A bill that seeks to stop metropolitan district developers from buying municipal bonds that they or their affiliates approved for sale while serving on the community’s board of directors passed the state House on Tuesday.
In a 38-24 vote that drew a Republican in favor and pulled seven Democrats from the majority, House Bill 1090 now moves to the Senate. The bill also drew 16 co-sponsors in the House, all Democrats. Three members were excused from the vote.
Bill sponsor Rep. Mike Weissman, an Aurora Democrat, said the conflict of interest of a developer buying their own financing is troubling and the key focus of the proposed legislation.
“I’m grateful of the support of my colleagues in recognizing that those who issue metro district debt, which is local government debt paid for by property taxes, should not be able to purchase and profit from that debt,” Weissman told The Denver Gazette after the vote.
Rep. Rod Bockenfeld, R-Watkins, was the lone voice on the House floor trying to dissuade colleagues from its passage, saying developer-owned bonds are crucial to a metro district’s success. Additionally, Bockenfeld said homeowners should do their homework before complaining about the practice.
“I’m sorry folks, when my constituents call me and complain about a metro district, it falls on deaf ears,” said the legislator of House District 56, which covers Adams, Arapahoe, Cheyenne, El Paso, Elbert, Kit Carson and Lincoln counties. “You have a responsibility when you buy a home to do your own due diligence.”
The seven Democrats who sided with Bockenfeld's dissent were Shannon Bird of Westminster; Cathy Kipp of Fort Collins; William Lindstedt of Broomfield; Barbara McLachlan of Durango; Marc Snyder of Colorado Springs; Alex Valdez of Denver; and, Mary Young of Greeley.
The lone Republican to break ranks was Rep. Stephanie Luck of Penrose.
While acting as a metro district’s board of directors, developers — or those who work for them — approve the public financing needed to reimburse them for their expenses, then purchase that debt for themselves, frequently at much higher interest-rate returns than other forms of financing. Critics say the practice appears unethical, but board members of quasi-governmental metro districts are not subject to state ethics commission scrutiny.
Another bill, HB 23-1065, takes square aim at that loophole. The House committee on appropriations also expects to hear it.
The Senate on Tuesday passed on second reading a bill that would allow the very practice Weissman’s offering would prohibit, setting up a legislative showdown in each chamber as the bills crisscross the Capitol.
The bill, Senate Bill 23-110, is likely to be taken up for its final approval this week.
Weissman said he is ready to see which bill will survive.
“I hope that problematic provisions of SB 110 that would allow this very practice by enshrining it in statute are amended as it continues its course in the Senate and then the House,” he said.
Co-sponsor Sen. Robert Rodriguez, D-Denver, will carry the Weissman bill through his side of the General Assembly next week.
