“Let’s turn the page”
By Alissa Johnson
The town of Mt. Crested Butte considered and ultimately approved, with conditions, an amendment to its service plan for Reserve Metropolitan Districts 1 and 2 in support of efforts by the latter (RMD2) to refinance significant debt. The move should help close a chapter of disagreement and litigation between the districts and other entities, including the town, developers and the county.
RMD2, which is a financing district within the town of Mt. Crested Butte and encompasses currently developed portions of the Prospect subdivision, requested the change in order to increase its mill levy cap. The change also affects District 1 (RMD1), an operations district.
At a March 1 public hearing with the Mt. Crested Butte Town Council, RMD2 property owner and finance subcommittee member John Flanigan outlined a series of financial obligations, including a current debt of $18.4 million with Compass Bank.
The district has the opportunity to purchase that debt for $8.5 million and finance other obligations as part of the deal.
“It would go a long way to putting the finances of RMD2 on solid financial ground,” Flanigan said.
Other obligations include paying $1.2 million in tax abatements. A Colorado Court of Appeals found that taxes collected in excess of the district’s mill levy cap in 2013, 2014 and 2015 were illegal, and the responsibility to refund them falls with the district.
“There are not sufficient funds to pay that obligation,” Flanigan said.
RMD2 also has $300,000 in legal fees from a series of disputes and lawsuits between landowners, a development group and government entities related to the way RMD2 exceeded its mill levy cap and issues about who would pay for infrastructure costs in the Prospect subdivision.
With closing costs and reimbursement of legal fees to Compass, the total amount of the loan is expected to be just under $11 million. But in order to qualify, RMD2 needs a mill levy cap of 68 mills—a 30 percent cushion on top of the anticipated 52 mills required to service the debt. Flanigan said the lenders require that cushion in order to make the loan.
“There is no intention on the part of RMD2 to charge 68. It would be charging a target mill levy of 52. The lender needs collateral and the collateral the lender has is a call on the assessed value of Prospect,” Flanigan explained, adding that if the valuation in Prospect increases, that mill levy could go down.
RMD2 also requested an additional 10 mills to support operations such as road maintenance in district two.
Several entities involved in litigation with RMD2 attended the public hearing and requested that the council put conditions on the amendment to the service plan.
Gretchen Stuhr, deputy county attorney, read a statement requesting that the council place conditions on its approval to ensure that RMD2 paid for the $1.2 million in tax abatements.
“The county concern is that taxpayers of the county as a whole are not required to bear the burden of abating illegally collected monies. We feel that responsibility is with RMD2,” Stuhr said.
Attorney Kim Seter, who represents the development group, a subsidiary of Crested Butte Mountain Resort, wanted to make sure that any modification to the service plan was in line with an existing settlement agreement. Specifically, he wanted to make sure that RMD2 pays for road maintenance in Prospect and that properties excluded from the district are subject only to previously agreed-upon debt.
Michael Kraatz attended the meeting on behalf of RMD1 but said he was not authorized to comment because the two districts will be in court next month on remaining disagreements.
Attorney Marcus Lock represented a group of lot owners whose dispute with the Prospect development has been resolved. He spoke in favor of amending the service plan and urged the council not to place conditions on its approval.
“I think what the county and the developer are asking you to do is insert yourself into settlement negotiations. I respectfully suggest you stay out of those negotiations,” he said.
Finally, Bob Orlinski, a director of RMD2, said that excluding any of the properties from any portion of the mill levy would be a problem for the district.
Following the close of the public hearing, the council considered at length whether it ought to approve the amendment to the service plan and whether it ought to place conditions on that approval. In the end, most councilmembers leaned toward doing both.
Mayor David Clayton felt the terms of the loan were good and understood RMD2’s need for refinancing. Though he supported the amendment, he expressed some frustrations.
“I have some reservations providing funding within the loan for the litigation payments… I really hate the fact that what’s going on here is we are potentially charging homeowners to pay themselves back for money they paid before. That just galls me, but that’s where we are,” he said.
“If we have the opportunity to put two and a half to three years and all this money behind us and allow the town to move forward with what generates the most income—which is development, land sales and construction—then overall the $11 million is a worthwhile endeavor,” said councilmember Todd Barnes.
“Let’s turn the page. If we have something in place we can agree on, with some conditions, let’s move forward,” said councilmember Ken Lodovico.
Councilmember Nicholas Kempin disagreed. “I’m concerned about [creating] conditions for agreements already in place. It seems like something you all should do so I would not be inclined to put conditions on it,” he said to members of the audience.
In the end, the council voted 6 to 1 in favor of amending the plan and allowing a mill levy cap of 68 mills for debt payment and 10 mills for operations. Kempin voted against.
Conditions specified uses for the funds, such as completing the settlement with Compass Bank and covering tax abatement liability. They also limited the debt obligation of property excluded from RMD2 and outlined the use of the 10 mills for road maintenance. Most parties present for the meeting seemed pleased with the decision.