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District Court, Adams County, State of Colorado Court Address: Adams County Justice Center CO Adams County District

Court 17th JD 2009CV1499 1100 Judicial Center Drive Filing Date: Feb 20 2011 2:42PM MST Transaction ID: 36051770 Brighton, Colorado 80601 ___________________________________________ Plaintiff(s): TODD CREEK VILLAGE METROPOLITAN DISTRICT, v. Defendant(s): GUARANTY BANK & TRUST COMPANY, a Colorado corporation; et al. ___________________ Case No. 09cv1499 Div W Ctrm: 507
EFILED Document District Court

OPINION AND ORDER GRANTING DEFENDANT GUARANTY BANK & TRUST COMPANAYS SUMMARY-JUDGMENT MOTION AND DISMISSING PLAINTIFF TODD CREEK VILLAGE METROPOLITAN DISTRICTS COMPLAINT WITH PREJUDICE This matter is before the Court on Defendant Guaranty Bank & Trust Companys summary-judgment motion filed on November 22, 2010. Plaintiff, Todd Creek Village Metropolitan District, filed its response on December 10, 2010, and Guaranty Bank filed its reply on December 23, 2010. Guaranty seeks dismissal of the Districts action for foreclosure of a perpetual lien under C.R.S. 32-1-1001(1)(j)(I). Hearing on Guarantys summary-judgment motion was held on Friday, January 21, 2011. Plaintiff and defendant were represented by exceptionally able counsel and the Court again thanks counsel for their written submissions and oral arguments. As the Court noted at oral argument, the Courts decision in this case has truly been a difficult one given the quality of the legal representation rendered by counsel.
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During oral argument, the Court inquired of counsel whether they believed that a sufficient record had been established to assist the Court in making an informed decision. Counsel stated on the record that they did in fact believe that a sufficient factual and legal record had been made. NATURE OF THE CASE AND CONTROVERSY This is a special district perpetual lien foreclosure action. See C.R.S. 32-11001(1)(J)(I). Plaintiff, Todd Creek Village Metropolitan District, is a Colorado special district organized and existing by virtue of the Special District Act codified at C.R.S. 32-1-101 et seq. There is no dispute that the District was formed as prescribed by law and that by virtue of the Special District Act the District was and is empowered to adopt, amend, and enforce bylaws and rules and regulations not in conflict with the constitution and laws of this state for carrying on the business, objects, and affairs of the board and of the special district. See C.R.S. 32-11001(1)(m). The Districts purposes and functions are to provide potable water, irrigation water, and sewer-sanitation services to those properties within its geographic boundaries and also within its Service Area, the latter of which includes the Subject Real Property now owned by Guaranty Bank. Only 1.51 acres of land are located within the Districts geographic boundaries. The vast majority of the Districts Service Area, which includes over 6,000 acres of property, is located outside of the Districts boundaries. According to the Districts Amended Service Plan (ASP), it contemplated providing services to these properties pursuant to out-of-District service agreements. (Exhibit A, Guarantys summary-judgment motion, Page 7). The District entered into one such service agreement with Todd Creek Links, LLC (TCL) and Lennar, Colorado, LLC to provide water and sewer service to a new residential golf course development known as Heritage Todd Creek. Lennar was the planned developer of the project, and was to acquire the land for the planned development from TCL. TCL, meanwhile, had borrowed over $12 million from Defendant Guaranty Bank in order to finance the acquisition of some of the land for the development, which was secured by a deed of trust. In 2008, TCL defaulted on the note, and Guaranty brought suit to foreclose. Judgment was entered in favor of Guaranty, and a public trustee foreclosure sale
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was held on May 27, 2009. Guaranty was the successful bidder, and acquired 301 parcels within the proposed development (the Subject Property). Title vested in Guaranty eight business days after the foreclosure sale, on June 8, 2009. On June 12, 2009, the District sent Guaranty an invoice for tap fees purportedly owed on the 301 parcels. When Guaranty refused to pay the tap fees, the District filed a statement of perpetual lien on this property under C.R.S. 32-11001(1)(j)(I), stating a claim for $5,399,677 in delinquent tap fees. Thereafter, on August 19, 2009, it filed this action seeking to foreclose on its asserted lien. The District asserts that the Subject Property is governed by the Districts New Rules and Regulations, which were revised on June 3, 2009. Under the revised Rules and Regulations, tap fees became immediately due and payable for properties within the Districts service area upon any vesting of title in the holder of a certificate of purchase, or similar interest, pursuant to a public trustees or other foreclosure sale.1 (Exhibit D, Guarantys summary-judgment motion, 6.4(e)). Guaranty disputes the Districts right to impose tap fees, and argues that the District may only assess such fees against properties outside its physical boundaries if it has provided requested services to the property or has some other contractual relationship with the property owner. Motion, p.12. Guaranty further argues that the Districts Rules and Regulations cannot operate to unilaterally bind property owners within its Service Area upon the vesting of title, without that property owner having requested or received services. Motion, p.15.
The record shows that the District initially adopted its Rules and Regulations in 1996 and from 1996 up to and including November 21, 2006, the District has revised those Rules and Regulations. The record also shows that the Rules and Regulations revised as of November 21, 2006 (which are attached as Exhibit D to the Banks Summary-Judgment Motion) are what the Bank has characterized as the Old Rules and Regulations. According to the Bank, the New Rules and Regulations (which are attached as Exhibit E to the Banks SummaryJudgment Motion) were revised and readopted on June 3, 2009. Unlike the Old Rules and Regulations, the New Rules are Regulations specifically provide that Tap Fees shall be immediately due and payable from Property Owners upon the occurrence of any one of the following events relative to real property within the Districts service are, including individual lots: * * * (e) any vesting of title in the holder of a certificate of purchase, or similar instrument, pursuant to a public trustees or other foreclosure action. (Exhibit E, New Rules and Regulations, Section 6.4 Events Triggering Obligation To Pay Tap Fees, Page 52)(emphasis added). 3
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STATEMENT OF UNDISPUTED MATERIAL FACTS On the record, the Court asked the Districts counsel whether the District admitted or denied Guaranty Banks recitation of undisputed facts contained on pages 8 through 10 of Guarantys summary-judgment motion. The Districts counsel admitted Guarantys Undisputed Facts 1 through 13 with only minor qualifications that the Court does not deem material. Consequently, the Court accepts as true Guarantys Undisputed Facts numbered 1 through 13, which are as follows: 1. The District is a special district created and governed by the Special District Act. 2. The Districts boundaries consist of 1.51 acres as described in the Districts Service Plan. 3. The Districts Service Area, as described in its Service Plan, is not within the boundaries of the District. 4. The property at issue in this action is within the boundaries of the Service Area, but is not within the boundaries of the District. 5. 6. 7. The Subject Property consists of 301 undeveloped, residential lots. Guaranty has not applied for service or a permit from the District. Guaranty has not received a permit from the District.

8. Guaranty purchased the Subject Property on May 27, 2009 at a Public Trustee foreclosure sale. 9. On June 3, 2009, the District revised and adopted its Rules and Regulations. 10. Title to the Subject Property vested in Guaranty on June 8, 2009.

11. On June 12, 2009, the District issued an invoice to Guaranty for tap fees and other charges in the amount of $5,399,667.00. Guaranty did not pay this invoice.
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12. On July 24, 2009, the District filed a Statement of Perpetual Lien against the Subject Property claiming a lien in the amount $5,399,667.00 for delinquent tap fees. 13. On August 19, 2009, the District filed this action seeking to foreclose the Subject Property pursuant to C.R.S. 32-1-1001(1)(j)(I). STATEMENT OF ADDITIONAL UNDISPUTED MATERIAL FACTS2 14. The Court inquired of counsel whether availability of services or facilities charges (or ASF charges) were an issue in this case, which, pursuant to C.R.S. 32-1-1006(1)(h), a special district has the authority to demand payment therefor, only if certain prerequisites are fulfilled under C.R.S. 32-11006(1)(h)(I). The Districts counsel suggested that this is not an ASF case.3 15. The Districts Service Plan, which included a defined Service Area, was approved by the Adams County Commissioners. 16. On or about August 23, 2000, an Amended And Restated Service Plan For Todd Creek Farms Metropolitan District No. 1 was approved (herein ASP). 17. The Districts geographic boundaries remain the same under the ASP. 18. As pertinent here, the ASP provides: PROPOSED USE/POPULATION PROJECTIONS Although the Districts boundaries may change from time to time as it undergoes inclusions and exclusions pursuant to parts 4 and 5 of Article 1, Title 32, C.R.S., it is most likely that [the District] will provide services to properties within its Service Area pursuant to out-of-District service agreements. (Exhibit
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The Court sets forth in some detail many of the provisions of the exhibits attached to the parties summary-judgment briefs because the Court is of the opinion that the vast majority of those provisions actually undercut the Districts contention that it has the legal authority to demand the payment of tap fees, even in the absence of a contractual agreement or actual or imminent connection to the Districts service lines or facilities. For the reasons set forth herein, the Court finds that this is an ASF case. 5

A, Amended Service Plan, Bates Stamp 00092, 3)(interlineation added)(emphasis added). DESCRIPTION OF PROPOSED SERVICES A. Types of Improvements. 1. Water. * * * The water supply system will supply the water needs for the Service Area as development occurs. Water facilities and service arrangements to the entire Service Area will be provided by the District * * * . (Exhibit A, Amended Service Plan, Bates Stamp 00094)(emphasis added). OPERATION AND MAINTENANCE/ESTIMATED COSTS * * * The District may impose a system of fees, rates, tolls, penalties or charges in connection with its provision of services. (Exhibit A, Amended Service Plan, Bates Stamp 00102)(emphasis added). FINANCIAL PLAN/PROPOSED INDEBTEDNESS A. General. [T]he provision of water and sanitary sewer and other facilities by the District will be financed by the issuance of revenue bonds secured by the revenue from the provision of services. The financial Plan shows the anticipated fees to be imposed and collected on the various proposed service users of the Districts facilities * * * The District shall have rate studies prepared from time to time to make certain that different types of service users are paying their equitable share of the cost of the facilities. (Exhibit A, Amended Service Plan, Bates Stamp 00103)(emphasis added). Water and sanitary sewer service revenues will make up the revenue derived from services. (Exhibit A,
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Amended Service Plan, Bates Stamp 00103)(emphasis added). The primary source of revenues to the District will be payments made to it by the users within the Service Area. It is projected that the payments received from the users will be sufficient to pay for the operation and maintenance of the facilities and to retire all bonds issued by the District. (Exhibit A, Amended Service Plan, Bates Stamp 00103-00104)(emphasis added). The District may capitalize interest to permit payment of interest during the time lapse between development of properties and collection of fees, rates, tolls and charges. Interest income through the reinvestment of construction funds will provide additional income. The projected revenue will retire the proposed bonds if growth occurs as projected; otherwise increases and/or the imposition of new rates, tolls, fees and charges may be necessary. (Exhibit A, Amended Service Plan, Bates Stamp 00104-00105)(emphasis added). The Districts estimated financing plan anticipates that all water development fees and sewer development fees shall be collected by the District prior to the issuance by the County of a building permit for the property upon which a fee is being imposed for the water or sewer improvements. (Exhibit A, Amended Service Plan, Bates Stamp 00105)(emphasis added). 19. An attachment to the ASP entitled Summary of Significant Assumptions and Accounting Polices December 31, 1996 through 2020 provides: Note 1: Service Charges

The forecast assumes that each equivalent residential unit (EQR) will pay $60 per month for potable and raw water and $30 per month for sewer treatment * * * . (Exhibit A, Bates Stamp 00119, 3). Note 2: Development Fees The District currently charges a development fee of $8,500 per EQR for hook-up to the water system. It is forecasted that new homes will also pay a $2,500 fee for an irrigation water tap. The homes that are planned to utilize the sewer treatment system will pay an additional $5,000 per EQR. The primary use of development fees is for the repayment of debt service on the existing and proposed revenue bond issues. (Exhibit A, Bates Stamp 00119, 4). 20. The Revised and Restated Intergovernmental Agreement Among The City of Thornton, the Todd Creek Farms Metropolitan District No. 1, and Todd Creek Village, LLC dated September 23, 2003 (Exhibit 2), provides, in pertinent parts: 2. Expansion of District Service Area. 3.1. The City agrees that the Heritage Todd Creek Subdivision shall be provided water service by the District. The District agrees to provide or the Developer agrees to cause the District to provide potable water for all structures, including the swimming pools; and non-potable water for irrigation of all landscaping in the Subdivision * * * . (Exhibit 2, Page 3, 3.1). 3.4. In the event that the Developer, District, or Property Owners Association requests water service from the City water system in the future, all costs for connection to the system including tap fees and water development fees shall be paid prior to connection and the groundwater shall be dedicated to the City at the time of connection or the City shall be provided the equivalent value of water or other consideration acceptable to the City at the time of connection. (Exhibit 2, Page 4, 3.4).

21. The Recognition Agreement dated May 14, 2004 (the Districts Exhibit 3), recognized Lennars and TCLs Option Agreements to develop the Subject Property and provided that the Guaranty Banks Deed of Trust on the subject real property would be released from portions of the subject property as Lennar made purchase price payments to the Guaranty Bank. (Exhibit 3, Page 2, C). The Recognition Agreement further provided, in pertinent parts: 7. No Liability of Lender. Except as otherwise expressly provided above or elsewhere herein, Lender shall have no obligation or liability to perform any undertaking of TCL or OLI under or with respect to the Option Agreements. (Exhibit 3, Page 4, 7). 8. Binding on Future Owners. The provisions hereof are in all respects binding upon all owners of any beneficial interest in the Deed of Trust, their successors in interest and assigns, and are intended specifically to bind not only the current owners of an beneficial interest in the Deed of Trust, but whomever acquires title to the Property, whether deriving rights through Lender or by reason of being a purchaser at a trustees sale or otherwise. (Exhibit 3, Page 4, 8). 22. The Water And Sewer Agreement dated May 21, 2004 (the Districts Exhibit 1), provided, in pertinent parts: 8. Caps and Offsets (a) Cap on Residential Water Tap Fees. Except as otherwise provided in Section 8(f) below, the Water District shall not charge a fee in excess of Twelve Thousand Five Hundred and 00/100 Dollars ($12,500.00) per residential lot for the right to connect to, use and receive service from the Water Districts water supply, treatment and distribution facilities now existing or hereafter constructed (the Water Tap Fee) for any residential lots located within the Property for a period of five (5) years commencing on the Effective Date and expiring on the fifth (5th) anniversary thereafter. The Parties acknowledge and agree that such Water Tap Fees pay for the supply, treatment and delivery of all water to any residential home sites

located within the Property * * * . (Exhibit 1, Page 10, 8(a))(emphasis added). (b) Cap on Sewer Tap Fees. The Parties acknowledge and agree that the sewer tap fees or charges payable for each residence located within the Property for the right to connect to, use and receive service from the wastewater collection and treatment facilities (the Sewer Tap Fee) * * * . (Exhibit 1, Page 10, 8(b))(emphasis added). (f) Meter Purchase and Inspection Fees. Notwithstanding anything else in this Agreement to the contrary, Owner acknowledges and agrees that the cap on Water Tap Fees provided for herein shall not preclude the Water District from requiring each owner of a residential lot located within the Property to pay meter purchase and inspection fees for the purchase and inspection of each potable tap and each non-potable tap (collectively, the Meter Purchase and Inspection Fees), which fees shall be payable at the time that the owner of a residential lot or lots obtains a building permit for such lot or lots * * * . (Exhibit 1, Page 11-12, 8(f))(emphasis added). 9. Default (b) In the event that the Owner fails to meet any of its obligations hereunder within twenty (2) days after receipt of a written notice from the Water District specifying the nature of such default, the Owner shall be in default. In such event, the Water District shall be entitled, as its sole and exclusive remedy, to withhold giving water or sewer taps to Owner until such default is cured * * * . (Exhibit 1, Page 13, 11(b))(emphasis added). 23. Section 6.3 of the Old Rules and Regulations provides: 6.3 TAP FEES. Tap Fees are privilege-of-service fees and shall be charged to all Customers of the District for a permit to connect to the Potable Water System and Irrigation Water Systems. All Tap Fees shall be assessed and paid in full before the permit for service is
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issued. Except as described below, Tap Fees shall be assessed as provided in Appendix A. The fees and charges reflected in Appendix A shall be based upon EQRs, factors of usage and physical structure and upon the application by the Manager of the District of those factors to the facts and circumstances surrounding the application. Once purchased, Tap Fees shall be effective for two (2) years unless subject to an agreement pursuant to Section 5.5 of these Rules and Regulations. If the service(s) are not fully connected and in use at the property for which the Tap Fee has been paid within two (2) years, the Customer shall be responsible for payment of the difference between the Tap Fee paid and the then current Tap Fee if an increase has been implemented by the District. Revised Tap Fee amounts and methods of calculation will become part of these Rules and Regulation when adopted by the Districts Board. (Exhibit E, Banks Summary-Judgment Motion)(emphasis added)). 24. Sections 6.3 and 6.4 of the New Rules and Regulations provide: 6.3 TAP FEES. Tap Fees are fees which shall be charged to all Property Owners or Customers of the District who have been granted the privilege of service by the District in any form whatsoever. A Property Owner or Customers failure to pay Tap Fees may result in the imposition of a Capacity Commitment Fee by the District. Customers shall obtain, and be charged for, a permit to connect to the Potable Water System and Irrigation Water Systems. All Tap Fees shall be assessed when due, and shall be paid in full by Property Owners or Customers before a permit for service will be issued by the District. Except as described below, Tap Fees shall be assessed as provided in Appendix A. The fees and charges reflected in Appendix A shall be based upon EQRs, factors of usage and physical structure and upon the application by the Manager of the District of those factors to the facts and circumstances surround the application. Once purchased, Taps and their Associated Tap Fees shall be effective for two (2) years unless otherwise provided in an agreement pursuant to Section 5.5 of these Rules and Regulations. If the service(s) are not
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fully connected and in use at the property for which the Tap Fee has been paid within two (2) years, the Property Owner or Customer shall be responsible for payment of the difference between the Tap Fee paid and the then current Tap Fee if an increase has been implement by the District. Revised Tap Fee amounts and methods of calculation will become a part of these Rules and Regulations when adopted by the Districts Board. 6.4 EVENTS TRIGGERING OBLIGATION TO PAY TAP FEES. Tap Fees shall be immediately due and payable to the District from Property Owners upon the occurrence of any of one of the following events relative to real property within the Districts service area, including individual lots: a. b. issuance of a permit for service by the District; issuance of a building permit for property located within the Districts Service Area, which property is to be served by the District; the expiration of the tap fee payment deadline/date set forth in a tap purchase or other written agreement between the District and Property Owner/Developer providing for purchase of taps; any sale or transfer of the ownership of real property from one Property Owner to another Property Owner; any vesting of title in the holder of a certificate of purchase, or similar instrument, pursuant to a public trustees or other foreclosure action.

c.

d. e.

(Exhibit D, Banks Summary-Judgment Motion)(emphasis added)).

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THE PARTIES CONTENTIONS A. The Districts Contentions The District first contends that it has broad power to fix fees, rates, tolls, and charges for facilities furnished by the District, that it has furnished facilities here and, thus, until paid, the Districts fees and charges constitute a perpetual lien against Guarantys property. The District argues that no differentiation is made in the Special District enabling statutes between a property located within the District and one that is located outside of the districts boundaries; and that the only relevant consideration is whether the facilities have been furnished, not whether a particular parcel of real property is within the Districts geographic boundaries. Second, the District contends that pursuant to its legislative authority, the District legally passed a regulation that calls for tap fees to be due and payable upon the sale or transfer of property pursuant to a foreclosure sale, which fees are charged for the facilities being furnished by the District. Guaranty bought the property at foreclosure, the tap fees imposed for the facilities being furnished by the District became due, and the lien was properly imposed. Third, the District contends that the arrangement of having a small special district with an extensive service area was endorsed by the Adams County Commissioners when they approved the ASP for the District in 2000. The District further argues that, as is the case for properties within a special districts boundaries, owners within this Districts Service Area have the right to service upon request, and the District has the duty to provide such service upon request. Fourth, the District contends that the existence of this water system enhances the value of all properties within the Districts Service Area, including those owned by Guaranty Bank. The District further argues that as Colorados courts have previously recognized, this added value fully supports the imposition of a lien for unpaid tap fees, even where the fees do not relate to facilities provided at the specific request of the property owner, and are not related to the specific cost of providing service to that owners property. Finally, the District contends that the Subject Property was the subject of a Water Service Agreement, entered into between the District and Lennar Colorado and approved by Guarantys predecessor in title, as well as an intergovernmental agreement among the City of Thornton, the District, and Guarantys predecessor in title. The District argues that these documents called for water service to
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Guarantys property to be provided by the District, and obligated the District to construct certain improvements in order to provide that service. Thus, even if a contract or request for service is a prerequisite to imposing a lien for unpaid rates, fees and charges (and the District does not concede that it is) then such contractual arrangements and/or requests for service were in place here. B. Guaranty Banks Contention Guaranty Banks principal contention is that the District does not have the statutory authority under the Special District Act to impose and demand payment for tap or connection fees on real property located outside of the Districts geographic boundaries, but which are included in the Districts Service Area, unless and until Guaranty either enters into a contract for service with the District or otherwise first requests service from the District. ISSUE PRESENTED Whether the District exceeded its authority conferred by the Special District Act when it amended its Rules and Regulations to now require the payment of tap fees upon the vesting of title in the holder of a certificate of purchase, or similar instrument, pursuant to a public trustees or other foreclosure action? DISCUSSION A. Summary Judgment Standards Summary judgment is appropriate only when the pleadings and supporting documents clearly demonstrate that no issues of material fact exist and the moving party is entitled to judgment as a matter of law. Cotter Corp. v. Am. Empire Surplus Lines Ins. Co., 90 P.3d 814, 819 (Colo. 2004). The moving party bears the initial responsibility of informing the court of the basis for the motion and identifying those portions of the record and of the affidavits, if any, which he or she believes demonstrate the absence of a genuine issue of material fact. Quist v. Specialties Supply Co., Inc.,12 P.3d 863, 868 (Colo. App. 2000). Once this initial burden has been met, the burden shifts to the non-moving party to establish that there is a triable issue of fact. City of Aurora v. ACJ Partnership, 209 P.3d 1076 (Colo. 2009). The non-moving party is entitled to the benefit of all favorable inferences that may be drawn from the undisputed facts, and all doubts as to the existence of a triable issue of fact must be resolved against the moving party. Martini v. Smith, 42 P.3d 629, 632 (Colo. 2002).
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After reviewing the parties summary-judgment briefs, the exhibits attached thereto, and a number of Colorado appellate opinions, the Court finds that notwithstanding the Districts statutory power to establish rates, fees, and charges, to adopt rules and regulations, and to exercise all rights and powers necessary or incidental to or implied from the specific powers granted to special districts, see C.R.S. 32-1-1001the District exceeded its grant of authority and powers vested in it under the Special District Act when it amended its Rules and Regulations in 2009 to specifically target and require the payment of tap fees from Guaranty, after Guaranty acquired the Subject Property in the Public Trustees foreclosure sale. Here, the Court finds that there are no genuine issues of material fact and that Guaranty Bank is therefore entitled to judgment as a matter of law under C.R.C.P. 56. B. The Applicable Decisional Law The Court has surveyed a number of Colorado appellate opinions on the issue presented in this case. Specifically, the Court has reviewed the following appellate court opinions, although the Court will not specifically address each one: Skyland Metropolitan District v. Mountain West Enterprise, LLC, 184 P.3d 106 (Colo.App.2007); Risen v. Cucharas Sanitation & Water District, 32 P.3d 596 (Colo.App.2001); Krupp v. Breckenridge Sanitation District, 19 P.3d 687 (Colo.2001); Bennett Bear Creek Farm Water and Sanitation District v. City and County of Denver, 928 P.2d 1254 (Colo.1996); Haggerty v. Poudre Health Service District, 940 P.2d 1105 (Colo.App.1997); Romer v. Fountain Sanitation District, 898 P.2d 37 (Colo.1995); Crested Butte South Metropolitan District v. Dyke, 768 P.2d 1248 (Colo.App.1988);Valley Housing and Development Corporation v. Ridges Metropolitan District, 753 P.2d 801 (Colo.App.1988); Johnson Homes, Inc. v. Southwest Metropolitan District, 725 P.2d 12 (Colo.App.1986); City of Arvada v. City and County of Denver, 663 P.2d 611 (Colo.1983); Millis v. Board of County Commissioners, 626 P.2d 652 (Colo.1981); North Washington Water and Sanitation District v. Majestic Savings and Loan Association, 594 P.2d 599 (Colo.App.1979); Wasson v. Hogenson, 583 P.2d 914 (Colo.1978); Perl-Mack Enterprises Co. v. City and County of Denver, 569 P.2d 468 (Colo.1977); Cherokee Water District v. Colorado Springs, 519 P.2d 339 (Colo.1974);
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Brownbriar Enterprises, Inc. v. City and County of Denver, 493 P.2d 352 (Colo.1972); City of Aurora v. Bogue, 489 P.2d 1295 (Colo.1971); Western Heights Land Corp. v. City of Fort Collins, 362 P.2d 155 (Colo.1961); Schlarb v. North Suburban Sanitation District, 357 P.2d 647 (Colo.1960); and City of Aurora v. Aurora Sanitation District, 149 P.2d 662 (Colo.1944). C. The Special District Act The District, as a political subdivision of the state, possesses only those powers that are expressly conferred upon it by the constitution and by statute and such incidental implied powers as are reasonably necessary to carry out the express powers so conferred. Haggerty v. Poudre Health Services, 940 P.2d 1105, 1107, citing Romer v. Fountain Sanitation District, 898 P.2d 37 (Colo.1995). The Special District Act is a comprehensive legislative scheme setting forth the powers and procedures for the establishment and organization of a special district. Haggerty, supra, at 1107, citing C.R.S. 32-1-101 et seq.; Upper Bear Creek Sanitation District v. Board of County Commissioners, 715 P.2d 799 (Colo.1986). In this regard, the Special District Act in 32-1-1001(1) sets forth common powers applicable to any special district, including the power: (j)(I) To fix and from time to time to increase or decrease fees, rates, tolls, penalties, or charges for services, programs, or facilities furnished by the special district;4 (k) To furnish services and facilities without the boundaries of the special district and to establish fees, rates, tolls, penalties, or charges for such services and facilities;

Until paid, all such fees, rates, tolls, penalties, or charges shall constitute a perpetual lien on and against the property served, and any such lien may be foreclosed in the same manner as provided by the laws of this state for the foreclosure of mechanics liens. C.R.S. 32-11001(1)(j)(I). 16

(m) To adopt, amend, and enforce bylaws and rules and regulations not in conflict with the constitution and laws of this state for carrying on the business, objects, and affairs of the board and of the special district; (n) To have and exercise all rights and powers necessary or incidental to or implied from the specific powers granted to special districts by this article. Such specific powers shall not be considered as a limitation upon any power necessary or appropriate to carry out the purposes and intent of this article. C.R.S. 32-1-1001(1)(emphasis added). In addition, the Special District Act in 32-1-1006(1) sets forth additional powers applicable to special districts, including the power: (a)(I) To compel the owner of premises located within the boundaries of any such district, whenever necessary for the protection of public health, to connect such owners premises * * * to the water lines * * * of such district within twenty days after written notice is sent by registered mail, if such sewer or water line is within four hundred feet of such premises;5 (g) To fix and from time to time to increase or decrease tap fees; (h)(I) To assess availability of service or facilities charges. C.R.S. 32-1-1006(1)(emphasis added). D. The Districts Power To Fix Or Set Tap Fees Under C.R.S. 32-11001(1)(j)(1) And C.R.S. 32-1-1006(1)(g) Is Distinct From When Tap Fees Become Due And Payable. Section 32-1-1001(1)(j)(I), C.R.S., provides that special districts have the power [t]o fix and from time to time to increase or decrease fees, rates, tolls, penalties, or charges for services, programs, or facilities furnished by the special district. Id. (emphasis added). It further states that [u]ntil paid, such fees, rates, tolls, or charges shall constitute a perpetual lien on and against the property served,
If such connection is not begun within twenty days, the board may thereafter connect the premises to the sewer, water and sewer, or water system, as applicable, of such district and shall have a perpetual lien on and against the premises for the cost of making the connection, and any such lien may be foreclosed in the same manner as provided by the laws of this state for the foreclosure of mechanics liens. C.R.S. 32-1-1006(1)(a)(I). 17
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and any such lien may be foreclosed in the same manner as . . . mechanics liens. Id. (interlineations added). Additionally, 32-1-1006(1)(g) provides that special districts have the power [t]o fix and from time to time to increase or decrease tap fees. Id. (interlineation added)(emphasis added). Altogether ignoring 32-1-1006(1)(g), the District focuses its attention on and reads 32-1-1001(1)(j)(I) as granting it the broad power to assess rates, tolls, charges and fees for facilities or services furnished to persons and property within its Service Area and should property owners not pay for those facilities or services, that it has a perpetual lien for the payment therefor. Response, p.6. The District contends that because it has financed, built, and installed infrastructure to provide services to the Heritage Todd Creek development, including Guarantys 301 lots, it is entitled to charge and collect tap fees on Guarantys property and that those fees are immediately due and payable. The Court disagrees. The District is attempting to exact payment for tap fees on property not within its boundariesfor which no connection request has been made by Guaranty Bank in the first placeand on property for which no services or facilities have been furnished by the District as contemplated by the Special District Act. Furthermore, the Districts definition and usage of the term tap fee is inconsistent with the plain, ordinary, and generally accepted meaning of that term under Colorado decisional law. Preliminarily, the Court notes that in City of Aurora v. Bogue, 489 P.2d 1295, 1296 (Colo. 1971), the Colorado Supreme Court held that statutes granting [municipal] powers must be strictly construed and no powers may be exercised except those which are expressly conferred, or which exist by necessary implication; and that if a doubt exists as to a municipalitys power, that doubt must be resolved against the municipality. Id. at 1296 (interlineation added). Consequently, the Court rejects the Districts contention that its powers and authority under the Special District Act are quite broad: They are no more than those expressly conferred or necessarily implied by the Special District Act. Id. Next, the Court concludes that there is a meaningful distinction between the Districts statutory rate-setting authority under C.R.S. 32-1-1001(1)(j)(I) and 32-1-1006(1)(g)that is, its power to fix fees or charges for services or facilities

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furnished (here, to set tap fees)6and when a real property owner is obligated to pay tap fees or charges for services or facilities actually furnished. A courts primary task in construing a statute is to give effect to the intent of the General Assembly by looking first at the language of the statute. Miller v. Indus. Claim Appeals Office of State of Colo., 985 P.2d 94, 96 (Colo.App.1999); Singleton v. Kenya Corp., 961 P.2d 571 (Colo.App.1998). Words and phrases in a statute should be given their plain and ordinary meanings, and a forced, subtle, or strained construction should be avoided if the language is simple and the meaning clear. Grogan v. Lutheran Medical Center, Inc., 950 P.2d 690 (Colo.App.1997). Here, the Court concludes that the plain, ordinary, and generally accepted meaning of the term tap fee is a fee that is charged or imposed for a revocable license (or in some cases the right) to tap into or connect to a special districts water or sewer lines or facilities or services. See, e.g., Risen v. Cucharas Sanitation & Water District, 32 P.3d 596 (Colo.App.2001); Romer v. Fountain Sanitation District, 898 P.2d 37 (Colo.1995); Johnson Homes, Inc. v. Southwest Metropolitan District, 725 P.2d 12 (Colo.App.1986); City of Arvada v. City and County of Denver, 663 P.2d 611 (Colo.1983); North Washington Water and Sanitation District v. Majestic Savings and Loan Association, 594 P.2d 599 (Colo.App.1979); Wasson v. Hogenson, 583 P.2d 914 (Colo.1978); and Perl-Mack Enterprises Co. v. City and County of Denver, 568 P.2d 468, 472 (Colo. 1977). Notably, in all of the cases that the Court has reviewed, the common thread was that before tap fees or connection fees or service charges, or even ASF charges, were charged or imposed (whether involuntarily assumed or voluntarily paid), the subject real property was either (1) within the special districts boundaries, or (2) development of in-district property was ongoing or imminent and a request to tap into or connect to water or sewer lines was made by a developer, or (3) tap fees or connection fees or service charges were imposed on out-of-district property pursuant to a contractual agreement, much like the District envisioned here. (Exhibit A, ASP, Bates Stamp 00092, 3). For example, in Risen v. Cucharas Sanitation & Water District, 32 P.3d 596 (Colo.App.2001), a compelled connection case under C.R.S. 32-1-1006(1)(a)(I), in which the subject property was within the districts boundaries and within 400 feet of the districts public sewer system, the Court of Appeals concluded, inter
See Bennett Bear Creek, 928 P.2d at 1261 (holding that a district acts legislatively when it sets rates and charges for its services); Cottrell v. City & County of Denver, 636 P.2d 703, 710 (Colo.1981) (determining that [r]atemaking is essentially a legislative function).
6

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alia, that a tap fee was included in the costs of making the connection to the districts sewer or water system. Id. (emphasis added), citing Per-Mack Enterprises Co. v. City and County of Denver, 568 P.2d 468 (Colo.1977). In Krupp v. Breckenridge Sanitation District, 19 P.3d 687 (Colo.2001), a plant investment fee (or PIF) case under C.R.S. 32-1-1001(1)(j)(I), which was assessed on all building projects within the district, our Supreme Court observed that the district assessed a number of fees, including connection fees for physical connections to its facilities, monthly service fees for use of the facilities, and plant investment fees. The PIF was a one-time charge designed to defray the cost of expanding the districts infrastructure as development increased demand for the districts services. The PIF had to be paid to the district before the Town of Breckenridge would issue a building permit or certificate of occupancy for a new building. Id. at 691 (emphasis added). Here, unlike in Krupp, Guaranty is not developing any of the subject 301 lots. The Krupp Court further observed that in conjunction with the legislative grant of authority to set appropriate fees, the district promulgated a Single-Family Equivalent Unit Conversion Schedule, which set forth a comprehensive system for determining SFE units and converting them into PIF assessments. The Court noted that a PIF was then assessed on every new project in the district, from residential housing to retail stores to service stations. The Court concluded that in promulgating its schedule for assessing PIFs, the district acted in a legislative capacity. Id., citing See Bennett Bear Creek, 928 P.2d at 1261 (holding that a district acts legislatively when it sets rates and charges for its services); Cottrell v. City & County of Denver, 636 P.2d 703, 710 (Colo.1981) (determining that [r]atemaking is essentially a legislative function). Here, again, unlike in Krupp, Guaranty is not developing any of the subject 301 lots, whether as residential housing or retail stores. In upholding the Court of Appeals determination that the PIF was a valid service fee, the Court concluded, inter alia, that the PIF was established by legislative authority, and was reasonably related to the specific government service of providing wastewater collection and treatment to new developments within the district. Krupp, 19 P.3d 687, 694 (Colo.2001)(emphasis added). In Romer v. Fountain Sanitation District, 898 P.2d 37 (Colo.1995), our Supreme Court, in footnote 2 of the opinion, explained that a sewer tap fee was a revocable license that authorized developers or new customers to tap into the districts sewage treatment system. Id. at 42 (emphasis added). In footnote 3, the
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Court went on to further observe that [g]enerally, a developer requests that the district provide services in areas of new development where extension of the districts main transportation lines or other construction is necessary. The developer pays a portion of the cost associated with such improvements and the district collects an agreed upon charge from other developers or new users who seek to utilize the extended or new facilities. The district then agrees to remit these charges to the developer with whom the recovery agreement was negotiated. Pursuant to this type of arrangement, the district does not retain the recovery charge, but remits the charge to the developer who paid for the necessary construction. Recovery agreements are authorized by C.R.S. 32-1-1006(3). Romer, 898 P.2d 37, 42 (Colo. 1995)(emphasis added). Here, Guaranty is not developing any of the lots, whether as private residences or retail stores and has not requested to tap into the Districts water or sewer lines or facilities or services. In Johnson Homes, Inc. v. Southwest Metropolitan District, 725 P.2d 12 (Colo.App.1986), the district owned and operated sewage collection and transmission lines but did not own or operate a sewage treatment plant. The district had arranged by contract with the City of Littleton (city) for connection to the citys sewage transmission lines and treatment plant. Johnson, 725 P.2d 12. When the district was formed in 1962, it included a tract of land known as Wolhurst Landing. In 1973, the tract of land was annexed by the city, and in 1978, the developer began development of the tract. The developer paid a sewer tap fee to the city and, under protest, to the district for each unit within Wolhurst Landing that connected into the districts sewer lines. The developer could have chosen to build its own sewer lines to connect into the citys sewer system instead of connecting to the districts sewer lines. The citys municipal code required only that the developer provide sewer service to the project at the developers expense. Id. at 12-13. In November of 1983, the developer filed suit against the district and the city. The developer maintained that it was entitled to a refund of any tap fees it had paid under protest and in excess of the tap fees imposed under the city sewer ordinance. The developer also argued that the district had bargained away its rights to collect tap fees in a sewer service agreement between the district and the city. Id. at 13. All parties moved for summary judgment. The citys motion for summary judgment was granted, and the city was dismissed from the lawsuit. The trial court
21

granted the developers motion against the district and entered judgment for the tap fees that had been paid under protest. The districts motion was denied. Id. at 13. On appeal, the district contended that the trial court erred in concluding that the April 12, 1979, sewer service agreement between the city and the district exempted the developer from paying sewer tap fees to the district. The Court of Appeals agreed. Id. The district argued that when property is located within a special district and within a city and the property connects to the special districts sewer lines for purposes of transmitting sewage into the citys sewer treatment facilities, a district can collect a sewer tap fee for use of its facilities. Id. The Court of Appeals observed that the overlap of the territory of a special district and a city did not vest exclusive jurisdiction over the overlapping territory in one entity or the other. Id., citing Garden Home Sanitation District v. City & County of Denver, 177 P.2d 546 (Colo.1947). The Court stated that the General Assembly had expressly and unequivocally authorized a water and sanitation district to operate and exist within the corporate limits of a municipality. Section 32-1-107(1), C.R.S. See City of Aurora v. Aurora Sanitation District, 149 P.2d 662 (Colo.1944) (sanitation district located entirely within city may collect fees and levy taxes). The Court of Appeals concluded that the developer could not be heard to complain because it chose to utilize facilities made available to it by the district, in that the tap fee charged by the district was restricted solely to facilities that it was providing the developer; and the citys tap fee was limited to the services it was rendering. Johnson Homes, Inc., 725 P.2d at 13. In City of Arvada v. City and County of Denver, 663 P.2d 611 (Colo.1983), a connection fee case under C.R.S. 31-35-402(1)(f), the City of Arvada imposed a one-time development fee on all persons connecting into Arvadas water system after April 1, 1975. City of Arvada at 614. The fee had two parts: a flat fee of $550 pre residential unit and a sliding scale fee dependent upon the size of the meter being installed. Id. Our Supreme Court affirmed Arvadas power assess a one-time development fee against its own new connectors. Id. at 615. In North Washington Water and Sanitation District v. Majestic Savings and Loan Association, 594 P.2d 599 (Colo.App.1979), the district actually provided water and sewer taps. When the tap fees remained unpaid, district brought a
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foreclosure action. The Colorado Supreme Court reversed the trial courts grant of summary judgment for the landowner, citing the predecessor to C.R.S. 32-11001(1)(j)(I), observing that unpaid rates, tolls, or charges (of a water and sanitation district), until paid, constituted a perpetual lien on and against the property served. North Washington at 600. Importantly for present purposes, the distinguishing feature of North Washington, was that water and sewer taps were actually provided and when the fees for those tape were not paid a perpetual lien was properly recorded against the property. Here, in contrast, the District has not provided water or sewer taps and Guaranty Bank has not requested any. In Wasson v. Hogenson, 583 P.2d 914 (Colo.1978), a contract and actual connection to sewer services case, on December 2, 1974, Hogenson, in order to obtain sanitary sewer service to certain real property, entered into a contract with the district to obtain twenty-two sewer taps for $315 each to serve certain warehouses. Hogenson paid $770 to the district and the balance was to be paid at the time construction started on each warehouse unit. Sewer lines from the warehouse units were tapped into the districts main line on December 4, 1974. Wasson at 915. Hogenson did not pay the balance for the sewer taps. The district recorded a perpetual lien against the subject real property under the predecessor statute to 32-1-1001(1)(j)(I) for the unpaid sewer tap fees and then brought a foreclosure action. Wasson at 915. Our Supreme Court held that the perpetual lien for the unpaid sewer tap fees was valid and had priority of a prior recorded deed of trust. Id. at 919. In Perl-Mack Enterprises Co. v. City and County of Denver, 568 P.2d 468, 472 (Colo. 1977), an actual connection case, the Colorado Supreme Court observed that the tap fee there was a fee for new connections to the sewer system. Id. at 472. In this case, it is undisputed that none of Guarantys parcels are actually connected to any of the Districts water or sewage facilities or receiving services. See Response, p.9. Indeed, none of Guarantys 301 parcels have even been developed. See Motion, Undisputed Fact #5 (admitted by the District at oral argument). In the absence of an actual or imminent connection to the Districts water or sewer lines or facilities or services, and in light of the authorities cited

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hereinabove, the Court holds that, as a matter of law,7 the District exceeded its statutory grant of authority under the Special District Act when it adopted the New Rules and Regulations so as to provide that tap fees were immediately due and payable from Guaranty Bank when title vested in Guaranty pursuant to the Adams County Public Trustees foreclosure sale in accordance with Section 6.4 of the New Rules and Regulations. (Exhibit D, Section 6.4). E. ASF Charges Under C.R.S. 32-1-1006(1)(h)(I) Dressed Up In Tap Fee Clothing. The Court further finds and concludes that were there no distinction between the Districts rate-making authority and when the District could demand payment for tap fees or connection fees or service charges that C.R.S. 32-11006(1)(h)(I)which speaks to availability of service or facilities charges (or ASF)would be rendered meaningless. Indeed, were the Court to accept the Districts contention, the District would be allowed to collect ASF charges under the guise of the payments for tap fees without first complying with the statutory prerequisites of 32-1-1006(1)(h)(I)(A)8 and (B);9 and, moreover, to collect what are in reality ASF charges for those properties that are not located within 100 feet of the Districts service lines and facilities in violation of C.R.S. 32-1-

See also Cherokee Water District v. Colorado Springs, 519 P.2d 339 (Colo.1974); Brownbriar Enterprises, Inc. v. City and County of Denver, 493 P.2d 352 (Colo.1972);City of Aurora v. Bogue, 489 P.2d 1295 (Colo.1971); Western Heights Land Corp. v. City of Fort Collins, 362 P.2d 155 (Colo.1961); Schlarb v. North Suburban Sanitation District, 357 P.2d 647 (Colo.1960); and City of Aurora v. Aurora Sanitation District, 149 P.2d 662 (Colo.1944). 8 Section 32-1-1006(1)(h)(I)(A) provides that No fee, rate, toll, or charge for connection to or use of services or facilities of such district shall be considered an availability of service or facilities charge. If tap fees are availability of service charges as suggested by the District, then the District has run afoul of the foregoing statutory proscription. ASF charges may be made only after being considered at a meeting where notice has been provided by mail to each taxpaying elector. See 32-1-1006(1)(h)(I)(B) and Skyland Metro. Dist. v. Mountain W. Enter., LLC, 184 P.3d 106, 121 (Colo.App. 2007).
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1006(1)(h)(I)(D),10 and to collect ASF charges that are greatly in excess of the 50% amount contemplated by 32-1-1006(1)(h)(I)(E).11 [I]n construing a specific provision of a statute, [a court] must consider the statutory scheme as a whole in an effort to give consistent, harmonious, and sensible effect to all its parts. Mahan v. Capitol Hill Internal Medicine, P.C., 151 P.3d 685, 691 (Colo. App. 2006)(interlineations added). In addition, courts are exhorted to construe specific provisions to prevail over general ones if it avoids rendering the more specific provision a nullity and allows both to coexist. Smith v. Colo. Motor Vehicle Dealer Bd., 200 P.3d 1115, 1118 (Colo. App. 2008). In enacting C.R.S. 32-1-1006(1)(h)(I), the General Assembly carved out a narrow set of circumstances under which a special district could assess ASF charges without a property actually being connected to the districts water or sewer lines. To interpret 32-1-1001(1)(j)(I) as permitting the District to impose tap fees where services are merely available (and not within 100 feet of the property to be charged), but not actually connected to the Subject Property, would be to render the provisions concerning ASF fees a nullity. For this reason, as well as those discussed above, the Court declines to interpret C.R.S. 32-1-1001(1)(j)(I) as permitting the imposition of tap fees where no connection has occurred or is imminently contemplated. Moreover, here, the District has constituted itself (the District is only 1.5 acres) so as to exclude from the tax-paying and, hence the voting, process real property owners whose properties are located outside of the District, but within the Districts Service Area. In fact, the Districts Service area is comprised of over 6000 acres. The obvious benefit the District enjoys by purposefully having such a small geographic area is that total control over the Districts affairs and management is vested exclusively in the hands of its board of directors. Indeed, the Districts powers are largely unconstrained because property owners within the Districts Service areain contrast to the handful of property owners within the
ASF shall be assessed only when water or sewer lines are installed and ready for connection within one hundred feet of any property line of the lot to be assessed. See 32-11006(1)(h)(I)(D) and Skyland Metro. Dist. v. Mountain W. Enter., LLC, 184 P.3d 106, 121 (Colo.App. 2007). ASF may not exceed fifty percent of user fees, as calculated by EQR. See 32-11006(1)(h)(I)(E) and Skyland Metro. Dist. v. Mountain W. Enter., LLC, 184 P.3d 106, 121 (Colo.App. 2007).
11 10

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Districts geographic boundaries (its board members)are not tax-paying electors and, thus, have no right to participate in the governance of the District. Further, the District cannot, however, provide the statutory notice required by 32-1-1006(1)(h)(I)(B) to each tax-paying elector of such districtin particular Guaranty Bankbecause the property owners within the Districts Service Area are not tax-paying electors in the first place. Because of that fact, the Districts Achilles heel and obvious burden is that it is prohibited under the facts of this case from demanding the payment of ASF charges from Guaranty Bank. The Court therefore concludes that, as a matter of law, the District may not demand the payment of what are in reality ASF charges under the guise of characterizing those ASF charges as tap fees. This is the price the District pays for purposefully, though presumably lawfully, disenfranchising real property owners in its Service Area such as Guaranty Bank. Additionally, even if the Court were to conclude that the statutory notice issue was not fatal, the District is nonetheless constrained by Colorado decisional law that explains the circumstances under which ASF charges may be imposed. Those circumstances do not, however, include a district masking tap fees as ASF charges or when a districts water or sewer lines are not readily available for immediate connection. For example, in Skyland Metropolitan District v. Mountain West Enterprise, LLC, 184 P.3d 106 (Colo.App.2007), an ASF case under C.R.S. 32-11006(1)(h)(I)(C) and (D), in which the subject property was within the districts boundaries, the Court of Appeals observed that special districts may assess ASF charges on undeveloped property where water or sewer lines are installed and ready for connection to within 100 feet of the property line of the assessed property. In contrast, user fees were assessed on developed property, and when a developer tapped in and connected to the districts system, the districts charges changed from ASF to user fees. Id. at 112-113 (emphasis added). In Crested Butte South Metropolitan District v. Dyke, 768 P.2d 1248 (Colo.App.1988), an ASF case under C.R.S. 32-1-1006(1)(h)(I)(D), in which the subject property was within the districts boundaries, the Court of Appeals observed that special districts may assess ASF charges on undeveloped property where water or sewer lines were installed and ready for connection to within 100 feet of the property line of the assessed property. Crested Butte at 1249-1250.

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In Crested Butte, the defendant, Mr. Dyke, contended that the trial court erred in upholding the districts imposition of ASF charges on his undeveloped real property. Although Mr. Dyke agreed that all of his lots were within 100 feet of the districts sewer line, he nonetheless asserted that because there were no roads or water lines to two of his properties, he received no special benefit for which he should be assessed ASF charges. Id. at 1249. The trial court found that Dyke did receive an actual benefit. In its order, the trial court stated that the statute reflects a clear legislative determination that any lot * * * located within 100 feet of existing lines does, in fact, receive a benefit in proportion to assessments charged. Id. The trial court found that even though Dykes lots had no road access, the Districts lines had been installed and were ready for connection within the required 100 feet and that, therefore, the properties may be assessed ASF charges. Id. at 1249. The Court of Appeals affirmed the trial court, concluding that by permitting the assessment of ASF charges only where the districts lines are installed and ready for connection within 100 feet, the General Assembly had explicitly written the required benefit directly into the statute. The benefit, installed lines ready for connection within 100 feet of a lot, was a prerequisite for the assessment of fees. Id. at 1249-1250. Here, the District does not argue that its water and sewer lines are ready for connection within 100 feet of the property line of any of Guarantys 301 lots. Instead, the District argues that the existence of the water system enhances the value of all properties within its Service Area, including those owned by Guaranty Bank. Readily available connection, not simply theoretic and general value enhancement, is what is demanded by 32-1-1006(1)(h)(I)(D). The Court therefore concludes that, as a matter of law, the District may not impose what are in reality ASF charges by dressing them up in tap-fee clothing. F. The Districts Authority To Furnish Facilities And Services Outside Its Boundaries And To Establish Fees And Charges Under C.R.S. 32-11001(1)(k). Contrary to the Districts contention, the Court concludes that C.R.S. 32-11001(k) does not support the Districts position that it may demand payment for tap fees for taps which Guaranty Bank has not requested. Section 32-1-1001(k) gives a special district the power [t]o furnish services and facilities without the boundaries of the special district and to establish fees * * * or charges for such
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services and facilities. This statute does nothing more than empower a special district to furnish services and facilities outside of its territorial boundaries, not demand the payment for tap or connection fees for services or facilities that have not been provided. G. The Districts Authority To Impose Tap Fees and Charges Under C.R.S. 32-1-1006(1)(a)(I). The District has also suggested that C.R.S. 32-1-1006(1)(a)(I), and the related case Risen, supra, support its position. The Court disagrees. Section 32-11006(1)(a)(I) provides that water and sanitation districts have the power [t]o compel the owner of premises located within the boundaries of any such district, whenever necessary for the protection of public health, to connect such owners premises * * * to the * * * water and sewer * * * lines * * * of such district * * * if such sewer or water line is within four hundred feet of such premises. Id. (interlineation added)(emphasis added). The Court rejects the Districts contention because there are no premises here to compel connection to, like in Risen. Guaranty owns nothing more than indisputably vacant lots. In Risen, the Court of Appeals affirmed the districts power to compel connection of properties within its boundaries and impose tap fees, the latter of which were merely incidental to the statutory authority of 32-1-1006(1)(a)(I) that permitted forced connection of properties within its boundaries for the protection of the public health, even though no request for service had been made. Risen at 601. From Risen, the District erringly extrapolates and concludes that it is empowered to fix fees for facilities it furnishes, and that [t]hose fees may * * * be imposed on properties within the Districts Service Area. Response, p.12. The Districts contention rings hollow. Unlike in Risenwhere the payment of tap fees were inextricably incidental to the compelled connection into the districts sewage systemthe District, here, has demanded the payment of tap fees from Guaranty Bank under circumstances where there has been no actual connection into the Districts facilities or system or where, more importantly, there could be forced connection into the Districts facilities or system. The Court cannot simply ignore the fact that this is not a compelled connection case like Risen. On the contrary, this case involves the Districts attempt to compel Guaranty Bank to pay for a fiction; that is, to pay for tap fees or connection fees despite the fact that Guaranty has not requested to tap
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into or otherwise connect to any of the Districts water or sewer lines. Consequently, the Court rejects the Districts argument that Risen supports its position. H. The Districts Authority To Adopt And Revise Rules and Regulations Under C.R.S. 32-1-1001(1)(m) And Its Authority To Impose Tap Fees And Charges Under Its New Rules And Regulations. The Court is also troubled by the Districts attempt to use a last-minute revision of its Rules and Regulations to justify the imposition of tap fees on Guarantys property. It is undisputed that the revision of these provisions occurred after the foreclosure sale was held, but prior to title in the Subject Property vesting in Guaranty on June 3, 2009. Pursuant to the New Rules and Regulations, tap fees became immediately due and payable upon the vesting of title of property within the Districts service area pursuant to any foreclosure action. (Exhibit D 6.4(e)). The District asserts that in passing this amendment it was exercising its legislative authority to fix fees for the water delivery system furnished by the District, relying on Krupp v. Breckenridge Sanitation District, 19 P.3d 687 (Colo. 2001). The Court rejects the Districts contention. In Krupp, our Supreme Court held that the districts imposition of a plant investment fee was a valid, legislatively established fee. Id. at 693. The Court noted that the PIF was assessed on every new project in the district, from residential housing to retail stores to service stations. Here, in contrast, it is undisputed that Guaranty Bank is not engaged in developing a residential subdivision and has not, importantly, requested to tap in into or otherwise use the Districts water or sewer lines. Consequently, the Court finds that Districts reliance on Krupp is misplaced. I. The Districts Authority To Impose Tap Fees And Charges Under Prior Agreements. Finally, the Court addresses the Districts contention that, even in the absence of statutory authority to impose the tap fees in question, Guaranty is subject to the contractual commitments entered into by its predecessors in interest. Specifically, the District has pointed to the Water and Sewer Service Agreement between Lennar, TCL and the District (WSA) (Exhibit 1), the Intergovernmental
29

Agreement (IGA) between the City of Thornton, the District, and TCL (Exhibit 2), and the Recognition Agreement (Exhibit 3). Pursuant to these agreements, the District agreed to provide, and the owner and prospective owner of the Heritage Todd Creek development agreed to accept, water service from the District. The District asserts that Guaranty, as the lender for the project, was fully aware of these agreements, and, moreover, participated in the execution of at least one of them. Notwithstanding, the Court rejects the Districts argument that Guaranty is bound by these agreements. For example, the Recognition Agreement did nothing more than acknowledge Lennars and TCLs Option Agreements and their rights to develop the Subject Property and provided that the Guaranty Banks Deed of Trust on the Subject Property would be released from portions of the Subject Property as Lennar made purchase price payments to Guaranty Bank. (Exhibit 3, Page 2, C). Additionally, the Court finds that the parties summary-judgment exhibits reinforce the Courts conclusion that tap fees are fees charged for tapping into or connecting to the Districts water or sewer lines or facilities or services12 based upon the following undisputed material facts: That the District itself contemplated providing water and sewer services pursuant to out-of-District service agreements given the manner in which the District constituted itself. (Exhibit A, Amended Service Plan, Bates Stamp 00092, 3)(emphasis added). That the water supply system will supply the water needs for the Service Area as development occurs. Water facilities and service arrangements to the entire Service Area will be provided by the District. (Exhibit A, Amended Service Plan, Bates Stamp 00094)(emphasis added). That the District may impose a system of fees, rates, tolls, penalties or charges in connection with its provision of services. (Exhibit A, Amended Service Plan, Bates Stamp 00102)(emphasis added).
See, e.g., Risen v. Cucharas Sanitation & Water District, 32 P.3d 596 (Colo.App.2001); Romer v. Fountain Sanitation District, 898 P.2d 37 (Colo.1995); Johnson Homes, Inc. v. Southwest Metropolitan District, 725 P.2d 12 (Colo.App.1986); City of Arvada v. City and County of Denver, 663 P.2d 611 (Colo.1983); North Washington Water and Sanitation District v. Majestic Savings and Loan Association, 594 P.2d 599 (Colo.App.1979); Wasson v. Hogenson, 583 P.2d 914 (Colo.1978); and Perl-Mack Enterprises Co. v. City and County of Denver, 568 P.2d 468, 472 (Colo. 1977). 30
12

That water and sanitary sewer service revenues will make up the revenue derived from services. (Exhibit A, Amended Service Plan, Bates Stamp 00103)(emphasis added). That the District may capitalize interest to permit payment of interest during the time lapse between development of properties and collection of fees, rates, tolls and charges. (Exhibit A, Amended Service Plan, Bates Stamp 0010400105)(emphasis added). That the Districts estimated financing plan anticipated that all water development fees and sewer development fees shall be collected by the District prior to the issuance by the County of a building permit for the property upon which a fee is being imposed for the water or sewer improvements. (Exhibit A, Amended Service Plan, Bates Stamp 00105)(emphasis added). That the District currently charged a development fee of $8,500 per EQR for hook-up to the water system. It is forecasted that new homes will also pay a $2,500 fee for an irrigation water tap. The homes that are planned to utilize the sewer treatment system will pay an additional $5,000 per EQR. The primary use of development fees is for the repayment of debt service on the existing and proposed revenue bond issues. (Exhibit A, Bates Stamp 00119, 4)(emphasis added). That except as otherwise expressly provided, Lender shall have no obligation or liability to perform any undertaking of TCL or OLI under or with respect to the Option Agreements. (Exhibit 3, Page 4, 7). That the Water District shall not charge a fee in excess of Twelve Thousand Five Hundred and 00/100 Dollars ($12,500.00) per residential lot for the right to connect to, use and receive service from the Water Districts water supply, treatment and distribution facilities now existing or hereafter constructed (the Water Tap Fee). (Exhibit 1, Page 10, 8(a))(emphasis added). That sewer tap fees or charges are payable for each residence located within the Property for the right to connect to, use and receive service from the wastewater collection and treatment facilities (the Sewer Tap Fee). (Exhibit 1, Page 10, 8(b))(emphasis added).

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That Owner acknowledges and agrees that the cap on Water Tap Fees provided for herein shall not preclude the Water District from requiring each owner of a residential lot located within the Property to pay meter purchase and inspection fees for the purchase and inspection of each potable tap and each non-potable tap (collectively, the Meter Purchase and Inspection Fees), which fees shall be payable at the time that the owner of a residential lot or lots obtains a building permit for such lot or lots. (Exhibit 1, Page 11-12, 8(f))(emphasis added). That in the instance that the Owner is in default, that the District shall be entitled, as its sole and exclusive remedy, to withhold giving water or sewer taps to Owner until such default is cured * * * . (Exhibit 1, Page 13, 11(b))(emphasis added). That Tap Fees are privilege-of-service fees and shall be charged to all Customers of the District for a permit to connect to the Potable Water System and Irrigation Water Systems. All Tap Fees shall be assessed and paid in full before the permit for service is issued. Once purchased, Tap Fees shall be effective for two (2) years unless subject to an agreement pursuant to Section 5.5 of these Rules and Regulations. (Exhibit E, Banks Summary-Judgment Motion)(emphasis added)). That all Tap Fees shall be assessed when due, and shall be paid in full by Property Owners or Customers before a permit for service will be issued by the District. Except as described below, Tap Fees shall be assessed as provided in Appendix A. (Exhibit E, Banks Summary-Judgment Motion). CONCLUSION AND ORDER For the reasons set forth hereinabove, the Court finds and concludes that the District exceeded its grant of authority under the Special District Act when it amended its Rules and Regulations for the express purpose of targeting and requiring Guaranty Bank to pay tap fees that were otherwise not due and owing to the District as a matter of law. Because the Court has found and concluded that there exists neither a statutory nor contractual basis for the imposition of the claimed tap fees, nor for a perpetual lien on Guarantys property, the Districts sole foreclosure claim is dismissed with prejudice. Guaranty Banks counterclaims are hereby held in abeyance pending a determination on the merits of the Districts imminent appeal in this matter.
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BY THE COURT:

DISTRICT COURT JUDGE

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