Cotton Ranch Metro District refinances bonds for its third time since ‘98
January 8, 2014
On Dec. 1, the Cotton Ranch Metro District refinanced the Gypsum community’s bonds for a third time since the bonds were issued in 1998 and ‘99, totaling $9 million.
Similar to refinancing a home loan to take advantage of low interest rates – thus paying less annually but more in interest by the time the loan is paid off – the Cotton Ranch bonds “restructured.” The bulk of property taxes within the district go toward paying off the bonds. The bonds were originally issued to pay for infrastructure in the district, such as streets, water and sewer systems.
“The district’s operating mill levy rate is 1.345 mills and the rest is for debt service. So for taxes payable in 2014, the debt service mill levy rate is 47 mills out of 48.345,” said Cotton Ranch Metro District Administrator Ken Marchetti.
District President Chris Meister said that with declining property values and other reasons, the mill levy would have climbed to 103 mills in order to keep up with the debt payments unless the district refinanced. He stated this bond restructure is enabling the district to lower its mill levy by 14 mills at the same time that assessed values are declining, resulting in a significant benefit to the Cotton Ranch taxpayers.
The Cotton Ranch bonds were originally slated to be paid off in 2017, then $3.5 million of the total $9 million was refinanced in 2002. In 2006, the bonds were refinanced for final repayment in the year 2022. The latest refunding has them being paid off in 2031, with a current outstanding balance of $9.452 million. At the end of 2012, the total amount of unpaid interest was $1.471 million and now it is $1.612 million.
Marchetti said the 2006 refinancing reduced the annual debt service payments by more than $500,000.
“This latest restructure saves the district approximately $200,000 per year for 2014 through 2022 but then the district will have to continue to make debt service payments for 2023 through 2031 under the new structure,” he said.
Change in course
The purchase of Gypsum Creek Golf Course by the town in 2010 also changed the fiscal landscape for the Cotton Ranch Metro District. The course was formerly a private one known as Cotton Ranch Golf Course.
“The main effect is that the golf course previously was private and therefore paid property taxes,” Marchetti said. “When the golf course was acquired by the town it became tax exempt and no longer pays taxes. Prior to becoming tax exempt, the golf course contributed approximately $1.3 million in assessed value to the district. At the district’s mill levy rate of 62.246 mills for taxes paid in 2013, the golf course would have paid $80,000 in taxes to the district, and at the district’s mill levy rate of 48.345 for taxes payable in 2014, the golf course would have paid $62,850. It means all other taxpayers have to pay a little more since the golf course is no longer paying. Or stated another way, if the golf course were still paying taxes the mill levy rate could be reduced by approximately 9 mills.”