During the regularly scheduled Rifle city council meeting on Sep. 4, Habitat for Humanity of the Roaring Fork Valley presented to the city on hopefully receiving funding in the matter of bonds by working with a firm named Hogan Lovells.

“Habitat for Humanity is in the process of developing a $16 million facility here in Rifle that will, ultimately, within the next several years, be producing up to 200 homes (units) a year and hiring 64 employees and training up to 100 students a year at the facility,” said Gail Schwartz, President of Habitat for Humanity of the RFV. 

To pay for such a facility, Habitat is asking the city of Rifle to help them issue a tax exempt bond issue, which will pay for a large portion of the project. 

“We plan to be issuing these bonds this fall, so with the help of a jurisdiction such as yourself, the city of Rifle, Habitat will be assuming all of the costs associated with this, it is simply allowing for your public jurisdiction to be the conduit issuer, and we will not be putting those costs on you,” Schwartz said. 

None of the costs will be on Rifle’s credit, balance sheet or anything of that nature. Investors in these bonds are investing in the project that Habitat is doing, not the municipality of Rifle. 

“One of the main reasons for asking the city of Rifle to serve in this capacity as a conduit issuer is to allow Habitat to issue these as tax exempt bonds and therefore get a lower rate of borrowing costs under the federal tax laws,” said Helen Atkeson from Hogan Lovells. “501c3 entities are allowed to borrow directly, but if they do, they don’t get that kind of tax exempt treatment, but if they involve a pure conduit entity, such as yours (Rifle) that takes no responsibility but issues and then loans the proceeds, then they’re able to get that treatment.” 

When bonds are issued, they are then purchased by investors. In this case, investors will see that the city of Rifle is backing the issue of the bonds, it won’t be a debt to the city — they become a neutral backer, since it’s a municipality. 

This will not appear on the ballot, since it doesn’t affect the city’s credit or funds as Habitat is bearing the full weight of the responsibility of finances. 

“My role would be to look out for the city and work with the city attorney to make sure that what we’re talking about is correct, that the city is fully protected, that the provisions and documents do what we were talking about,” said Atkeson. “In addition to that, we would be putting together all of the transaction documentation so that the whole thing works, so that the arrangement that Habitat’s expecting to have with the city is in place.” 

Lee White, Managing Director from D.A Davidson, a financial advice company, said that the bonds will be offered to investors who send in a “big boy letter”, or an investor letter, where the investors understand what they’re getting into and they understand the risk. 

Schwartz said that with the factory making 200 units a year, they’ll be able to address about 6% of the need for housing, if they’re able to issue these bonds. 

“Were you not able to get any grant funding for this project?” asked councilor Clint Hostettler. 

Schwartz conveyed that the state gave out $38 million for modular projects in Colorado, none of which came to western Colorado. 

“We’re standing on this project as a community, saying, ‘this is what we’re entitled to, opportunity in western Colorado, jobs in western Colorado, and we’re going to prove our concept’,” Schwartz said. “I fought very hard for that, but there wasn’t the confidence that we would be needing that project or that funding in western Colorado.”

The agenda item was to vote on a letter of engagement to support the bond relationship with the firm Hogan Lovells and Habitat. If it passes, then the final terms of the bonds and transactions will come before the council in the future. Schwartz said they’re looking at Oct. 3 for having the documents in front of the city. 

The item was approved six to one, with Brian Condie opposing. 

“This is innovative,” Strode said. Jim Neu, the city attorney, added that Rifle is known for their innovation.