Colorado’s Federal Mineral Lease Districts Frequently Asked Questions

The primary aspect in the creation of an FML District is the passage of a resolution by the Board of County Commissioners of any county to create such district.

The resolution creating an FML District must include the following:

• The name of the county creating the district.
• A description of the boundaries of the district (see Question 2).
• The name of the district.
• The number of directors (3 or more, must be an odd number)

C.R.S. Section 30-20-1304(2)

Once a resolution is adopted by a county, the clerk of that county must transmit a certified copy of that resolution to the Executive Director of the Department of Local Affairs. Thereafter all amounts of mineral leasing act dollars (FML) for annual direct distribution the county will be forwarded to the FML district as established

C.R.S. Section 30-20-1304(4)

The boundaries of an FML District must include all unincorporated area of the county creating the FML District, and may include any municipal areas within the county boundaries.

HB C.R.S Section 30-20-1304(2)(c)

The initial board of directors of a newly established district is appointed by a majority vote of the Board of Commissioners creating the district. Terms of office are 3 years each, and the first slate of directors are required to be staggered so that not more than one director’s
term is expired in each year (a 1 year, a 2 year and a 3 year term – each with 3 year terms thereafter).

If desired, the BOCC may include in their resolution establishing a district, provision that the board must be elected through similar circumstances to Title 32 special district elections. Each director holds office until the end of their term, or until a successor is selected through the appointment or electoral process.

C.R.S. Section 30-20-1306

Creation of a district through the county passage of a resolution must occur by June 1 of the year of desired FML Direct Distribution funding for the district.

• The FML District’s Federal Employer ID Number (FEIN) and W9 must be submitted to DOLA by July 15th.
• FML Direct Distributions are made August 31st of each year.
• A budget is required to be adopted before any expenditure of funds can occur. All local governments must file a copy of their budget with DOLA. Annual Budget for the district is due to DOLA by January 31st of each year. [C.R.S. Section 29-1-113]
• Annual Audit due to the Office of the State Auditor by July 31st of each year. Annual Application for Exemption from Audit (for governments receiving less than $500k) due by March 31st of each year. [C.R.S. Section 29-1-606]

C.R.S. Section 30-20-1305.5(4)

The formation documents of an FML District consist of a county resolution outlining specific aspects of the District (see Question 1). Generally a single county creates and adopts a resolution. C.R.S. 30-20-1307 (3) specifically provides for cooperation or contracting
between FML Districts. Further, distribution of funds outside of the boundaries of any FML District is specifically authorized in 30-20-1305.5 (2)(h).

After a county creates an FML District and provides notification of such creation to the Department of Local Affairs, the district additionally will need to provide its Federal Employer Identification Number (FEIN) and a W9 to the Department by July 15th of the year in which the district is to receive the August 31st Annual FML Direct Distribution.

The district will need to apply to the Internal Revenue Service, complete Form SS-4 (available on their website), and provide a copy of the county’s adopted resolution forming the district. The IRS may also request a copy of or reference to the Colorado statute authorizing the creation of the FML district as a public corporation.

Yes, unlike a county that creates an FML District, any municipality located within an FML District will continue to receive their municipal FML Direct Distribution payment from DOLA pursuant to C.R.S. 34-63-102(5.4)(c)(II). FML District statutes authorize DOLA to distribute
to a county or FML district. Therefore, only a county is authorized to elect to have DOLA defer the county’s FML Direct Distribution payment to an FML District.
C.R.S Section 34-63-102(5.4)(c)

However, the existing statutory provision for DOLA’s Executive Director to accept an annual Memorandum of Understanding (MOU) between a county and all municipalities located therein pursuant to C.R.S. 34-63-102(5.4)(c)(IV)(A) remains. Therefore, using both the provisions for an FML District and annual MOU, a municipality may indirectly defer its FML Direct Distribution to an FML District. However, such MOU must detail the calculation of the proportions to be distributed among the FML District and any municipalities that will still receive payment. Please see DOLA’s Federal Mineral Lease and State Severance Tax Direct Distribution Program Guidelines for more information on MOU’s.

DOLA’s Federal Mineral Lease and State Severance Tax Direct Distribution Program Guidelines

There is no impact on the Department’s Severance Tax Direct Distribution. Severance tax distributions will continue to be forwarded to both counties and municipalities where a FML District has been established.

In 2017, the Colorado General Assembly gave FML Districts the option, but not the obligation, to invest a portion of the funding they receive from the local government mineral impact fund in a fund. If the FML District opts to invest funds, requires adoption of an investment policy resolution that must be reviewed annually that includes:

• An acknowledgment of the board of director's fiduciary responsibility with respect to oversight of the district's investment policy
• Performance benchmarks for all investments and for all investment advisors who may be hired by the board of directors
• A requirement for the preparation and publication of annual financial statements that must include, at a minimum, information regarding starting balances, contributions, investment income, and losses, if any, and any investment fees incurred
• Careful consideration of investment fees or other brokerage costs which might reduce investment returns
• A requirement that the board of directors annually review the investments and annually set appropriations to be included in the trust fund.