SOUTHSHORE METROPOLITAN DISTRICT
District Outstanding Debt
Each year, we provide an overview of Southshore Metro District's outstanding debt to maintain transparency and keep our community informed. Outstanding debt can impact our community's ability to fund essential services, improvements, and amenities. This update outlines the current status, steps taken to ensure compliance with state and federal laws, and how they may affect our budgeting plans.
General Obligation Bonds
Southshore issued bonds in 2020, which were strategically utilized to refinance existing debt and to support the construction of the Lighthouse, as well as necessary public improvements such as roads and landscaping. The issuance of these bonds was approved by the voters in May 2018, with a favorable outcome of 270 votes in support and 70 against. The underwriting process was conducted by D.A. Davidson & Co., a reputable firm known for its extensive experience in municipal bond underwriting.
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In 2020, Southshore was only about half built out, limiting its tax base. To minimize the financial impact on property owners, D.A. Davidson structured the Southshore Metro District Bonds to gradually increase debt principal payments, giving home builders more time to complete their projects.
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The Official Statement or Bond Agreement is available for the public to review.
Bond Amortization Schedules
Government General Obligation Bonds are different from traditional home mortgages. Servicing bond principal payments requires calling bonds from bondholders, which requires significant coordination. As a result, General Obligation Bonds have a predefined payment schedule listing principal and interest payments. These schedules are referred to as Bond Amortization Schedules.
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Southshore Metro District has three bond series: Series A-1, Series A-2, and Series B. Each bond series has a unique interest rate, term, and amortization schedule.
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The Bond Amortization Schedules are available for the public to review.
Current Bond Status
Scheduled payments for General Obligation Bonds, including mandatory sinking fund redemptions, are clearly detailed within the Official Statement or Bond Agreement. To date, all payments have been successfully made in full and on schedule.
As of December 31, 2025, over 12% of the original principal amount of the bonds has been repaid.
Furthermore, a debt reserve totaling $2.9 million has been established to ensure financial stability and meet future obligations.
How Does Southshore Compare?
Neighboring communities as presented in their most recent audited financial statements.
Southshore has demonstrated strong financial performance, significantly reducing its principal debt since the debt's 2020 inception. While only Beacon Point has repaid a higher percentage of their debt, Beacon Point benefited from five additional years to achieve these results.
Bond Redemptions
In 2026, Southshore’s General Obligation Bond payment—specifically the principal portion of the mandatory sinking fund redemption—will rise by $225,000 from the previous year, an increase of more than 13%.
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By 2032, this annual redemption amount will have grown by $610,000, representing a 32% increase from 2026.
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Consequently, interest expenses will fall by about $352,000 by 2032, reflecting the benefits of accelerated principal repayment.
How Does Southshore's Bond Redemptions Compare?
By December 31, 2032, Southshore will redeem over $15.3 million in outstanding bond principal.
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Compared to neighboring communities, Southshore leads in:
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Total bond principal redeemed
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Redemption amount per household
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Percentage of outstanding bond principal redeemed as of December 31, 2025. (calculated as redemptions divided by the bond principal outstanding on 12/31/2025)
* Excludes a $4.9 million balloon payment.
Bond Rating
On April 16, 2024, Moody's Investors Service upgraded the rating of Southshore Metro District Bonds to Baa1.
A Baa1 rating from Moody's on municipal debt carries significant implications, as it reflects the moderate creditworthiness of the issuing entity. This rating serves as a crucial indicator for investors and stakeholders alike.
Designated within the "investment-grade" category, a Baa1 rating indicates that the issuer faces moderate credit risk while demonstrating an adequate capacity to fulfill its financial obligations.
Risk of Default
A report by Moody's Investors Service highlights that the historical default rate for Baa-rated municipal bonds ranges from 0.03% to 0.48%. This demonstrates the reliability of these bonds, even though they are positioned at the lower end of the investment-grade spectrum.
These remarkably low default rates emphasize the relative safety of municipal bonds compared to other asset classes, even for bonds that carry moderate credit risk, such as those rated Baa.
Additionally, this reliability reflects the fiscal stability and repayment discipline typically demonstrated by municipal issuers. As a result, Baa-rated municipal bonds can be a valuable addition to diversified, risk-conscious investment portfolios.
Source: Moody's Investor Service report dated July 19, 2023 titled US municipal bond defaults and recoveries 1970-2022.
How will Southshore Fund the Growing Mandatory Redemptions?
While mandatory sinking fund redemptions increase annually, the Arapahoe County Assessor reevaluates home values every two years. In the bond agreement, D.A. Davidson assumes a 2% increase in home values every two years.
In the chart above, Southshore takes a more conservative approach by comparing the annual mandatory redemptions to a scenario where home values increase by only 1% every two years.
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Even with the more conservative assumption, property value growth exceeds the annual increases in mandatory redemptions.
How does Southshore Compare Today to the Bond Agreement Assumptions?
D.A. Davidson made predictions in 2020, believing that new home construction would wrap up in 2025 which in fact the final homes were sold in 2025.
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Since the bonds were issued, property values have grown much faster than expected, allowing the debt service mill levy—the taxes used to repay the debt—to be 14% lower than the original forecast.
Can Southshore Buildup Funds Now to Make a Larger Payment in 2030?
Some community members have suggested setting up a savings fund over the next few years to pay off a big chunk of our bond debt after December 1, 2030. While this is a thought-provoking idea, there are restrictions from the federal government that make it difficult for Southshore to take this approach.
These rules, known as arbitrage regulations, are designed to prevent government organizations from borrowing money at a lower interest rate and then investing that money at a higher rate to make a profit.
If a government entity violates these rules, it may incur substantial fines and penalties. In fact, due to rising interest rates in 2023 and 2024, many government organizations have faced significant fines. For example, in September 2024, the City of Cleveland, OH was fined over $400,000 for this issue.
How is Southshore Managing Arbitrage Risk?
To date, Southshore has successfully avoided issues related to arbitrage through thoughtful planning and adherence to necessary regulations.
The issuance of general obligation bonds initially necessitated a Debt Service Mill Levy of 45 mills until a reserve of $2.9 million was established. This reserve was fully funded in 2022, resulting in an uncharacteristic high cash balance as of December 31, 2022.
Beginning in 2023, the Debt Service Mill Levy was temporarily adjusted downward to reduce the excess cash balance and mitigate any potential concerns regarding arbitrage.
How has Arbitrage Impacted the Debt Service Mill Levy?
The Temporary Debt Service Mill Levy Reduction enabled Southshore to avoid arbitrage. In 2025, for the first time since 2022, the Debt Service Mill Levy will closely align with the mandatory sinking fund redemption.
Southshore's Mill Levy
Every year, a Mill Levy is established as part of the budgeting process to collect property taxes. This process considers various factors and adheres to local, state, and federal laws.
The Mill Levy has two main parts: the Debt Service Mill Levy, which helps pay off debts, and the General Fund Mill Levy, which is used to fund everyday operations, maintenance, and other activities.
As Southshore has grown and developed over the years, the Debt Service Mill Levy has gradually decreased.
How Does Southshore Compare?
Interest rates are dictated by the market.
Factors affecting the market would be:
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Debt levels
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Financial Health
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Credit rating
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Economic conditions
Overall, Southshore's interest rates are the lowest in the area.
How Does Southshore Compare?
Debt Service Mill Levies are primarily determined by the terms of the debt.
Several factors can influence the Debt Service Mill Levy, including:
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Mandatory sinking fund redemptions
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Interest rates
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The maturity or length of the debt
Currently, Southshore's mandatory sinking fund redemptions exceed those of neighboring communities, leading to a higher Debt Service Mill Levy.
Optional Redemptions
The bond agreement allows for optional redemptions in addition to the mandatory sinking fund redemptions, with the first opportunity occurring on December 1, 2030.​
Although the option for redemption is still several years away, the Directors of the Southshore Metro District are committed to avoiding any arbitrage fines or penalties. As we approach December 1, 2030, it may be beneficial to hold a community discussion on this topic.​
To illustrate the potential impact of an optional redemption on the outstanding bonds, the chart above displays the outstanding principal balance per property. Beginning in 2031, if each property owner contributes an additional $100 annually until the bonds are retired, the bond term would decrease by one year. If each owner contributes an additional $200 annually, the bonds would be fully retired by 2044, and so forth.
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Please note that these additional payments would be separate from the mandatory sinking fund redemptions.
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Note: The Southshore Metro District is not endorsing or opposing this approach but is simply providing an example to illustrate long-term planning considerations for the community.
Is There An Alternative That Lowers the Debt Burden?
Some believe that the debt burden should be fairly distributed among property owners throughout the remaining term, rather than increasing redemptions and requiring more upfront payments.
To illustrate the potential impact of refinancing the bonds while maintaining the same maturity date of 2046, the chart above shows the outstanding principal balance refinanced into a fixed annual mandatory redemption schedule from 2031 to 2046.
This approach would ensure that the debt service burden remains stable, regardless of who owns the property during that time. Additionally, as property values typically increase over the years, the debt burden would represent a smaller percentage of the property value in the future. In this scenario, property owners in 2031 would pay less than the current mandatory sinking fund redemptions.
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Note: The Southshore Metro District is not endorsing or opposing this approach but is simply providing an example to illustrate long-term planning considerations for the community.
