Opinion ID: 4565231
Heading Depth: 3
Heading Rank: 2

Heading: The Special District Act

Text: ¶15 In enacting the Special District Act, the General Assembly intended that special districts would “serve a public use” and “promote the health, safety, prosperity, security, and general welfare of the inhabitants of such districts and of the people of the state of Colorado.” § 32-1-102(1), C.R.S. (2019). Moreover, the legislature provided that, because the Act is “necessary to secure the public health, safety, convenience, and welfare, [it] shall be liberally construed to effect its purposes.” § 32-1-113, C.R.S. (2019); see also SDI, Inc. v. Pivotal Parker Commercial, LLC, 2014 CO 80, ¶ 16, 339 P.3d 672, 676. 9 ¶16 The plain language of Part 4 of the Special District Act demonstrates that it concerns the expansion of the surface area of a special district. At the outset, Part 4 is titled “Inclusion of Territory,” and section 32-1-401 is also titled “Inclusion of territory—procedure.” These titles alone make it clear that the General Assembly enacted Part 4 of the Special District Act to create procedures for inclusion of territory in a special district. Cf. In re Black Forest Fire/Rescue Prot. Dist., 85 P.3d 591, 593 (Colo. 2003) (“Section 32-1-501, et seq., C.R.S. 2002, sets forth the provisions for exclusion of territory from a special district.”). ¶17 In addition to these titles, subsection 401(1)(a)—the subsection at the heart of this dispute—references the “boundaries of a special district” and analogizes the inclusion petition to a “conveyance of land”: The boundaries of a special district may be altered by the inclusion of additional real property by the fee owner or owners of one hundred percent of any real property capable of being served with facilities of the special district filing with the board a petition in writing requesting that such property be included in the special district. The petition shall set forth a legal description of the property, shall state that assent to the inclusion of such property in the special district is given by the fee owner or owners thereof, and shall be acknowledged by the fee owner or owners in the same manner as required for conveyance of land. § 32-1-401(1)(a) (emphases added). ¶18 Similarly, subsection 401(1)(b), which sets out the notice and public hearing requirements for including new territory within a special district, explains that the failure of any other municipality or county to file an objection to the petition for 10 inclusion “shall be taken as an assent to the inclusion of the area described in the notice.” § 32-1-401(1)(b) (emphasis added). ¶19 Subsection 401(2), which provides alternative methods for inclusion of new territory in a special district, also repeatedly uses the terms “boundaries” and “area.” For example, one method by which “the boundaries of a special district may be altered” pursuant to subsection 401(2) requires a certain number “of the taxpaying electors of an area which contains twenty-five thousand or more square feet of land [to file] a petition with the board in writing requesting that such area be included within the special district.” § 32-1-401(2)(a)(I) (emphases added). Another provides that the board of a special district may adopt a resolution to include the “specifically described area; but no single tract or parcel of property constituting more than fifty percent of the total area to be included may be included in any special district without the consent of the owner thereof.” § 32-1-401(2)(a)(II) (emphases added). ¶20 The use of these terms—territory, area, boundaries, tract, parcel, and square feet—demonstrates that section 32-1-401 sets forth procedures for expanding the surface area of a special district. Black’s Law Dictionary (11th ed. 2019) defines territory as “[a] geographical area included within a particular government’s jurisdiction; the portion of the earth’s surface that is in a state’s exclusive possession and control.” (Emphases added.) Merriam-Webster Dictionary similarly defines 11 territory as “a geographic area belonging to or under the jurisdiction of a governmental authority.” https://www.merriam-webster.com/dictionary/terri tory; [https://perma.cc/9RTE-8WHU] (emphasis added). And it defines area as “the surface included within a set of lines” and “a particular extent of space or surface or one serving a special function: such as . . . a geographic region.” https://www.merriam-webster.com/dictionary/area; [https://perma.cc/S372WHNQ] (emphases added). The language of Part 4 of the Special District Act could not be more plain—it establishes mechanisms for the expansion of the surface territory included within and served by a special district. The assent required in subsection 401(1)(a) is therefore the assent of all owners of surface property whose inclusion will expand the boundaries of the district. ¶21 The courts below reached the same conclusion. However, in construing section 32-1-401(1)(a), they focused on the meaning of the phrase “real property capable of being served” in section 32-1-401(1)(a) and concluded that the reason the consent of the owners (or lessees) of the mineral estates was not required was that the mineral estates could not be “served” by the special district. In doing so, both courts below—as well as the parties—lost sight of the language and purpose of Part 4 of the Special District Act. Of course, it is also true that the surface property is generally the property that can be served by the facilities of a special district. See Schlarb v. N. Suburban Sanitation Dist., 357 P.2d 647, 648 (Colo. 1960) 12 (noting that the purpose of special districts is to benefit the landowners within a district). But, even if the subsurface estates could in some way be served by the districts, they are not the “real property” contemplated by the procedural mechanism that the Special District Act creates for “inclusion of territory” within a special district. ¶22 After a special district’s boundaries are expanded in conformity with section 32-1-401, the Special District Act provides that “all taxable property” within those boundaries is subject to ad valorem taxation by the district. § 32-1-1101(1)(a). Section 32-1-1101(1)(a) gives special districts the power “[t]o levy and collect ad valorem taxes on and against all taxable property within the special district.” This includes oil and gas leaseholds if the wellheads are located within the special district’s boundaries. See Kinder Morgan CO2 Co. v. Montezuma Cty. Bd. of Comm’rs, 2017 CO 72, ¶ 4, 396 P.3d 657, 660 (citing § 39-7-102, C.R.S. (2019); Colo. Const. art. X, § 3(1)(b)) (“Oil and gas leaseholds are subject to taxation as real property.”); see also § 39-7-101(1), C.R.S. (2019) (“[I]rrespective of the physical location of the producing leaseholds or lands, the point of taxation is the same as the point of valuation, which is the wellhead.”). And, of course, it is this aspect of the Special District Act to which Lessees most object, but this section of the Act has not been challenged here and we therefore do not opine on it. 13 ¶23 Lessees and amicus curiae, the Colorado Alliance of Mineral and Royalty Owners (“CAMRO”), suggest that our construction of the statute allows for surface estate owners to include subsurface mineral property in a special district and for the district to tax that property without any notice to the subsurface mineral owners or leaseholders and without giving them an opportunity to object. We decline to address Lessees’ due process argument as it is not properly before us. But we also note that subsection 401(1)(b) does set out notice and public hearing requirements for expanding a special district by the consent of the surface property owners. It requires “publication of notice of the filing of such petition, the place, time, and date of [the public board] meeting, the names and addresses of the petitioners, and notice that all persons interested shall appear at such time and place and show cause in writing why the petition should not be granted.” § 32-1-401(1)(b). Thus, owners of subsurface mineral estates whose wellheads are located on a surface estate will receive notice in the form of a newspaper publication and will be given an opportunity to object to the expansion of the boundaries of a special district when the surface estate owners petition for inclusion in a special district.