I thought it might be instructive to take a look a Denver’s existing debt. Given that the proposed bond questions for this November ballot will total $550 million, with an additional $27 million per year anticipated to be generated by the 2.5 mill levy increase on property taxes, the following may provide either an OMG! moment for you, or, simply provide some perspective on what we may be getting ourselves into.
From the City’s September Budget Book–there will be a couple more iterations of the proposed 2008 budget as the year closes out–comes the following:
First of all, it’s interesting to note that the General Obligation Debt Burden to each and every Denverite–calculated according to population–is currently $726 for every person residing in the City and County of Denver. So, what are we on the hook for currently?
General Obligation Debt (bonds) are “…backed by the full faith and credit of the City and are payable from ad valorem property taxes and other general revenues.” This kind of debt is limited by the City Charter to three percent of the actual value of taxable property in the City.
Existing General Obligation Debt: $422,924,000
Revenue Bonds are “…backed by certain excise taxes (Sales, Occupational Privilege, Facilities Development Admission, and Lodgers’ taxes.” There are no Charter limitations on restricting Revenue Bond debt.
Existing Revenue Bond Debt: $304,105,000
Lease Purchase Agreements are utilized by the city to finance certain capital projects and fund the purchase of some capital equipment. Typically, funding for lease purchase agreements comes in the form of Certificates of Participation (COPs). The Budget Book notes: “The leases…do not constitute a general obligation or other indebtedness of the City within the meaning of any constitutional, statutory, or Charter debt limitations.” So, these are purchases you, the taxpayer, do not vote on and are rarely aware are occurring. I guess the most notable Lease Purchase agreement in recent history is the Wellington E. Webb Building, at 201 W. Colfax. Yes, the City doesn’t own that building yet. As a matter of fact, the final “maturity date” on that building is shown to be 2029. $250,290,000 is still owing.
Existing Lease Purchase Debt: $412,845,000
So, let’s see, we’re looking at (at least!) $1,139,874,000, in current city debt. This number does not, of course, include the debt extant for enterprise funded agencies–e.g. Wastewater Management; DIA. Enterprise funded agencies are responsible for the payment of their debt through their collection of revenues specific to their Charter mandated mission.
The Budget Books notes, “…Denver’s debt burden is moderate in comparison with similarly sized cities.” The curiosity for me is that this sentence is followed by: “The moderate rating is mainly a result of paying for the City’s indebtedness from the net revenues of enterprise funds.” Whoa… As I noted, enterprise funded agencies are responsible for their own debt, which is not set forth above. How can Denver’s tax burden be identified as “moderate” if the rationale for arriving at that conclusion is based upon the payment of debt by enterprise funds? I’m confused.
Oh well… By now you’ve had your OMG! moment or you’re simply sitting back, scratching your head and saying, “Okay, so what!”
The “…so what…” of this entry is simply to inform. Information is power. And, I suspect this entry will come in handy when we get to a discussion of each of the tax/bond questions being proposed.