La Plata County commissioners voted unanimously Tuesday to hold a public hearing to discuss the Tamarron Metropolitan District’s ability to service its debts after learning the district has missed more than $14 million in debt payments.
The district, which was created in 2003, serves the Glacier Club, a development of expensive homes along U.S. Highway 550 north of Durango.
In May, commissioners voted to request an application for a “finding of reasonable diligence” from the district after the Colorado Department of Local Affairs notified the county that the district had fallen significantly behind on its debt payments.
Soon after the district’s creation, its electors – just five voters at the time – approved a borrowing limit of up to $150 million. In 2006, $23,127,000 in bonds were issued to the district. The debt, which was used to finance the development of public resources such as roads and parks, was to be paid off using property tax revenue generated from homeowners in the district.
But the district soon fell behind as property taxes failed to generate enough revenue to make payments on both the interest owed as well as the principle amount.
County staff members reviewed the application for a finding of reasonable diligence submitted by Tamarron earlier this month and found several remaining concerns and discrepancies.
The district’s application says it has $153.5 million in authorized and unissued debt – despite the fact that voters only authorized $150 million in debt, and $23.1 million was already issued, theoretically leaving $127,373,000 in authorized but unissued debt.
The application also contains two amendments to Tamarron’s agreement with its bondholder, a Florida-based firm named ITG Capital Group, which purchased the debt for $7 million several years ago. In May, Rick Carlton, the developer of Glacier Club, described ITG as a “very friendly bondholder” to the Board of County Commissioners.
The amendments strike a clause that would have allowed the bondholder to raise mill levies in the district in the event of nonpayment. Now, mill levies may not exceed 50 mills and may not drop below 37 mills.
Another amendment included in the application says, “The only obligation currently remaining under the Bond Indenture with respect to repayment of the Series 2006 Bonds is to levy the Required Mill Levy of 37 mills … until the final Discharge Date of Dec. 2, 2046.”
In short, the remainder of the debt will be wiped in 2046 so long as the district continues to pay the bondholder at least 37 mills until that time.
Jim Goodman, chief operating officer of Glacier Club and chairman of the Tamarron board, said the bond holder agreed to the two amendments because he recognized it was “in his best interest to cooperate with the district.”
A certified public accountant produced projections, included in Tamarron’s application, that say the mill levy is likely to produce about $36.2 million in revenues from present through Dec. 2, 2046.
Those revenues will produce a significant return on investment for the bondholder, which purchased the debt for just $7 million. However, the district is projected to have over $128 million in outstanding debt by that date.
“It looks to me now that they’ll never be able to pay it off,” County Finance Director Adam Rogers told commissioners.
The district’s current outstanding indebtedness is $40.8 million.
The county cannot exert much power over the existing debt, but could deny the authority of the district to issue any more of the authorized debt.
Representatives of Tamarron have informed the county they do not intend on issuing any more debt, however, this statement is not binding at this time.
Goodman said the district is committed to working with county commissioners until they are comfortable with the arrangement, and stressed that the district is not in default but is “solvent and able to discharge its requirements.”
The county will hold a hearing at 8:30 a.m. July 26 on the matter. Tamarron’s attorneys will be able to present their side of the case and any members of the public who want to voice concerns will be able to do so.
rschafir@durangoherald.com
