A look into Denver’s $400 million bond proposal | Government
Denver voters may soon choose whether to let the city take out a $400 million bond to fund numerous infrastructure projects as part of a long-term COVID-19 recovery plan.
The city announced the proposed general obligation (GO) bond in April and the Denver City Council is set to begin voting on the proposal later this month. If approved by council and the mayor, voters will see the bond on the ballot in November.
The proposed bond is one of Denver’s many COVID-19 relief efforts. The Department of Finance says there is still $375 million left from the city’s last general obligation bond — Elevate Denver — which passed in 2017.
During the pandemic, the city accelerated the distribution of Elevate Denver to issue $170 million to various projects — $100 million more than originally planned for that period.
The city is also set to receive $308 million in federal relief funds from the American Rescue Plan in 2020 and 2021, and continues to spend the last of the $127 million Denver received last year from the CARES Act. This will be spent before the end of this year, according to the Department of Finance.
Because of this drastic influx in relief funding, the proposal of another general obligation bond has raised questions among the general public and city officials alike about the need for funding and what it all means.
What are GO bonds?
GO bonds are a type of municipal bond that cities use to pay for projects. The bonds are backed entirely by a city’s creditworthiness and are paid back over decades using property taxes.
“It is essentially a loan that the city takes out that is backed by property taxes,” said Chief Financial Officer Brendan Hanlon. “We will ask voters for permission to incur debts, we will go to a bank and lend money, and then those funds will be paid back by way of property taxes.”
Denver has passed major, citywide GO bond programs every nine to 10 years to support rehabilitation projects or restore, replace and expand capital assets.
GO bonds require voter approval. Denver voters have OK’d all but one of 11 bond packages sent to them since 1982 — and the only one they rejected ($325 million to fund a new justice center in 2001) was passed under a new package four years later.
“The people of Denver are really invested in investing in their community,” Hanlon said. “They want a quality of life that they’re proud of … and the fact that we have to have the public vote on them means that we have to do all the leg work up front. That due diligence, that level of engagement means that we have far more support for the packages that we put on the ballot.”
In recent decades, Denver’s GO bonds have ranged from $25 million for the Auditorium Theater in 2002 to $937.4 million for the Elevate Denver project in 2017, according to data from the Department of Finance.
The city passed GO bonds in 1989, 1990, 1998, 1999, 2002, 2003, 2005, 2007 and 2017, totaling just under $2.6 billion. The three most recent bonds made up more than 70% of that total and are the three largest in Denver’s history at $378 million, $549.7 million and $937.4 million respectively.
Hanlon attributed the increasing size of GO bonds to rising costs due to inflation and the “challenges of a growing city,” however, other city officials have criticized the city’s willingness to borrow this extreme amount of money.
“There seems to be a common perception that we must borrow money we hope we can pay back later to jumpstart the economy,’” Councilwoman Candi CdeBaca said after Mayor Michael Hancock announced the proposed 2021 GO bond. “A $400 million loan that you will be responsible for paying back long after he is no longer our mayor.”
“We just raised property taxes on all of you to generate revenues/dollars we lost during the shutdown of 2020. … It’s just more of the same. It will likely be a hodgepodge of favors and window dressing that will fail to address anything comprehensively in a visionary way.”
In addition to concerns about paying back the bond, others have questioned whether the city needs this funding at all.
The 2021 GO bond package
The proposed GO bond, called the 2021 RISE Denver GO Bond package, would ask for approximately $400 million to bolster the city’s investment in infrastructure for the next 10 years.
The bond would be a longer-term addition to the immediate financial relief funding provided by the federal government, Elevate Denver and other sources, said Julie Smith with the Department of Finance.
The bond is intended to focus on infrastructure because the industry has historically supported Denver’s recovery from previous economic recessions by providing jobs and supporting multiple economic sectors, Smith said. City data estimates that every $10 million spent on infrastructure results in 130 jobs, $8.5 million in labor income and $20 million in economic output.
The infrastructure projects that would be funded by the bond come from a $4-billion list of capital improvement projects. City officials are still working on narrowing the list to fit with the $400 million budget of the bond.
Though there is not yet a set project list, Hanlon said the $400 million limit was chosen to stay within the current property tax levels to avoid a tax increase. Since GO bonds are paid off by property taxes, they can result in raised property taxes in the years or decades following their passage.
“We started with a number because we wanted to make sure we understood what the affordability level of the project was and that we could actually issue the $400 million within the current tax rate,” Hanlon said. “We could have gone higher but what we’re trying to do is make sure we leave capacity for the next City Council and mayoral administration.”
During council meetings and press conferences, several people have questioned the necessity of another GO bond after Denver’s passed the 10-year, $937 million Elevate Denver bond only four years ago.
Elevate Denver was the largest bond program in Denver’s history, approved by voters in 2017 to enhance Denver by improving the city’s infrastructure including roads, sidewalks, parks, recreation centers, libraries, cultural facilities, safety facilities and public-owned buildings.
To date, approximately $562 million of the bond has been issued and $375 million is still available to be spent through 2027, according to city documents.
Hanlon said though the $375 million hasn’t been dedicated yet, there are still several large construction and improvement projects under Elevate Denver that haven’t been funded yet, including the East Colfax Corridor Bus Rapid Transit, District 6 Denver Police Station, Washington Street reconstruction and 72nd and Tower Fire Station.
Of the money already spent, 33.13% has gone towards transportation and mobility systems, 20.8% towards cultural facilities and 15.59% towards parks and recreation systems. The rest has gone towards the Denver Health and Hospital Authority, public safety facilities and the library system, according to city documents.
“Also, we have a spend down requirement that says when you draw down funds from a GO bond, you have to spend it within a three-year period of time to meet IRS tax guidelines,” Hanlon said. “So, we can’t just issue all $937 because we’d never be able to spend it within three years. That’s why you see that we still have $375 million.”
Regarding the $308 million Denver is receiving from the American Rescue Plan, Hanlon said those funds are going to be focused on service restorations and business and community recovery, while the proposed GO bond would specifically be for infrastructure.
In addition, the more relief funds that Denver has, the more federal money it can receive, Smith said. If Denver receives the American Jobs Plan from Congress to fund qualifying projects, the city must match 25% of the federal dollars to receive the funding, which they could take from the GO bond.
Smith said the COVID-19 pandemic’s impact on the Denver economy is the worst since the Great Depression.
The city government’s revenue has declined by nearly $220 million, which is equal to the full operating budgets of Parks and Recreation, Community Planning and Development, Denver Public Library, Trash Collection, Department of Public Health and Environment, Human Rights and Community Partnerships and the Office of Climate Action, Sustainability and Resiliency combined.
“Our investment in recovery must take into consideration how far we have to go to recover in all areas,” Smith said. “We are only beginning to see the first signs of recovery for our city.”
What would the GO bond be spent on?
Working from the $4-billion project list, a GO Bond Executive Committee has selected 134 projects totaling $1.7 billion as possible recipients of the proposed GO bond, said Capitol Budget Manager Emily Snyder.
The committee — comprised of eight community volunteers, City Council President Stacie Gilmore and City Council Pro Tem Jamie Torres — evaluated the projects based on equity, city vision alignment, economic impact, safety, accessibility, resiliency, readiness, risk and financial planning, Snyder said.
The highest-evaluated top tier projects total $585,370,000 and include the following:
- Improving or expanding the Youth Empowerment Center, Westwood Community Center, Central Library, Globeville Library, Westwood Library, Martinez Park, Sun Valley Riverfront Park and Westwood Recreation Center
- Rehabilitating the Denver Museum of Nature and Science
- Constructing the National Western Center Arena and Historic 1909 Building Public Market
- Purchasing a homeless shelter on 48th Avenue and various hotels/motels for sheltering services
- Citywide bike infrastructure, sidewalk construction and pedestrian programs
- Improving Morrison Road, Santa Fe Drive and Santa Fe Street
The GO Bond Executive Committee is now working with leaders in the City Council to cut down and finalize the list of projects, Snyder said. The final list will be submitted to the council for review before it can go to the ballot.
On Thursday, the City Council budget committee met to discuss the current project list and several council members spoke out against the inclusion of the National Western Center Arena. According to city data, construction of the arena would cost $170 million — more than 40% of the $400 million GO bond.
The arena was originally intended to be funded by a tourism tax, which has taken a significant hit during the COVID-19 pandemic, officials said.
“This volume of dollars going in one direction is troubling,” Councilman Paul Kashmann said. “The projects suggested don’t seem to be hitting all districts of the city.”
Of the current 21 top tier projects, seven are in District 3, four are in District 9, one is in District 7, one is in District 8, one is in District 10 and seven are in multiple or unspecified districts. Even when accounting for the multi-district projects, no top tier projects are located in District 2, which is southwest Denver.
Councilman Kevin Flynn, who represents District 2, pointed out the inequality in project distribution and criticized the list in general.
“Deferred maintenance is a waste of 20-year borrowing,” Flynn said. “We ought to look at this as a way of helping establish new assets that continue to give back, in the way that Holly Gymnasium and Red Rocks Theater and other new deal investments are still being used 80 years later.”
CdeBaca called the project list “obviously rushed” and said the funding would be better off going towards things like housing.
During the Department of Finance’s public outreach process, they found that Denver residents prioritized the investment in housing, transportation and workforce when spending COVID-19 relief funds, the department announced last month.
The GO Bond Executive Committee is scheduled to present its finalized project list to the City Council finance and governance committee on July 27. On Aug. 3, the council committee will be presented with the official language of the proposed GO bond package and its projects for a vote.
If the council committee passes the bond, it will be sent to Mayor Hancock for approval on Aug. 10 and then to the full City Council for two final votes on Aug. 16 and Aug. 23 before being added to the November ballot.
While the GO bond makes its way through the city process, Hanlon urges voters to consider supporting the measure on the ballot.
“This idea of investing in infrastructure to help our recovery is a proven tool,” Hanlon said. “When we came out of the Great Recession, we were the second-fastest big city to come out and I think it had a lot to do with how we leaned in to allocate those funds and support our construction industry.”
If the GO bond is approved by voters in November, the first debt issuance for the bond would be in the spring of 2022.