June 20, 2019

Colorado Court of Appeals: Special District Had Authority to Enter Into Loan Agreements and Pledge District’s Assets as Collateral

The Colorado Court of Appeals issued its opinion in Todd Creek Village Metropolitan District v. Valley Bank & Trust Co. on Thursday, November 21, 2013.

Municipal District—Colo. Const. art. XI, § 6(1)—Collateral—Service Plan—General Obligation Debt.

Defendant Valley Bank & Trust Company (bank) appealed the judgment entered in favor of plaintiff Todd Creek Village Metropolitan District (special district). The judgment was reversed.

The bank contended that the district court erred in concluding that the loans made to the special district and the security agreements that it signed were invalid because they were not submitted to the voters in accordance with the Colorado Constitution. It was undisputed that (1) the board of the special district adopted a measure approving the debt; (2) the ballot issue specified the purposes of the debt; and (3) the voters approved the ballot issue. Therefore, the district court erred in reaching this conclusion.

The bank also contended that the district court erred in ruling that the loan to the special district was invalid based on the special district’s service plan. The service plan, however, did not prohibit the issuance of the general obligation debt, and the loan issued by the bank did not dramatically expand or change the special district’s service authority. Therefore, the loans to the special district did not violate the plan, and the special district had the statutory authority and voter approval to enter into the loans. Accordingly, the district court erred in invalidating the loan.

Summary and full case available here.

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