Serving lawfully? Questions about corporate authority in Thornton subdivision

Dispute between homeowner and metro district board touches on larger issues around control of miniature governments

Michael Karlik and Liam Adams
Colorado Politics and Colorado Community Media
Posted 3/16/21

It might not be obvious that the sprawling residential construction site near Holly Street and East 144th Avenue in Thornton is also a local government: the Willow Bend Metropolitan District, …

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Serving lawfully? Questions about corporate authority in Thornton subdivision

Dispute between homeowner and metro district board touches on larger issues around control of miniature governments

Posted

It might not be obvious that the sprawling residential construction site near Holly Street and East 144th Avenue in Thornton is also a local government: the Willow Bend Metropolitan District, organized in 2013 to finance and maintain the infrastructure for the subdivision.

Like any other local government, the metro district has elected officials, in the form of a five-member board of directors. Four of them, as is common, happen to be employees of the neighborhood’s homebuilder, the Lennar Corporation.

The fifth member is homeowner Dwayne Bergeron, who was elected in May 2020. Bergeron moved into Willow Bend in 2019. He is a chef from New Orleans. He and his wife relocated from Florida to Colorado for work.

And he believes the other board members are serving illegally. Instead of verifying their eligibility to govern a district which will someday have 1,300 residents and with a debt limit of $22 million, however, the Lennar employees have refused to respond to Bergeron or the media.

Given the design of metro districts — where boards control homeowners’ property tax assessments with an eye toward paying off subdivision debt — the nature of developers’ involvement is key. A Denver Post series starting in 2019 revealed that homebuilders hold onto certain bonds with high interest rates, creating a windfall for themselves. Occasionally, large property tax increases catch homeowners by surprise.

“I want to get answers about their qualifications and I want to be able to possibly have an emergency election,” Bergeron said.

He pointed to several circumstances that support his hunch: At a virtual board meeting on Nov. 3, Bergeron said someone removed him from the meeting room when he asked the Lennar representatives to prove their eligibility to serve.

“I told them that `I’m not voting for anything. So whenever it comes to me, it’s a nay for me. I need to see your guys’ qualifications,” Bergeron recalled. (The draft meeting minutes make no mention of this exchange.) “And that’s when one of them zapped me out of the meeting….They cut me out of the Zoom. My screen just went away.”

In a letter dated three days later, he asked to see certain documents from his fellow directors, including any land purchase agreements, proof of property taxes paid and evidence that the land contracts were filed with Adams County. Bergeron said he received no response.

“I followed all requirements through the county and through the process, so I’m sticking to no comment,” Willow Bend director Jonathan “Jack” Beckwitt told Colorado Community Media and Colorado Politics during a brief phone conversation.

In response to a list of questions, a spokesperson for Florida-based Lennar declined to provide a statement.

Questions of propriety in metro district governance reach beyond Willow Bend. In other districts, the representatives of developers resigned when their qualifications were challenged. A case out of Colorado and appealed to the U.S. Supreme Court featured condo owners who were included in a metro district without their knowledge or consent — with the district assessing property taxes on them.

And on Feb. 27, 2020, before the board election, Debra Hessler, a Lennar employee and Willow Bend director, emailed a letter to homeowners signed by Lennar Division President Frank Walker. If the district’s mill levy exceeded a certain threshold, Walker wrote, “Lennar will pay the amounts in excess of the foregoing. Additionally, Lennar will continue to fund the District’s annual operating deficit.”

The only condition?

If the board of directors is “is fully comprised of Lennar associates or affiliates” — in other words, no homeowners.

Charles Wolfersberger, president of Wolfersberger LLC, a property management firm that handles finances for homeowner-controlled metro districts, said the letter alone was incriminating for Lennar. “It could be considered a veiled threat to everyone to not run against Lennar’s employees on the board or else Lennar pulls its funding from the district,” Wolfersberger said.

Bergeron brought his concerns to Thornton City Council this February. Deputy City Manager Jeff Coder told councilors that Lennar disputed Bergeron’s complaints and added that the city did not have codes or ordinances to address Bergeron’s specific allegations.

“Metro districts are so complicated and I definitely don’t understand the intricacies of metro districts,” said Council Member Jacque Phillips, “but we hear you.”

“What’s with you guys harassing me?”

On Feb. 12, 2020, homeowners in the Willow Bend, Lewis Pointe, North Holly and Trailside subdivisions gathered at a fire station in northern Thornton. According to a flyer left in neighborhoods from Wolfersberger LLC, the purpose was to “discuss the dangers of continuing to allow your neighborhood property tax (aka `metro’) district board to be controlled by the land developer rather than by homeowners.”

In those four districts, developers controlled the boards. Wolfersberger LLC wanted to empower homeowners to run for their boards in the May 5 election. The deadline to submit a self-nomination form was the end of February.

“As long as the developer owns the land … the district is basically like a corporate subsidiary,” Wolfersberger told Colorado Community Media and Colorado Politics. For example, a developer-controlled board might approve debt to pay for overpriced construction costs charged by the development company.

Wolfersberger also tries to help homeowners take control of boards because his company manages finances for homeowner-controlled metro districts. He did not deny that he would benefit financially from gaining new business with metro districts that hired him.

“Those who criticize our firm for profiting from helping homeowners gain control of their district boards are usually individuals who have significant conflicts of interest serving on a district board,” Wolfersberger said. “We continue to build trust with homeowners as we successfully flatten and reduce property tax rates across the neighborhoods we serve.”

The Feb. 12 meeting inspired enough homeowners in Lewis Pointe, North Holly and Trailside (whose metro district is Cundall Farms) to run for their boards and eventually take majority control. Afterward, the North Holly and Lewis Pointe boards fired the existing management firm and hired Wolfersberger LLC.

In Willow Bend, by contrast, homeowners started hearing from Lennar employees because the corporation sent people to the meeting to see which homeowners were in attendance. Wolfersberger said he spoke with two individuals in Willow Bend who originally planned to run for the board but decided against it after hearing from Lennar.

Then along came Bergeron, who did not attend the Feb. 12 meeting, but called Wolfersberger after seeing a flyer. After the two talked, Bergeron decided to run. He submitted a self-nomination form on Feb. 28. He reportedly received a call from a Lennar employee with a message of, according to Bergeron: “What can we do to make you go away?”

After the phone call, Bergeron also received an email from Hessler on March 3 containing Walker’s letter. Bergeron replied, “I will be running for one of those seats. What’s with you guys harassing me today? Scare tactics or threats don’t scare me. Good day.”

Asking for qualifications

When Bergeron gained his seat on the board after the May 5 election, he was not content being the only non-developer there. So he and Wolfersberger discussed a tactic that homeowners in other districts had used: challenge developer-employed directors about their qualifications to serve on the board. If they were unqualified, then homeowners could try to remove and replace them.

Bergeron’s opportunity came at the Nov. 3 meeting. He said he showed up late because he received an email notifying him about the meeting just hours before. Upon his appearance, the board was voting on resolutions, according to draft minutes. When it was his turn to vote, he demanded his fellow directors’ qualifications. Suddenly, he was no longer in the meeting.

His wife, Dyonne, witnessed it happen and said she watched him unsuccessfully try to re-enter the meeting room.

Draft meeting minutes do not show if Bergeron left the meeting, and a recording of the meeting, if one exists, was not available for inspection in response to an open records request. Clint Waldron, a representative of the district’s legal counsel, White Bear Ankele Tanaka & Waldron, who attended the meeting, responded to Bergeron’s claim, “I am not aware of any board member ever being ejected from a board meeting. All board members are encouraged to attend any and all meetings of the Board.” Other individuals present at the meeting did not respond to requests for comment.

After the meeting, Bergeron told Wolfersberger what happened. From there, the two drafted the letter Bergeron sent to Lennar and the district’s attorney on Nov. 6 asking for proof that they qualify. “Please provide this information to me by no later than Friday November 20th” it concluded. He still awaits a response.

Under Colorado law, a registered voter must own taxable property in a metro district or have a contract to purchase property in order to qualify for a board seat. The legislature, seemingly envisioning an attempt to circumvent the spirit of the law, also prohibited anyone from knowingly transacting business in this fashion for the purpose of making them a voting member of the district.

However, there is an exception: if not enough people live in the district or express interest in being a board member.

“As soon as five people move into the neighborhood, they can serve on the board,” said John Henderson, an attorney and expert on special districts. If board members have no contract, “as soon as that becomes known, either through litigation or otherwise...there is a vacancy. They have to leave the meeting in the middle of the meeting if that’s when it became known. They could not vote, they can no longer act. So it’s very important that they answer that question.”

According to conflict-of-interest paperwork filed with the Colorado Secretary of State’s Office, Beckwitt, Hessler, and the two other Lennar directors in Willow Bend — Jason Steinberg and John Cheney — have collectively sat on the boards of 18 metro districts in seven counties.

Colorado is not the only state with special districts. But conversely, not all states with special districts have Colorado’s metro district framework for private development.

“When a district is formed in Oregon it has to be formed for one specific service, such as water, fire or sanitary,” said Frank Stratton, executive director of the Special Districts Association of Oregon. California similarly allows Community Facilities Districts for public infrastructure improvements.

Fred Crawford, executive director of the Florida Association of Special Districts, described a system that closely resembles Colorado’s, community development districts.

“The developer creates the district through the legislature, develops the community and once 51% of the development is sold, the board is turned over to the citizens of the community and they are in charge from there on out,” he said.

In the nearby Thornton metro district of North Holly, the transition from a homebuilder board to a homeowner board happened in May 2020, but it was not amiable.

Minutes from the Nov. 30 meeting showed the board was scheduled to consider the qualifications of the two homebuilder representatives, but five days earlier the employees submitted a resignation letter. According to them, Wolfersberger, who was by now the district manager, “treats Board members who are affiliated with the land developer and homebuilder in a hostile manner.”

They also accused Wolfersberger of a “shell game” and “cooking the books.”

In response, Wolfersberger told the remaining homeowner board members that the homebuilder had provided “free legal services” to its board members by responding on their behalf to inquiries about their qualifications. The company reportedly asserted the two employees were qualified to serve as directors and “the District’s requests to provide property ownership documentation proving their eligibility is frivolous and a waste of taxpayer money.”

The same scenario played out in the nearby Amber Creek subdivision, which is also a Lennar Corporation project, in the summer of 2019. After the homeowner-majority board authorized an inquiry into the two homebuilder directors’ qualifications, Adam Coates, one of the Lennar representatives, resigned two weeks later.

Skepticism of developers’ involvement in Colorado’s metro districts, however, is not a universal sentiment.

“I have no problem with Lennar taking over the board. They have been transparent with us and have offered in writing not to increase the mill levies and/or prices for homeowners as long as they stay in control,” said Julissa Martinez, a resident of Willow Bend, referring to Lennar’s email promising to cover some costs as long as homeowners stayed away from the board.

She added: “It’s a homeowner's responsibility and due diligence to be informed of all they are getting into when purchasing a home.”

Little recourse

At this juncture, if Bergeron or other homeowners in the district want to still challenge the qualifications of his fellow directors, there are options, but not many. According to Denver attorney Brian Matise, the next authority to intervene is the district attorney’s office.

But they tried that already. After Bergeron received no response to his Nov. 6 letter, Wolfersberger called the office of now-17th Judicial District Attorney Brian Mason. They declined to respond. The next step, Matise said, is for homeowners to petition Gov. Jared Polis to force Mason’s office to respond. And if the governor’s office declines, then homeowners could file a “quo warranto” lawsuit against the directors in district court.

Bergeron is not sure he is the person to lead that charge, though. He and his wife are considering moving to another state for multiple reasons, including career-related ones, but feeling unwelcome in the community is a contributor. His struggles with the board have not helped.

“I’m not welcomed by them. They don’t acknowledge anything that I say or anything that I have an inquiry about,” he said.

Bergeron is not even sure he will finish out his three-year term. But until then, he said, “I’m going to keep on fighting until I put the for sale sign out in front of the house.”

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