Council hears update on metro districts, directs model service plan change to preserve bond revenue

Dalton Kelly, bond counsel with Butler Snow, and Jason Simmons, the city's municipal advisor from Hilltop Securities, gave Brighton City Council a primer on metro districts and urged an update to the city's model service plan to address changes in residential assessment rates after the repeal of the Gallagher amendment.

Kelly told council that metro districts are "an independent quasi municipal corporation that's formed under Title 32," and that the districts exercise powers under that statute unless limited by the approved service plan. He explained that metro districts typically rely on property taxes and can be limited by caps set in a service plan, commonly "50 mills for debt and 10 mills for O&M." Kelly said the traditional Gallagher mechanism adjusted mills as assessment rates changed; after Gallagher's repeal the General Assembly now sets residential assessment rates and the new law produces years in which the rate can move up or down.

The presenters said the proposed change would peg the hold-harmless calculation at a reference rate (discussed as 6.8%) and require the annual mill-levy adjustment to preserve the dollar revenue that a capped mill levy would have produced at that reference assessment rate. "It's meant to be a hold harmless," Kelly said, so bond revenues neither "enhance nor decline due to legislative changes." Simmons added that auditors and CPAs generally calculate adjustments today but that the process is becoming more complicated as the legislature changes assessment and exemption rules.

Council members asked clarifying questions about what the adjustment protects (Kelly: the district and its bondholders from legislative changes, not shortfalls from slower buildout), whether the change would allow districts to exceed a council cap (the presenters repeatedly said the adjustment only compensates for state-law changes), and what city oversight exists after formation (Kelly described limited enforcement remedies, including court injunctions and a quinquennial review under Title 32 to review authorized but unissued debt). Mayor Pro Tem and several council members said they supported revising the model service plan language to require adjustments tied to the assessment rate rather than an arbitrary prior-year date, while keeping oversight authority limited to the service-plan tools already available.

Council did not take a formal vote at the study session but directed staff to bring updated service-plan language forward that: (1) pegs the hold-harmless calculation to the referenced residential assessment rate rather than a historical date, and (2) changes the adjustment from permissive ("may") to mandatory ("shall") so districts must reduce mills when assessment rates rise and increase when rates fall to maintain the same revenue dollar amount.

Brighton uses a model service plan to set policy parameters for any metro district wholly inside the city's boundaries; such plans set maximum mill levies, debt limits and disclosure obligations that apply when a developer seeks city approval. Kelly noted enforcement after organization is limited, usually requiring court action by the city or other interested taxing entities to enjoin material deviations from an approved service plan. Council members discussed additional oversight options (audits, reporting) but did not adopt any new enforcement steps in the study session.

The council will see proposed language in a future meeting and a metro district service plan is expected to come before the council in the near term.