Colorado § 32-1-502 - Exclusion of property within municipality - procedure.

§ 32-1-502. Exclusion of property within municipality - procedure.

(1) (a) The governing body of any municipality wherein territory within a special district is located, the board of any special district with territory within the boundaries of any municipality, or fifty percent of the fee owners of real property in an area of any municipality in which territory within a special district is located may petition the court for exclusion of the territory described in the petition from the special district. Within ten days after the filing of any petition for exclusion, the governing body of the municipality and the board shall be notified of the exclusion proceedings. The taxpaying electors shall be notified of the exclusion proceedings by publication. The governing body of the municipality, the board, and the taxpaying electors, as a class, shall be parties to the exclusion proceedings.

(b) The provisions of this section shall not apply to health service districts.

(c) The provisions of this section shall not apply in the event that the territory described in the petition for exclusion constitutes the entire territory of the special district.

(2) Subject to the provisions of subsection (5) of this section, the court shall hold a hearing on the petition and order the territory described in the petition or any portion thereof excluded from the special district if the following conditions are met:

(a) The governing body of the municipality agrees, by resolution, to provide the service provided by the special district to the area described in the petition on and after the effective date of the exclusion order.

(b) The service to be provided by the municipality will be the service provided by the special district in the territory described in the petition for exclusion.

(c) The governing body of the municipality and the board shall each submit a plan for the disposition of assets and continuation of services to all areas of the district. Said plans shall include, if applicable, provisions for the maintenance and continuity of facilities to be utilized by the territories both within and without the municipal boundaries and of services to all territories served or previously served by the special district. If the municipality and the special district agree upon a single plan and enter into a contract incorporating its provisions, the court shall review such contract, and if it finds the contract to be fair and equitable, the court shall approve the contract and incorporate its provisions into its exclusion order. The court's review of the provisions of the contract shall include, but not be limited to, consideration of the amount of the special district's outstanding bonds, the discharge by the municipality or the territory excluded from the special district of that portion of the special district's indebtedness incurred to serve the territory proposed for exclusion, the fair market value and source of special district facilities located within the territory proposed for exclusion, the facilities to be transferred which are necessary to serve the territory proposed for exclusion, the adequacy of the facilities retained by the special district to serve the remaining territory of the special district, the availability of the facilities transferred to the municipality for use, in whole or in part, in the remaining territory of the special district, the effect which the transfer of the facilities and assumption of indebtedness will have upon the service provided by the special district in territory which is not part of the exclusion, and the extent to which the exclusion reduces the services or facilities or increases the costs to users in the remaining territory of the special district.

(d) If the municipality and the special district are unable to agree upon a single plan, the court shall review the plans of the municipality and the special district and direct each to carry out so much of their respective plans in which there is no disagreement and make such other provisions as the court finds fair and equitable, and shall make such allocation of facilities, impose such responsibilities for the discharge of indebtedness of the special district, and impose such other conditions and obligations on the special district and the municipality which the court finds necessary to permit the exclusion of territory from the special district and the transfer of facilities which are necessary to serve the territory excluded without impairing the quality of service nor imposing an additional burden or expense on the remaining territory of the special district. For the purpose of making such determination, the criteria set forth in this paragraph (d) and paragraphs (b) and (c) of this subsection (2) shall be considered. The respective portions of the plans to be performed, the transfer of facilities, and the requirements for the discharge of indebtedness of the special district and other conditions and obligations imposed by the court shall be specifically set forth in the order excluding territory from the special district.

(3) (a) The following additional requirements shall be met before any court orders the exclusion of any area from any water, sanitation, or water and sanitation district or any metropolitan district providing water or sanitation services or both:

(I) Such district's outstanding bonds shall not exceed ten percent of the valuation for assessment of the taxable property in the remaining territory of the special district, or, as an alternative, the municipality or the territory excluded from the special district shall discharge that portion of the special district's indebtedness incurred to serve the territory proposed for exclusion or the municipality shall have entered into a contract to purchase the entire system or systems of such district at a price at least sufficient to pay in full all of the outstanding indebtedness of such district and all of the interest thereon.

(II) Provision shall be made that all areas of such district receive the service or services for which such district was organized in substantial compliance and fulfillment of the service plan of the district, if one exists, or in accordance with the petition for organization of such district if no service plan was originally adopted and approved pursuant to part 2 of this article.

(b) If an election in a water, sanitation, or water and sanitation district or a metropolitan district providing water or sanitation services or both has been held pursuant to subsection (7) of this section and the majority of votes cast favor the municipality providing the service, the municipality and such district shall enter into a contract for the municipality to assume full responsibility for the operation and maintenance of the entire system or systems of such district and to integrate said system or systems with those of the municipality to the largest extent possible. The terms and conditions of service and the rates to be charged by the municipality for said service under the contract shall be uniform with the terms, conditions, and rates for similar service provided by said municipality to other users within the municipality.

(4) If no election has been held pursuant to subsection (5) of this section, the following additional requirement shall be met before any court orders the exclusion of any area from any fire protection district: The quality of service including, but not limited to, the fire insurance costs for the improvements within the excluded area will not be adversely affected by such exclusion.

(5) (a) After the filing of a petition for exclusion under subsection (1) of this section, ten percent or one hundred of the eligible electors of the special district territory proposed for exclusion, whichever number is less, may petition the court for a special election to be held within the special district territory proposed for exclusion on the question of exclusion of the territory described in the petition for exclusion. If a petition for a special election is filed with the court and complies with this subsection (5), the court shall order a special election to be held only after it finds the conditions of subsections (2)(a), (2)(c), and (2)(d) and, if applicable, of subsection (3) or (4) of this section are met. The election shall be held and conducted, and the results thereof determined, in the manner provided in article 13.5 of title 1. The special district shall bear the costs of the election.

(b) If a majority of the electors voting at such election approve the question of exclusion, the court shall order the territory excluded from the special district in accordance with its findings on the conditions specified in subsection (2) and, if applicable, of subsection (3) or (4) of this section. If a majority of those voting do not approve the question, the court shall conclusively terminate the exclusion proceeding.

(6) Any order for exclusion of territory from a special district shall become effective on January 1 next following the date the order is entered by the court. The order for exclusion shall recite in the findings a description of any bonded indebtedness in existence immediately preceding the effective date of the order for which the excluded property is liable and the date that such bonded indebtedness is then scheduled to be retired. After July 1, 1993, failure of the order for exclusion to recite the existence and scheduled retirement date of such indebtedness, when due to error or omission by the special district, shall not constitute grounds for correction of the omission of a levy on the excluded property from the assessment roll pursuant to section 39-5-125, C.R.S.

(7) (a) After any exclusion of territory under this section, the court may order an election of the electors of the portion of the special district remaining to determine whether they desire the municipality to provide the service provided by the special district if either of the following conditions exists:

(I) More than fifty percent of the territory within the special district as it existed prior to such exclusion has been excluded; or

(II) The valuation for assessment of the area of the excluded territory is greater than the valuation for assessment of the area of the remaining territory in the special district.

(b) If a majority of the electors voting at such election approve the question requiring the municipality to provide such service, the court shall request the governing body of the municipality and the board to enter into a contract which will govern the providing of the service. The terms and conditions of the contract shall be reviewed and approved by the court, but in no event shall the terms, rates, and conditions be less equitable than for services supplied by a municipality to any other users within the municipality. The court's review of the contract or, if the municipality and the special district after good faith negotiations are unable to agree upon a contract, the court's order shall be in accordance with the criteria set forth in paragraphs (b), (c), and (d) of subsection (2) of this section. The special district shall continue in existence for the purpose of fulfilling any obligation imposed upon it by the contract with the municipality or otherwise.

(c) Any election held pursuant to this subsection (7) shall be held and conducted, and the results thereof determined, in the manner provided in articles 1 to 13 of title 1, C.R.S.

Source: L. 81: Entire article R&RE, p. 1559, § 1, effective July 1. L. 85: (2)(a) and (2)(b) amended, p. 1110, § 1, effective April 24. L. 92: (5)(a) and (7)(c) amended, p. 877, § 111, effective January 1, 1993. L. 93: (6) amended, p. 83, § 2, effective March 29. L. 96: (1)(b) amended, p. 474, § 14, effective July 1. L. 2016: (5)(a) amended, (SB 16-189), ch. 210, p. 785, § 84, effective June 6. L. 2021: (5)(a) amended, (SB 21-160), ch. 133, p. 540, § 11, effective September 7.

Editor's note: The provisions of this section are similar to provisions of several former sections as they existed prior to 1981. For a detailed comparison, see the comparative tables located in the back of the index.

ANNOTATION

Annotator's note. The following annotations include cases decided under former provision similar to this section.

This section is a remedial statute intended to facilitate the elimination of the overlapping of services provided by local governments and the double taxation which may occur because of annexation of municipal territory, when all or part of the annexed territory also lies within a special improvement district. City & County of Denver v. Bd. of Dirs. of Bancroft Fire Prot. Dist., 38 Colo. App. 53, 554 P.2d 714 (1976).

It should be liberally construed so as to accomplish its purpose. City & County of Denver v. Bd. of Dirs. of Bancroft Fire Prot. Dist., 38 Colo. App. 53, 554 P.2d 714 (1976).

Exclusive remedy. The entire purpose of the exclusion provisions — to eliminate the overlapping of services and double taxation — would be totally frustrated if a town were not allowed to petition for exclusion from the district. The statute provides no other remedy by which a town can avoid the necessity of paying for services which it already provides. In re Org. of N. Chaffee County Fire Prot. Dist., 190 Colo. 40, 544 P.2d 637 (1975).

Whether or not duplication of services caused. A municipality may petition for exclusion from a special service district regardless of whether annexation has caused the duplication of services. In re Org. of N. Chaffee County Fire Prot. Dist., 190 Colo. 40, 544 P.2d 637 (1975).

This section controls in event of conflict. In the event of a conflict between this section and other exclusion provisions, this section is controlling. City & County of Denver v. Bd. of Dirs. of Bancroft Fire Prot. Dist., 38 Colo. App. 53, 554 P.2d 714 (1976).

Remedies under this section and former § 32-5-323 are separate. The words "in addition to" contained in former § 32-1-309 are not intended to require that Denver proceed under former § 32-5-323 (since repealed), and this section sequentially. Instead, the two remedies are entirely separate. City & County of Denver v. Bd. of Dirs. of Bancroft Fire Prot. Dist., 38 Colo. App. 53, 554 P.2d 714 (1976).

A town need not petition for exclusion from the district for water service that the district has not provided and has not shown itself capable of providing. If the district were providing water service to the town in addition to the sewerage service, the town would be required to proceed through an exclusion process in order to substitute itself as the water service provider. S. Fork Water v. Town of S. Fork, 252 P.3d 465 (Colo. 2011).

Denver may, in the first instance, petition for the exclusion of the annexed municipal territory under this section. City & County of Denver v. Bd. of Dirs. of Bancroft Fire Prot. Dist., 38 Colo. App. 53, 554 P.2d 714 (1976).

No need to first initiate petition for exclusion pursuant to former § 32-5-323. The words "in addition to" in former § 32-1-309, which provided that the procedure for filing petitions for exclusion under this section in addition to other means set forth in title 32 by which the exclusion may be accomplished, should not be construed to require Denver to initiate a petition for exclusion pursuant to former § 32-5-323 (since repealed) before proceeding under this section. City & County of Denver v. Bd. of Dirs. of Bancroft Fire Prot. Dist., 38 Colo. App. 53, 554 P.2d 714 (1976).

The legislative purpose of this section is fulfilled by according Denver and other cities the right to file a petition for exclusion of municipal territory on their behalf in the first instance rather than proceeding indirectly through the property owners as would be required under former § 32-5-323 (since repealed). City & County of Denver v. Bd. of Dirs. of Bancroft Fire Prot. Dist., 38 Colo. App. 53, 554 P.2d 714 (1976).

Before a city may undertake to seek exclusion of a particular territory, it must establish itself as the governing body of that area. City & County of Denver v. Bd. of Dirs. of Bancroft Fire Prot. Dist., 38 Colo. App. 53, 554 P.2d 714 (1976).

Until an annexation is finally determined to be void, the disputed territory remains a part of the annexing municipality. City & County of Denver v. Bd. of Dirs. of Bancroft Fire Prot. Dist., 38 Colo. App. 53, 554 P.2d 714 (1976).

This section is not unconstitutionally vague and does not confer arbitrary and unlimited power on the trial court, but rather provides a specific statutory procedure for the exclusion of municipal territory from a special service district, as it sets forth conditions which a petitioning municipality must meet and which the trial court must find have been complied with in order to obtain exclusion from a district. City Council v. Bd. of Dirs. of S. Sub. Metro. Recreation & Park Dist., 181 Colo. 334, 509 P.2d 317 (1973).

Intent of section. The section is intended to ensure that the overall quality of the services provided will not be lower as a result of the exclusion of municipal territory. City & County of Denver v. Bd. of Dirs. of Bancroft Fire Prot. Dist., 38 Colo. App. 53, 554 P.2d 714 (1976).

City may contract with others to furnish services. This section does not require that the city itself do the furnishing of services; it merely says it shall provide them, and if a city council chooses to contract with others to provide such services, it has the right to do so. City Council v. Bd. of Dirs. of S. Sub. Metro. Recreation & Park Dist., 181 Colo. 334, 509 P.2d 317 (1973).

City need not prove intention to duplicate all services. While there was no evidence in the record to show that Denver could or would duplicate all of the services provided by the fire protection district, this section did not require Denver to prove its intention to do so. City & County of Denver v. Bd. of Dirs. of Bancroft Fire Prot. Dist., 38 Colo. App. 53, 554 P.2d 714 (1976).

The requirement in subsection (2)(b) that the service provided by the municipality will be the service provided by the special district does not require the municipality to be able to provide the service before the exclusion occurs. City Council v. S. Suburban Park, 160 P.3d 376 (Colo. App. 2007).

In determining whether a plan is fair and equitable, it is not necessary to determine that the exclusion of property from a special district would result in either an impairment of the quality of service or the imposition of an additional burden or expense on the special district before considering statutory criteria, including fair market value. City Council v. S. Suburban Park, 160 P.3d 376 (Colo. App. 2007).

The quality of service and additional burden language in subsection (2)(d) is an outer limit on the court's power to add provisions to the exclusion plan rather than a prerequisite to considering the statutory criteria in making the exclusion fair and equitable. City Council v. S. Suburban Park, 160 P.3d 376 (Colo. App. 2007).

Although this section directs the trial court to make provisions in the exclusion plan as the court finds fair and equitable and references fair market value as one factor the court should consider, it does not require a trial court to order a city to reimburse a special district for the fair market value of the transferred facilities. City Council v. S. Suburban Park, 160 P.3d 376 (Colo. App. 2007).

Factors to be weighed. The trial court must weight the advantages and disadvantages of an exclusion to determine whether, on balance, the quality of service will not decline as a result of the exclusion. City & County of Denver v. Bd. of Dirs. of Bancroft Fire Prot. Dist., 38 Colo. App. 53, 554 P.2d 714 (1976).

Appellate court bound by trial court's determination. As to whether the services to be provided by Denver in the future would not be of lower quality than those presently provided by the fire protection district, the appellate court is bound by the trial court's determination unless it is "clearly arbitrary and capricious". City & County of Denver v. Bd. of Dirs. of Bancroft Fire Prot. Dist., 38 Colo. App. 53, 554 P.2d 714 (1976).

While the legality of annexation proceedings is being challenged in court, the disputed territory remains in the city subject to city taxes and assessments and is entitled to all city services. City Council v. Bd. of Dirs. of S. Sub. Metro. Recreation & Park Dist., 181 Colo. 334, 509 P.2d 317 (1973).

Property excluded from a fire protection district by a July 12, 1974 order was subject to all property taxes levied by the district for the 1974 taxable year, and for the taxable year 1975 and thereafter, the excluded territory was subject only to a levy for taxes for a pro rata share of the district's indebtedness outstanding on January 1, 1975. City & County of Denver v. Bd. of Dirs., 37 Colo. App. 496, 549 P.2d 1090 (1976).

Applied in City of Westminster v. Hyland Hills Metro. Park & Recreation Dist., 190 Colo. 558, 550 P.2d 337 (1976).