Court of Appeals Issues Second Ruling in Public Finance Case

Court hands down narrow opinion on five issues in Landmark Towers Association v. UMB Bank

The Colorado Supreme Court considered the ongoing effects of historic contamination in applying waivers to governmental immunity / LAW WEEK FILE

The Colorado Court of Appeals has issued a second decision in Landmark Towers Association v. UMB Bank, a high-profile public finance case that has already seen a ruling on one issue overturned by the Colorado Supreme Court.

The latest decision ruled on several issues, but ultimately has a much narrower scope than the Court of Appeals decision from 2016 that sent a tremor of uncertainty through Colorado’s public finance community.

When the  Supreme Court ruled last December the property owners’ challenge to TABOR elections for creating a special district and for bond issuances were time barred, the court remanded the remainder of the case’s issues to the Court of Appeals. The Court of Appeals determined the Supreme Court’s decision did not impact five lingering issues and upheld the district court’s findings in all but one concerning the property owners’ entitlement to a refund of bond proceeds.

“When the Supreme Court said no, [election challenges are] jurisdictionally time barred, which means you cannot even apply equitable estoppel to it, that relieved, I think, the pressure in the municipal finance community because now they can rely on elections,” said Brian Matise, a shareholder at Burg Simpson who represented the Landmark Towers Association. “And nothing in this opinion changes that.”

Neil Arney, a partner at Kutak Rock who represented UMB Bank and Colorado Bondshares, was not available for comment by press time.

The Court of Appeals found in favor of the Landmark Towers Association on four counts: 

The inclusion of the Landmark Project in the Marin Metropolitan District violated the property owners’ right to due process. 

The district cannot levy property taxes in excess of 50 mills.

The district court did not err in weighing the equities when it imposed an injunction barring the district from levying the Landmark owners’ properties. 

The injunction does not violate the Uniform Tax Clause in Colorado’s Constitution.

The Court of Appeals sided with the defendants’ contention that Landmark property owners should not receive a refund of misappropriated bond proceeds. The court reasoned the proceeds are not “revenue” under the applicable TABOR provision because they are borrowed funds rather than income and because the funds were lent by a private, outside entity rather than by the Landmark property owners.

Matise said the plaintiffs haven’t yet made a decision about whether to petition the Colorado Supreme Court to review the last issue. The more significant issue for the property owners, he said, was a refund of the money collected in excess of the mill levy cap, which the Court of Appeals upheld.

“When you add in the interest that’s accrued, when you add in the cost of attorneys’ fees and all of that, it may be a moot point,” Matise said of a possible appeal. The Marin Metropolitan District’s financing plan called for a debt service mill levy capped at 49.5 mills, but the district imposed a levy of 59.5 mills. The district court found the mill rate “‘is a substantial and significant variance from the pro forma model materially affecting’ the Landmark owners (and anyone else required to pay it).”

The underlying case’s events date back to 2007. A group of six organizers led by developer Everest Marin voted to create the Marin Metropolitan District and approve bond issuances and property taxes to finance the infrastructure of the European Village, a planned residential community near the Landmark Towers condominiums and retail space. The special district included the Landmark Towers, which had not yet been fully developed and had buyers under contract to purchase condos and pay pro-rated property taxes upon closing. 

Landmark’s future property owners were not notified of the votes to create the special district or issue the bonds and levy property taxes to repay them. They brought suits in 2011 through the Landmark Towers Association both to invalidate the creation of the district and the approval of the bonds and taxes, saying they were cut out of the approval process as eligible electors and that the six organizers were not eligible electors.

The organizers had each entered option contracts to purchase small pieces of land in the district for $500 to become eligible electors. After the special district’s creation, it issued $30 million in bonds to Colorado Bondshares. UMB Bank held the proceeds in trust, and Everest Marin controller Zachary Davidson allegedly misappropriated several million dollars for his personal use while purportedly acting on behalf of the district.

In 2016, the Court of Appeals ruled the Landmark property owners’ challenges to the elections were not time barred. Following the ruling, to avoid widespread impact on other outstanding debt obligations, lawmakers scrambled to draft legislation ensuring the court’s interpretation that invalidated the election in this case would not apply to already existing metro districts.


In analyzing the due process issue, the court looked to a century-old U.S. Supreme Court ruling in Myles Salt Co. v. Board of Commissioners of the Iberia & St. Mary Drainage District. In that case, two adjacent parishes created a drainage district that contained land in both parishes. To finance construction, the district levied a five-mill ad valorem tax on all property in the district. 

Myles Salt sued, arguing its land wouldn’t benefit from the construction and land in its parish had been included in the district only to provide funding for construction benefiting land in the other parish. The Supreme Court held including Myles Salt’s land in the district was “an act of confiscation” and violated Myles Salt’s due process right, even though the particular type of district’s creation was otherwise legal.

“Likewise in this case, the District’s organizers included the Landmark Project in the District only to use it as a source of payment for improvements to other property — specifically, the European Village Project,” wrote Judge Jerry Jones in the opinion. “And, as the district court found, with record support, the Landmark Project receives no benefit, direct or indirect, from those improvements.”

The court also examined the distinction between a tax and special assessment. While the opinion stated the difference was not consequential in the Myles Salt case, the defendants in the Landmark Towers case argued the levy was not a special assessment because it was ad valorem in form, meaning imposed on real property at a uniform mill rate. 

“But defendants overlook the purpose and characteristics of the levy,” stated the opinion. An ad valorem tax, it said, raises revenue to defray the general expenses of government, different from a specific function or service. “The levy at issue in this case funds purely local improvements directly and specially benefiting only the European Village Project. … It is therefore a special assessment, not a tax.”


The court’s special assessment determination surfaced again in its finding that the district court’s injunction on the levy did not violate the Uniform Tax Clause in Colorado’s Constitution. The clause states property tax levies must be uniform upon all non-exempt real and personal property within the authority’s territorial limits.

The defendants argued the injunction violated the clause because it resulted in only some of the property within the Marin Metropolitan District, that in the European Village Project, being taxed. The Court of Appeals upheld the district court’s rejection of that argument because the Uniform Tax Clause applies only to taxes, not special assessments. But the district court had first rejected the argument because the defendants did not raise it until after trial, which the Court of Appeals also affirmed.

The court also concluded the injunction did not violate the clause because it did not require the district to impose taxes on anyone or any property. If the district were to impose a true tax, the court reasoned, it could exclude the Landmark Project from the district.

“To these three reasons for rejecting defendants’ argument, as given by the district court, we add a fourth — the violation of the Landmark owners’ rights to due process under both the Federal and Colorado Constitutions entitles them to the injunctive relief they request, as a matter of law,” stated the opinion. “We don’t think that article X, section 3 can be read to require what due process forbids.”

The Court of Appeals remanded the case to the district court for further proceedings consistent with its reversal of the court’s ruling on the misappropriated bond proceeds.

—Julia Cardi

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