have the (conflict-of-interest) exemption when they are just forming, but later, when there are (residents) who are being chosen, elected, to act in the public interest, it should not at all be used for private gain,” said Peg Perl, a public policy lawyer in Denver who was counsel to the U.S. House of Representatives Ethics Committee from 2008-2010, and more recently was chief counsel to Colorado Ethics Watch.
At CIC#3, developers knew they were to be ousted from the board in February 2018, when five residents filed applications to run for election to the board’s five seats. Because there were no other challengers for the May election, the sitting board canceled the ballot, declared the residents the default winners and prepared to have them take over.
On April 4, 2018, the developers – Andrew Klein, Theodore Laudick, Otis Moore III, and Kevin Smith — met near CIC#3 to discuss normal district business. Two district residents – Tami Romeis and Ronald Patterson, each running for the board – were there, meeting minutes show.
“There was discussion about bonds, but it was way over my head,” Romeis told The Post.
The next meeting, on April 16, was held at the developers’ Glendale offices – 17 miles away. Minutes show no resident attended.
The bonds were approved unanimously.
“On one hand it doesn’t matter, because it’s done,” Romeis said. “On the other hand, it’s easy to jump to intent and down-play innocent coincidence. Is this a reasonable amount for our neighborhood?”
Klein said it was simply business.
“We paid for the infrastructure and we use the districts to get reimbursed for it,” Klein said of the bond deal that would repay his group, ACM High Point VI LLC, the final dollars they say they were owed.
ACM had purchased the rights to develop CIC #3 – and the right to collect on any advances that had been paid — from its previous developer. District residents were already paying taxes on $11 million in bonds that were issued in 2016, records show.
“Why would the residents choose to repay us for the money we spent?” Klein told The Post when asked why the developer-controlled board couldn’t wait until the new members were sworn in. “We made sure this happened in the right way and the smooth way.”
Klein’s Westside Investment Partners is involved in several other metro districts, including a new one in Denver’s Loretto Heights neighborhood.
In cases such as at CIC#3, residents were poised to take control via the normal election process when the developers pushed bond financing through. In others, The Post found developer-controlled districts passing last-minute financing measures to reimburse themselves as board members faced recall petitions to oust them.
RJ Sangosti, The Denver Post
Tamila Romeis, a resident of Colorado International Center Metro District #3, is now the board president.At BNC Metro District #2 in Commerce City, residents filed recall papers Oct. 24, 2019, to oust its three-person, developer-controlled board run by Theodore Antenucci, Janis Emanuel and Robert Bol. Two other seats are vacant.
Antenucci is president of Catellus Development Corp., the project’s developer, and Emanuel is an employee there, according to conflict of interest documents they filed with the Colorado secretary of state’s office. Bol is a personal friend and neighbor of Antenucci in Evergreen, the latter told The Post.
The California-based company also owned more than $5 million in BNC bonds that Catellus had purchased from the bank that held them previously, documents show.
On Dec. 23, 2019, at an 8 a.m. meeting held at the Eagle Point Recreation Center on Commerce City’s south side – 10 miles from the Bison Ridge Recreation Center that is next to the metro district on the city’s north side – Antenucci, Emanuel and Bol unanimously approved the sale of more than $21 million in a pair of bonds amid the recall process.
No residents were in attendance.
“The board passed the new bond (not long) after filing for the recall, and the meeting was scheduled for a weekday in the afternoon, when most homeowners are at work,” BNC resident Joel Person told The Post in an email. “As a homeowner, I have the right to be on the board, to help control the debt being issued by the district.”
The money, Antenucci said, was to reimburse Catellus for funds they’d spent on additional infrastructure construction, as well as to refinance the original bonds the company had owned.
But the bonds were never actually sold to the public. Instead, Catellus kept all $21 million of the bonds for itself, a tax-free deal with about 6% interest that was closed before the residents’ recall process could advance any further.
“The costs were incurred and it was time to be reimbursed, and the minute the bonds were floated, we got paid,” said Antenucci, who emphasized the bonds were a lower interest rate than the ones being refinanced – 8% on the original bonds as opposed to 6% and 3.5% for the new bonds.
That the board voted at a time its control was threatened by a recall election was merely a coincidence, he said. And the location of the meeting was also a coincidence.
“It was in our plan to issue bonds sometime early (in 2020), but we finished sooner,” he said. “Secondly, it was appropriate to lower the interest rates, and thirdly, we didn’t know what would happen in April or May (when the recall election takes place), of course.”
Antenucci added: “If someone owed you $21 million to be reimbursed when you were completed, why would you wait any more time for that? It’s crystal clear we are owed the money.”
That the company now owns the tax-free bonds that homeowners are required to repay and didn’t sell them on the open market was a business decision, he said.
“The company is interested in cash flow instead of just cash, and the answer is to have the bonds now with the cash flow associated with them,” Antenucci said. “At some point, we might sell them. Liquidity is what our mind-set is, where we are right now.”
Person said it’s too comfy of an arrangement.
“I feel there is a conflict of interest when the same people requesting the bonds are also the people receiving the funds at the expense of the homeowners,” he said.
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