On Sunday the CPN Homeowners for a Solid Foundation hosted a meeting for concerned citizens to hear a presentation on upcoming community ballot questions by Mark Shively, past president of Castle Pines North Metropolitan District. The presentation covered the Castle Pines North renewable water challenges, how the ballot questions will impact the ability of the community to fund sustainable water supplies, and other tax implications of the CPN ballot issues. In addition to serving as President of the Metro District, Mr. Shively has also served as its Treasurer, and for the past two years has served as Chair of Douglas County Water Resource Authority ( www.dcwater.org). His "real job" these past twenty years is that of registered investment advisor. From time to time he serves as an expert witness in his field. He has lived in Castle Pines North since 1986.

The first segment concerned a civics class "refresher" on the three elements of direct democracy, referendum, recall, and initiative. The items on this year's ballot are referenda. The incorporation of the City came as an initiative. Mr. Shively opined that recall should be reserved for illegal activities, whereas differences of opinion on policy questions should be addressed at the next election. He pointed out, "TABOR was an initiative from 1992 that requires all residents to vote on any tax policy change that results in net revenue gain". He stated, "The referenda, if approved, is a tax policy change that could result in net revenue gain for the community's new City, and so this change must be considered and approved by the citizens of the community". Resident will decide that IF the Metro District board approves a tax reduction, could the City increase taxes by a similar amount. The second ballot item asks for some relief from provisions of "TABOR", as well as an expansion for how revenues could be used by the new City's general fund.

The second segment focused on tax impacts. Mr. Shively pointed out, "What we need to focus on is that either the Metro District or the new City is going to have to raise fees, cut services, or suspend the debt prepayment that permits our community to fund its sustainable water future. There is no free lunch." It was pointed out that even if voters approve the measures, the Metro District board will still have to find that transferring funds from debt service to fund the City is in the best interests of the District's finances. Given the status of credit markets in the wake of the $700 billion bailout, such a finding may prove very difficult. It was also pointed out that the interest paid on some short term Metro District debt has recently soared from 1.7% to 8.75%. Mr. Shively pointed out that the Metro District boards over the years have pursued a prudent path that allowed debt to be prepaid in good times, while providing a buffer to pay debt in tough economic times. It is this foresight and planning that has positioned the Castle Pines North community to succeed with its sustainable water plans.

The last segment focused on how these ballot measures may negatively impact efforts to obtain sustainable water, and that a better course of action is available to the new City in its struggle to achieve financial viability. Debt prepayment is an integral part of the Metro District financial plan for future water supplies. Mr. Shively explained, "The more debt you can prepay now, the more money you can borrow later - when you need that money to purchase water assets." He pointed out efforts to outsource all District functions are "an empty sack". He said, "We looked at that option carefully on two occasions. While some efficiency could be obtained those could produce a couple hundred thousand dollars in savings, it cannot produce a couple million dollars in savings. That is just dreaming. We should strive to pursue efficiencies, but we should not mislead people as to what is possible." The Metro District also is working to champion water resource conservation measures in the community, and so the importance of stringent water conservation measures was pointed out as being essential in meeting the community's goals.

The last part of the presentation focused on how current monies used to prepay debt are being "squeezed" by factors such as higher interest rates, prevailing subprime lending woes throughout the world, and costs to issue debt, despite the District's good credit history and exemplary single A3 credit rating. Mr. Shively stated flatly , "Reduced prepayments negatively impact ability to fund renewable water". This sentiment echoes a recent Intergovernmental Agreement entered into by the Metro District and City just this past week. While supporting a "NO" vote on the ballot questions, Mr. Shively pointed out that the community does need to pull together to address the need to fund basic services now provided by Douglas County government when the City has to start paying for these services in February, just four months from now. City Treasurer Doug Gilbert said, "We just got our first revenue payment three weeks ago. I think it was like, $50,000."

Mr. Shively suggested the City levy a fee on the Metro District. The Metro District could pass along this fee to run the City to residents. He estimated the fee at $55 per month, but pointed out the figure could be higher or lower as the City matures and betters understands both its needs and cash flow. This $55 monthly figure was derived from a study performed by City manager CH2MHill. Mr. Gilbert has previously described the study as, "Accurate to a dime". The Colorado Court of Appeals has found this approach to be lawful. Mr. Shively stated the benefits to this approach include, "Provides Metro District flexible options in turbulent times, provides firm source of revenue for City, no negative impacts for renewable water,easily adjustable as City matures, does NOT burden businesses with more tax.

Before the question and answer audience participation segment, Mr. Shively summarized regional attempts to pursue water funding solutions with both federal and state entities. He ended his presentation as follows:

• The Metro District needs existing mil levy/ tax dollars to prepay debt.

• A "NO" vote on 2D prevents interruption of prepayment opportunity.

• A "NO" vote by Metro Board prevents interruption.

• The City needs an alternative funding mechanism, NOT mil levy transfer!

• A Fee levied by the City is the BEST solution.

A lively question and answer period followed.

Al Quarteraro asked if Mr. Shively felt the Metro District board would be supportive of the notion of a NO vote on the transfer of the mil levy and instead a fee being levied by the new City to fund its operations. Mr. Shively replied, "Yes, I believe so. We all need to pull together to fund services come February, and this approach appears to be the best way to proceed in this environment of credit market turmoil and interest rate volatility."

City Treasurer Gilbert asked if Mr. Shively had asked Metro District counsel John Hayes about this fee. Mr. Shively said no. Mr. Gilbert claimed such a fee was illegal. Mr. Shively replied, "The Colorado Court of Appeals has affirmed that a "fee" defrays the cost for specific government services - such as street maintenance. A "tax" funds the general burden of the cost of government. In this way the new City may lawfully adopt such a fee."

Don Rosenkrans asked if there was a "collar" as to how high interest rates could go on the Metro District's funding. Mr. Shively explained there are "collars" and how they work, how the current situation is not good for the bank that remarkets the debt, and that this situation is a ripple effect from subprime lending woes that have nothing to do with actions of either the City or the Metro District. Mr. Shively and Treasurer Gilbert agreed it would be best if normalcy returned to the credit markets as soon as possible in the wake of Friday's $700 billion bailout action by Congress.

Long-time Master Homeowner Association participant Allison Gibbens said angrily, "Once a fee is put in place it never goes away. This entire City effort has been a case of 'Ready, Fire, Aim. When are we going to ask that our so-called community "leaders" to take responsibility for their actions?" Mr. Shively replied, "Right now we need to pull together as a community to support a solution for the City to pay for services in February, without negatively impacting the ability to prepay debt and fund a water solution for the community. Other issues facing the community can be addressed in time, but with prudent action right now, we buy time to consider other issues down the road."

Former HOA1 President, former Master Homeowner's Association President, and current association manager Ron Valiga echoed concerns, and spoke passionately about how adding a fee to run the City negatively impacts the competitiveness of the Castle Pines North community. Mr. Shively replied, "There are two categories of communities in our region. The first group includes entities that have done a water resources plan. Their rates are rising. The second group has not yet done that planning. When they complete that planning, their rates will rise too. The water issues we all face will float all boats in the region to higher rates. In addition, at this point in time we find that we need a fee to allow the City to provide basic services when the County services go away in February."

Kathy Rosenkrans asked how the Metro District efforts were keeping up with the efforts of other water providers in the area so pursue and obtain sustainable water supplies. Mr. Shively commented on a presentation at this week's Douglas County Water Summit that reflected how Castle Pines North Metro District participation in the pursuit of water solutions is exemplary within the region.

Greg Havercroft asked, "Are you saying 72% of the community was wrong when they voted to create a City?" Mr. Shively replied, "That issue was presented and voted on. It's now water under the bridge. Rather than looking back, we need to pull together as a community to focus on the issues confronting the community in the future, specifically obtaining and funding water, and creating the best mechanism to fund the provision of services in February when County services go away."

Dan Schatz asked, "Does the ability to impact the Metro District's Integrated Water Resource Plan get impacted by a "yes" vote on these two ballot questions?" Mr. Shively answered, "The IGA between the City and the District addressed this point. Yes, definitely. Reduced prepayments negatively impact ability to fund renewable water. It's my sense that's exactly the danger of a "Yes" vote on these measures. I'm voting "NO"."

City Treasurer Doug Gilbert opinoined that the ballot questions were merely technical corrections to authorizations already voted to the City, and being done at the request of the Metro District's attorneys. Hidden Pointe Metro District Board President Jeff Huff rebuffed Doug's statement as an attempt to mischaracterize the ballot questions saying, "I served on the committee that drafted those bond questions you speak of. The limitations to use the revenue only on water and sanitation services was put there as a protection for the community. These new ballot questions we're getting ready to vote on are clearly an attempt to use revenues for the City's general fund purposes. That was specifically not the intent of the prior ballot questions." Mr. Shively added, "The Metro District's bond counsel is one of the three experts on TABOR in the State. If that input is information voters can use in making the community run as smoothly as possible in the future, let's provide that information to the people of the community."

Norm Cygan asked if the City could levy the fee directly, without placing the fee on the Metro District. Mr. Shively replied yes, and pointed out that rather than reinventing the wheel, the Metro District already sends out monthly bills, and its billing mechanism could provide for the fee to run the City to be easily collected at minimal cost. This would be another way the District could work cooperatively to help the City.

Mr. Cygan asked if with interest rates climbing from 1.7% to 8.75% if the District was getting paid 8% on the money it invested? Mr. Shively lamented, that no, in this turbulent credit market environment, interest rates being paid to the District are far less. My Cygan, a former geologist, opined, "While some claims made by (unnamed geologists) about the Denver Basin aquifers tend to be inflammatory, the Metro District definitely needs to be able to take action to migrate to sustainable water supplies".

Loyd Sanger asked if an article in The Connection was accurate. He pointed out the article stated there were prepayment penalties incurred by the District for paying off debt. Mr. Shively went through the mechanism of how debt is in fact prepaid at no cost. He said, "I've not read The Connection, but if it states that there are prepayment penalties, no that's not correct." Treasurer Doug Gilbert admitted that rather than asking the Metro District, he got the erroneous information from "bond council" and passed that on to The Connection for publication and distribution.

City Council member Kim Hoffman invited people to attend more meetings and offer input. Denise Quarteraro responded that every time she tried to raise a question at a City meeting, only one Council member would respond to shout her down. Other members of the audience echoed that they had received the similar treatment, and felt as if they were branded "trouble makers" any time they asked any question. Audience members asked that the new City and the Metro District work together to let citizens know about the inaccuracies portrayed in The Connection, so that voters understand facts before casting their votes. Councilwoman Havercroft asked no questions, saying she was there to listen. The members were thanked for taking time to attend the community meeting.

The meeting was very well received by those in attendance. After adjournment, people lingered to exchange additional points of view. Subsequent meetings of the citizen group will continue. The next meeting is scheduled for 7 p.m. on Sunday October 12 at the Castle Pines North Metro District building, 7404 Yorkshire Drive. All are welcome.

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