Periodically, the City and County of Denver authorizes general obligation (GO) bonds to restore, replace, and expand infrastructure and capital assets across the city. GO Bonds are a debt obligation issued by local governments to fund public purpose capital improvements such as roads and public facilities and are backed by the full faith and credit of the city and payable from dedicated property tax mill levies. GO Bonds are proposed and voted on in citywide elections. The city’s last GO Bond initiative was the 2007 Better Denver Bond Program, which authorized an issuance of $550 million to fund capital improvements throughout the city.
Denver’s next GO Bond authorization was presented to voters in November 2017. The voters approved all seven of the ballot questions.
The city is ready to get projects going and make good on our commitments to the community. We plan to have a program management team and supporting resources in place by early 2018. They will be focused on getting each project ready to go and out the door and will coordinate the departments and determine size and timing of bond issuances with the Department of Finance team. The first bond issuance is anticipated to occur by mid-2018 pending City Council approval.
Please stay tuned as we begin the implementation phase. We will continue to keep you updated on our progress along the way.
Questions and comments about the 2017 GO Bond can be directed to 2017GOBond@denvergov.org.
A schedule for when the projects will be bid has not been developed. We expect to have more information available in the first quarter of next year.
Procurements for the projects will be posted on www.work4denver.org and will include participation goals for Minority/Women and/or Disadvantaged Business (M/WBE/DBE) through the city’s Office of Economic Development M/WBE/DBE program.
Residents, businesses and neighborhoods provided their input on potential improvement projects that they would like to be considered as part of the 2017 GO Bond in November and December 2016. This public input was provided through several options, which included: six community meetings held around the city, via the GO bond website, at a public library or recreation center, and through their Councilmember’s office. The more than 4000 comments from the public were combined with project ideas identified by City Council, city agencies, and the projects listed in Elevate 2020. The city also received major capital needs from partners, such as city-owned cultural facilities.
The projects underwent further evaluation by Mayor-appointed stakeholder committees from March through June 2017. Community members continued to provide input through email that was shared with the relevant stakeholder committees or by speaking in person at stakeholder meetings.
The Mayor selected community members, as well as members of City Council, to serve on six stakeholder committees to help evaluate each eligible project and ultimately make a recommendation to the Mayor on a package of investments in June 2017.
The six stakeholder committees included an Executive Committee and five programmatic areas. The Mayor took their recommendations and along with Council President Albus Brooks announced a revised list in July 2017.
City council deliberated and ultimately referred the final list of projects to the November ballot in August 2017.
The list of who was on each stakeholder committee can be found here. In addition, each committee was staffed by city agency personnel to help coordinate the committee’s activities and serve as technical resources where needed.
The stakeholder committee members included 60+ volunteers from the public who come from a diverse range of backgrounds and have a wide range of experience and expertise to help each committee evaluate and balance citywide needs. You can read more about each stakeholder committee here.
The city is committed to equity throughout this entire process, which is why geographic and neighborhood equity indicators (socio-economic, health, accessibility to key services, etc.) were part of the foundational criteria that each stakeholder committee used when evaluating proposed projects..
The city is ready to get projects going and make good on our commitments to you, the community. We plan to have a management team and staff in place by early 2018. They will be focused on getting each project ready for construction and coordinating the size and timing of bond issuances with the Department of Finance. The first bond issuance is anticipated to occur by mid-2018 pending City Council approval. Projects would begin shortly after that issuance.
Each stakeholder taskforce committee was provided foundational criteria that primarily focused on project readiness, bond funding eligibility (e.g., serves a government purpose and has a 10-year useful life), equity, cost considerations, and critical system needs. Each committee was also asked to identify criteria that help further evaluate each project within their specific committee. You can read more about each stakeholder committee here.
Every neighborhood in Denver is a unique and special place, and over the past couple of years, we have made intentional capital investments in neighborhoods to enhance pedestrian safety, improve multi‐modal connections, rehabilitate park assets and address deferred Six‐Year Capital Improvement Plan capital needs.
Denver’s city charter mandates a six‐year capital planning process. City agencies identify initiatives or objectives, with the help of public input, facility assessments and neighborhood plans, to be accomplished within six years and list priority projects which support those objectives. The Six‐Year Capital Improvement Plan includes projects that continue major rehabilitation of city assets and new investments in capital infrastructure.
A general obligation bond (GO bond) is a common financial tool utilized by governments that are secured by a pledge to use legally available resources, such as property tax revenues, to repay bond holders over the life of the bonds. Basically, a city or state is loaned funds up front for capital projects, generally raised by financial institutions, to allow for the construction of large capital projects they wouldn’t otherwise be able to afford. Those funds, including borrowing costs (interest), are repaid back over time.
In Denver, GO bonds are typically sold in a competitive sale to ensure the lowest interest rate. The bonds are tax exempt because Denver is a government entity. The city continues to pay off older debt and has seen an increase in property values in the last few valuation cycles, which allows the capacity for the proposed new debt of $937 million without triggering an increase to tax rates.
City Charter limits GO debt to 3% of actual value of the taxable property within the City.
The final package of projects that were referred to the November ballot by City Council are valued at $937 million- $887 million in projects and $50 million in contingency. This bond does not require a change in the tax rate.
Tax rates will not be increased to pay for the final $937 million bond package.
Taxes collected from medical and retail marijuana revenues are part of the City’s overall budget. These marijuana taxes fund the regulation and enforcement of the marijuana industry, as well as education programs to help keep our communities and youth safe. As such, they are typically not used for capital projects.
The city has older debt being paid off and has seen an increase in property values in the last few valuation cycles, which allows the capacity for the new debt of $937 million without triggering an increase to tax rates.
The city does as much as we can each year to maximize the annual capital improvement budget but our infrastructure needs are greater than what annual funding can support. In fact, at the beginning of the 2017 GO bond process, the list of projects identified topped $3 billion. GO bonds offer the city a cost-effective financial tool to address a large number of both deferred maintenance and new infrastructure projects at over the course of several years.
We will not know who will buy the GO bonds until they are sold in the market. Denver typically sells bonds competitively, to ensure the lowest interest rate available.
The city is also considering the best way to build on the success of the 2007 Better Denver Bond mini-bond program, where residents bought bonds in smaller amounts in exchange for a certain rate of return over either nine or 14 years.
The Department of Finance expects that a component of the bond could be sold in small dollar amounts. A mini-bond issuance will most likely take place later in the program.
Denver typically sells bonds in a competitive sale to ensure the lowest interest rate available. Denver’s AAA credit rating also helps ensure a low interest rate. Further, the tax-exempt nature of the bonds ultimately allows the city to borrow money to achieve the efficient construction of expensive and/or numerous capital infrastructure projects at the lowest repayment cost available.
For the 2017 GO bonds, the city has conservatively built in financial flexibility for not only possible contingency costs, but also for changes in the market and potential needs down the line to restructure the debt. Per TABOR, the city builds in a maximum repayment cost, which is reflected in each ballot question.
Our financial model currently assumes costs of issuance of $5 per $1,000 of par (or 0.5%), which equates to a total of approximately $4.7 million in costs of issuance expenses for the $937 million. This includes not only fees to banks or financial institutions who help us sell the bonds to investors, but also to ratings agencies, legal counsel, financial advisors, etc. We currently anticipate that we will generate sufficient bond proceeds to fund $937.5 million of projects (including the $50m set aside for purpose contingency) and to pay for all costs of issuance expenses. This is subject to market conditions, but at this time we do not anticipate any additional costs or fees related to the issuance of the bonds for the City to pay from other sources.
Typically, general obligation bond investors are large institutional investors, such as property and casualty insurance companies, trust departments and others. A later issuance of the proposed 2017 GO bond will also feature a mini-bond, where local residents can purchase bonds in smaller dollar amounts.