A. A special district is a local governmental entity that is a quasi-municipal corporation and political subdivision of the State of Colorado. Special districts are typically formed to provide necessary public services to an area that the county or municipality cannot otherwise provide.
Special districts can take many forms, including metropolitan districts, water districts, sewer districts, fire protection districts, and park and recreation districts. For example, a metropolitan district is a special district which provides more than one essential public service including: park and recreation, roadway construction and maintenance, traffic safety, sanitation treatment, water treatment and delivery, television relay and translator facilities, mosquito control, and fire protection. A special district typically also has the ability to construct, operate and maintain public improvements, including park and recreation improvements; landscaping; roadways; water, drainage and wastewater infrastructure; and other public improvements within its boundaries.
As a governmental entity, a special district has the power to impose property taxes, fees and charges for service, and the power to condemn property for public purposes.
In contrast to a special district, a homeowners’ association (“HOA”) is a private entity that is generally responsible for enforcing restrictive covenants in the community and for the maintenance and operation of HOA owned common areas. A HOA is not a governmental entity and does not have taxing powers.
A. The formation of a special district is governed by Title 32 of the Colorado Revised Statutes and other applicable laws. The persons wishing to form a special district create a service plan for the district. The service plan sets forth the special district’s services, a financial plan, a map of the special district’s boundaries, and other information. Once the service plan is approved by the county or municipality in which the special district will be located, a petition is filed with the district court, which makes findings regarding the legal sufficiency of the proposed special district and orders an election on the organization of the special district and its initial board of directors. If a majority of the votes cast are in favor of organization, then the district court shall enter an order creating the special district.
A. A special district is governed by its board of directors, made up of eligible electors of the district who are elected by the district’s voters. The board of directors is made up of five or seven members. The directors serve staggered four year terms with the result that some of the seats are up for election every two years. The board of directors may hire a manager, employees and/or consultants to carry out the purposes of the district and to ensure compliance with all statutory requirements for the district operations.
The board of directors makes decisions regarding the operation of the special district, including capital projects, maintenance, and annual budgets, at public meetings held at a time and place designated by the board of directors.
A. Benefits of a special district include:
- A special district can raise funds for public infrastructure by issuing bonds with favorable rates and terms not available to private entities.
- Special districts are exempt from sales, use and other taxes for equipment, supplies and services allowing lower overhead costs.
- A special district is not in the business of making a profit from the facilities and services provided. Specific statutes govern the expenditures and revenues of special districts.
- State-obligated budget, audit and other financial filing and reporting requirements provide regulatory oversight of a special district’s operations.
- Special districts enjoy governmental immunity against certain legal actions thus avoiding expensive lawsuits and corresponding taxes or fee increases.
- Because of its local nature, a special district is often better able to address issues of local concern to the community than a larger county or municipality.
A. A special district has a number of ways to raise revenues, including issuing debt, levying taxes, and imposing fees and charges. Methods of raising revenues include:
- General Obligation Bonds. Special districts are authorized to issue general obligation bonds, secured by ad valorem property taxes received through the imposition of a mill levy. Property taxes are tax deductible by property owners as opposed to fees or assessments imposed by private entities (such as HOAs), which are not.
- Revenue Bonds. Revenue bonds are payable from any non-tax revenue source of the district, including fees, rates, tolls or other charges collected from district residents and customers for service. Unlike property taxes, these fees, rates, tolls and charges are not tax deductible.
- Grants and Loans. Through the Colorado Division of Local Government and other state, local and federal programs, a special district can be eligible for infrastructure improvement grants and/or very low interest loans.
- Service Charges and Fees. A district may impose fees, rates, tolls and charges for programs, services and facilities provided by the district.
- Property Taxes. A district may impose a property tax. The amount of property tax received is determined by multiplying the district’s mill levy with the assessed value of each property located within the district. The district’s property tax is collected with other property taxes paid to the County.