What is a Metro Tax District in Colorado?
If you’ve been looking to buy a home in Denver - you may have noticed that there are some areas of Denver with significantly higher property taxes. These areas of town are part of something called a Metro Tax District. If you’ve stumbled upon this blog, it’s probably because you’re thinking about buying a home in one of these district’s and you’re wondering what the heck it is. So in this blog, I’ll explain what a Metro Tax District is, how it works, and the pros and cons of living one.
To begin with, let's define what a Metro Tax District is. A Metro Tax District is a special taxing district that’s created by a land developer to finance public infrastructure, such as roads, water lines, sewer systems, sidewalks, streetlights, and various amenities like parks, trails, playgrounds, etc, within a specific area. So essentially, a Metro Tax District is a way for developers to pay for the infrastructure that’s required for a new development without using their own funds and without burdening the local government. This metro tax is in addition to the base levy you are already paying that’s set by your local taxing authorities.
The Metro Tax District is funded through property taxes that are levied on the new properties within the district. When a developer creates a Metro Tax District, they typically issue bonds to finance the construction of the infrastructure. The bonds are then paid off over time through the property taxes that are collected within the district by the homeowners of this new community. Once the bonds are paid off, the Metro Tax District typically dissolves, and the responsibility for maintaining the infrastructure is transferred to the local government.
Having these bonds paid over time via property taxes also allows the developer to keep housing costs down because instead of just adding the cost of infrastructure to the cost of the homes, they are spreading the cost out over time.
Metro Tax Districts are usually established in areas where public infrastructure is inadequate or non-existent, and the cost of building new infrastructure would be too high for the developer to bear. They are also used to fund maintenance and repairs of existing infrastructure that have deteriorated over time. So the primary objective of a Metro Tax District is to provide the necessary infrastructure to support new developments, enhance the value of the properties within the district, and promote economic growth.
So now that you know what a Metro Tax District is and how it works let's delve deeper into the pros and cons of a Metro Tax District.
Pros of a Metro Tax District:
1st Pro: Infrastructure Financing - The most significant benefit of a Metro Tax District is that it provides developers with a way to finance public infrastructure that’s required for new developments. Developers are required to pay for the infrastructure upfront, which can be a substantial financial burden. By creating a Metro Tax District, they can spread the cost over a more extended period, which makes the development more financially feasible.
2nd Pro: Public Benefits - A Metro Tax District provides public benefits to the residents within the district, such as new roads, sidewalks, parks, and other amenities that improve the quality of life. The new infrastructure also attracts businesses, which creates job opportunities and stimulates economic growth. It also lowers the initial price of a home, which would otherwise include these infrastructure costs
3rd Pro: Local Control - Metro Tax Districts are controlled locally, which means that the residents within the district have a say in how the funds are allocated and how the infrastructure is maintained. This local control provides a level of transparency and accountability that’s not always present in other forms of infrastructure financing.
Cons of a Metro Tax District:
The first con is pretty obvious and that is Higher Property Taxes: One of the most significant drawbacks of a Metro Tax District is that property owners within the district are required to pay additional property taxes to finance the infrastructure. Like I said earlier, these taxes are in addition to the regular property taxes that property owners pay to the local government. This can be a financial burden for some property owners, especially if the taxes are significantly higher than the regular property taxes.
The second con is Long-Term Debt: A Metro Tax District typically issues bonds to finance the infrastructure, which means that the district incurs long-term debt. The debt is paid off over a period of 20-30 years through the property taxes collected within the district. This long-term debt can be a concern if the infrastructure does not generate enough revenue to cover the costs of the bonds.
The third con is Lack of Flexibility: Metro Tax Districts are established to finance a specific set of infrastructure projects, which means that the funds cannot be used for other purposes.
If you live within a Metro Tax Districts, you will be responsible for paying the property taxes that are used to pay off the bonds that were issued to finance the infrastructure.
Conclusion
A Metro Tax District is a special taxing district that’s created by a developer to finance the infrastructure required for the community the developer intends to create. The Metro Tax District is funded through property taxes that are levied on the properties within the district. These property taxes are used to pay off bonds that were issued to finance the infrastructure within the district, and are in addition to the local levy being paid to the city. The Denver area has various Metro Tax Districts, each of which was created to finance the infrastructure within a specific development.
I hope that you found this information helpful. When you’re making your move to Denver, be sure to give me a call, shoot me a text, or send me an email so that I can help you find your perfect home.
📱616-808-1185 📨 jess.anderson@exprealty.com
Watch Vlog Here: