Voters sidestepped in city loan bid
Post Independent Staff
GLENWOOD SPRINGS – City Council informally decided at a work session Wednesday to borrow $12 million – without getting voter approval – to build a golf course, kayak park, swimming pool and tennis courts.
A formal decision on the loan is expected to come at council’s May 1 meeting.
Five of the seven council members agreed that borrowing the money using certificates of participation (COPs) is the right thing to do. They said the amenities built with the money, especially the golf course, will eventually generate money and help pay off the loan.
Councilman Don Gillespie said he’s confident voters would approve the loan, but said he’s concerned that if council takes the time to have a bond election, the currently low interest rates could go up.
“This has always been the missing puzzle piece to having people stay for more than one night,” Gillespie said of the golf course.
Councilman Larry Emery agreed.
“If we’re trying to be a tourist town, we need to do this,” he said.
Councilmen Dan Richardson and Dave Merritt were the only council members opposing the financing plan.
“COPs are bordering on an unethical way to support the golf course,” Richardson said.
Certificates of participation, COPs, are a method many municipalities have used to borrow millions of dollars without legally going into debt, thereby skipping the need for a public vote that would be required under Colorado’s TABOR Act. Loan payments for the COPs would require year-to-year approval by City Council.
City manager Mike Copp pointed out that the Garfield County Jail was built using COPs.
Stifel Nicolaus financial advisor Michael McCallum informed council that in order to borrow the money using COPs – as opposed to getting a general obligation bond or a revenue bond – the city would need to put up collateral, or property that’s equal in worth to whatever it borrows.
Richardson said he wasn’t sure about putting up $12 million in collateral to secure the loan.
“It’s risky,” he said.
He also said the interest rate using COPs would be higher than other types of bonds, because purchasing them is riskier for investors.
“I think getting tied into this without a vote is a mistake,” Merritt said.
If council approves the $12.3 million loan, around $8 million would be used to build a golf course, some of the money would go toward funding a kayak park on the Colorado and Roaring Fork rivers that’s estimated to cost $1 million, and council would pitch in another $750,000 toward the fund-raising drive for a swimming pool at the Community Center, putting the total city pledge toward the pool at $1.5 million.
According to a 20-year bond debt service schedule produced earlier this year by Stifel Nicolaus/Hanifen Imhoff Inc., if the city borrows $12.3 in COPs, the interest would total $6.3 million. Payments would be around $1 million per year.
Council members in favor of using COPs to fund the recreational amenities argued that if the money isn’t borrowed soon, the city could miss locking in the low interest rates that are available today.
“You know, the war’s over and Bush is pushing to improve the economy,” Mayor Don Vanderhoof said. “I’d like to get these COPs before the interest rates go up. If they go up a percentage point or two, that could be devastating.”
Vanderhoof also said he feels comfortable about borrowing the money using COPs because if people are adamantly against the idea, they still have time to challenge the idea at the May 1 council meeting.
“As the public has the opportunity to display that, I feel good about it,” Vanderhoof said.
Councilwoman Jean Martensen also said she’d support the loan.
“I think the people will accept it wholeheartedly,” she said.
Aside from borrowing the money without a vote, Merritt also pointed out that the loan could be looked at as illegally indebting future councils.
“This thing is going to generate revenue in 17 years,” Merritt said. “I hope I’m alive long enough to see it.”
Contact Greg Masse: 945-8515, ext. 511
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