Memorandum in support of House Bill 17-1100
RE: Qualification of electors in special district elections
By virtue of a contract to purchase taxable property
Background
On April 21, 2016, the Colorado Court of Appeals delivered an opinion that virtually froze bonding for special districts in Colorado. In Landmark Towers Association, Inc., et al. v. UMB Bank, N.A., et al., 2016 COA 61 (“Landmark”) the decision created uncertainty regarding the validity of previous elections held for the vast majority of metropolitan districts in Colorado.
· The legislature responded swiftly and decisively and adopted SB 16-211.
· That legislation clarified that the time period has run for challenging an election based upon who voted in any election held prior to April 21, 2016 and that the time period for the May 2016 elections will expired 10 days after the election results were certified to the Designated Election Official (“DEO”).
· Elections held prior to April 21, 2016 were deemed valid by SB 16-211.
The case is now on appeal to the Colorado Supreme Court. A decision is not expected in this case by the end of the 2017 legislative session.
The Problem Today – the Phantom Elector:
While advocates of Senate Bill 16-211 are waiting for the Colorado Supreme Court to act on the appeal before addressing future issues related to metropolitan district formation, there is one issue that should be legislatively addressed in 2017. The decision in Landmark has created a “phantom elector” problem for elections held by special districts and other local government entities going forward by interpreting current law in a way that was never intended, and has not been followed at any time prior to the issuance of this opinion.
Under current law, a registered voter who owns real property within certain districts, can be a qualified elector, and is entitled to receive notices and vote in the elections of the district. The law also says that a registered voter will qualify as a landowner if the person is obligated to pay taxes under a contract to purchase such taxable property. The opinion in Landmark interpreted this language, for the first time since the provision was enacted in 1982, to include standard residential purchase and sale contracts, since they all include language that requires the purchaser to pay the portion of property tax due from the time of closing forward, to be paid at or after the closing of the purchase. This new and erroneous interpretation means that every purchaser of a home is a qualified elector of the district from the time they enter into the purchase contract until closing of the purchase, even though they are not technically land owners and do not have possession, control or use of the property during that interim period.
The “phantom elector” exists because the contract to purchase property is typically not recorded or filed in any place where a special district DEO can discover it or otherwise be aware of its existence in order to know who is a holder of a contract to purchase property and has a right to receive notice and to vote in a TABOR election. And technically, the purchaser is not an “owner” until this contract is closed and a deed and deed of trust take its place.
Specifically, the court determined that persons who are obligated under a contract to purchase taxable property to pay taxes at or after the closing, but who are not yet owners because the transaction has not closed on the property purchase are eligible to vote in special district elections, thus creating “phantom electors”, meaning electors that no one knows exist.
This phantom elector issue needs to be addressed during the 2017 session in order that the TABOR elections that may be held in November of 2017, and thereafter, are not at risk of being nullified because the DEO’s were unable to identify and notify these phantom electors of the election.
A solution is necessary:
A group of key stakeholders which included the top public finance experts and bond counsel in the state, are of the strong opinion that the phantom elector problem has to be fixed. The solution is to assure that the only contracts that convey voter status are those which require the purchaser to pay taxes prior to the date of purchase. This upholds the spirit of TABOR, and is administratively feasible.
This proposal does not affect any litigation concerning special district elections held prior to January 1, 2017.
Due to the importance of clarifying eligible electors for upcoming elections the proposed legislation is limited to solving the narrow issue of the phantom elector.
Contact: Special District Association of Colorado
Ann Terry, Executive Director Phone: (303)863-1733
Michael A. Valdez, Policy Director (303)863-1733
MaryKay Hogan, Legislative Consultant (303)229-7407
Evan Goulding, Legislative Consultant (720)244-1560)
Colorado Municipal Bond Dealers