Forest Meadows in like a lot of subdivisions started in the mid-2000s in Colorado Springs.
No one expected the nation’s economy to collapse, leaving developers sitting on thousands of lots with no buyers.
Forest Meadows developer Jim Morley has been a poster child for the plight of developers. The size of the foreclosures linked to him are absolutely staggering.
He has laid off all 20 of his employees and watched his porfolio of properties disintegrate.
Today, he said his company is on “life support” and he’s trying to stay afloat with his few remaining projects.
Not only is he broke, Morley said the same is true of the Woodmen Heights Metro District, a quasi-governmental umbrella organzation to oversee infrastructure in subdivisions planned for a 1,070-acre swath on the city’s northern edges.
Woodmen Heights was created by a group of the city’s most prominent developers — Morley, City Councilman Scott Hente, brothers Randy and Lindsay Case, and Les Krohnfeldt – to finance the subdivision’s infrastructure and amenities and oversee future maintenance.
The district sold $22 million in bonds in 2005 to build roads, water, sewer and drainage, parks and trails, retaining walls, entranceways and landscaping. To repay the debt, it is authorized to collect a special property tax on the homes and businesses in the district.
Of course, the housing market crashed in 2007 and the number of houses built have not generated enough property tax to service the bonds.
An audit of the 2009 district financial statement produced a dire warning: its expenses exceeded income by $1.56 million and the auditor doubted “its ability to continue as a going concern.”
The district’s attorney, Sean Allen, confirmed that cash-flow projections show the district will be in default of its December interest payment unless bondholders agree to refinance the district’s $30 million debt.
The good news, Morley said, is that the city capped the district’s ability to raise property taxes at 40 mills for residential property and 50 mills for commercial.
As a result, homeowners will not be asked to pay exhorbitant property taxes to repay the debt.
That’s exactly what happened in 1989 in Colorado Centre in the Banning-Lewis Ranch development when its metro district went into default. To avert homeowners facing property tax bills of $30,000 or more, the district declared bankruptcy.
Here’s a related story about Banning-Lewis Ranch financial troubles.
And read the more recent saga of the Metex Metro District.
To understand how fast things deteriorated, Morley offered these numbers:
In 2005, when Woodmen Heights was conceived, he sold 906 lots.
In 2006, he sold 881 lots.
And in the first seven months of 2007, he sold 360 lots.
Then everything crashed.
Over the next five months he sold just 24 lots.
It wasn’t much better in 2008 when he sold just 59 lots.
Sales bottomed out in 2009 when his sales were just 42 lots.
Things rebounded mildly in 2010 with 81 lots and he said 2011 is shaping up about the same.
In fact, he’s seeing more activity at Forest Meadows, which he started in 2007. In the first phase he developed 532 lots. Of that total, 330 have sold and most have houses built. Plans call for 550 single family homes and 220 multifamily lots with commercial parcels in the next phase, which is on indefinite hold.
What is built at Forest Meadows is pretty nice. It looks like a typical new subdivision with tidy lawns, porches with swings and even a park with a playground.
But there are obvious signs of problems like the sagging retaining wall. There are plenty of vacant lots, some overgrown with weeds, and large sections of missing sidewalk. A second planned park is unfinished, as well, to the frustration of some residents.
Morley said he’s trying to stay on top of issues like the wall. Neighbors have voluntarily pulled weeds from the entrance median to improve appearances.
Others complain the neighborhood is being allowed to deteriorate by allowing some residents to forgo landscaping and to let their fences and yards deteriorate.